Retirement Age: Legal Considerations and Employer Discretion

The Basic Conditions of Employment Act and Labour Relations Act do not specify a mandatory retirement age for employees. Specific industries adhere to additional basic employment conditions outlined in a collective bargaining agreement that may include that employers must provide benefits such as a retirement fund to their employees.

The retirement fund is administered by a registered financial institution, which determines the terms and conditions of the fund, including the retirement age linked to the fund. In the absence of a collective bargaining agreement, the specified retirement age is at the employer’s discretion. The employer can decide and agree upon a retirement age with their employees or rely on the average retirement age, which is 60 – 65 years, based on social norms.

Relevant legislation

When employers decide on an appropriate retirement age, they must be aware of any applicable laws and regulations that govern their employment practices, including those related to age discrimination. Employers should ensure that their retirement policies comply with relevant laws and are implemented fairly and transparently.

Employers must be cautious about potential age discrimination issues, as the Employment Equity Act highlights. Dismissing an employee based solely on age can be seen as discriminatory unless the employer can demonstrate that there is a legitimate and inherent requirement for a particular role.

Section 187(2)(b) of the Labour Relations Act guides how a dismissal based on age can be considered fair. The dismissal may be deemed fair if an employee reaches the expected or agreed retirement age for persons employed in that capacity.

In Rubin Sportswear v SA Clothing & Textile Workers Union and others (2004) 25 ILJ 1671 (LAC), the LAC held, “Section 187(1)(b) creates two bases upon which an employer can justify the dismissal of an employee on the grounds of retirement age. The one is an agreed retirement age; the other is a normal retirement age. Those are the only two bases.”

In Cash Paymaster Services (Pty) Ltd v Browne (2006) 27 ILJ 281 (LAC), the LAC held that “(t)he provisions relating to the normal retirement age only applies to the case where there is no agreed retirement age between the employer and the employee.”

Case law

In Solidarity obo Strydom and Others v State Information Technology Agency SOC Ltd, the issue was the dismissal of employees by the employer, SITA (State Information Technology Agency SOC Ltd). Solidarity, representing the employees, argued that the dismissal was automatically unfair according to section 187(1)(f) of the Labour Relations Act (LRA) (C 148/18; JS [2022] ZALCJHB 95 (9 May 2022).

Solidarity presented two alternative claims:

  1. That the dismissal was unfair under section 188 of the LRA.
  2. A contractual claim for damages under section 77(3) of the Basic Conditions of Employment Act (BCEA).

The dispute arose because the employees, although members of the Alexander Forbes Pension Fund (Pension Fund), were allowed to work beyond the average retirement age of 60 years. However, the employer decided to enforce the retirement age per the Pension Fund Rules and served the employees with individual retirement notices in September 2017.

The relevant legal principles, particularly section 187 of the LRA, were considered. Section 187(1)(f) states that a dismissal is automatically unfair if the employer unfairly discriminates against an employee based on arbitrary grounds, including age. However, section 187(2)(b) provides that a dismissal based on age is fair if certain conditions are met:

  1. The dismissal must be based on age.
  2. The employer must have an average or agreed retirement age for persons employed in that capacity.
  3. The employee must have reached the age referred to in (2) above.

The court noted that the dismissal is considered fair once these conditions are established according to the statute. Therefore, in the context of this case, if the employer met these conditions, the dismissal based on age would be deemed fair, and the court would not consider it further.

When an employer is bound by a collective bargaining agreement specifying a retirement age, strict adherence to that agreement is paramount. Alternatively, without such an agreement, the employer retains discretion over setting the retirement age.

Nevertheless, to mitigate potential labour disputes and ensure transparency, it is strongly recommended that the retirement age be stipulated either within the employment contract or a comprehensive retirement policy. This proactive approach fosters a harmonious employer-employee relationship and promotes compliance with relevant labour laws and regulations.

For assistance in including retirement age specifics within your employment contract or establishing a comprehensive retirement policy, email us at admin@invictusgroup.co.za or call our offices at 086 173 7263