RETIREMENT OR RETRENCHMENT?

[Ivan Israelstam]

RETIREMENT OR RETRENCHMENT?
An employer retired 3 Admin employees who were well past their contractual retirement ages but did not retire a fourth employee who was in an operational role. One of the retirees claimed at CCMA that she had been unfairly retrenched. The employer denied that it was a retrenchment and gave as the reason for retiring the 3 employees that it was no longer financially viable to retain the 3 employees. The employer argued that such a retirement did not constitute a dismissal at all because the parties had agreed, via the employment contract, that 60 would be the retirement age. It argued further that, even if it was found that a dismissal had taken place, Section 187(2) of the LRA protected the employer from an unfair dismissal claim. Was the employer right?

[Patrick Deale]

No – the employer was wrong. An agreed retirement age is equivalent to the expiry date of a fixed term contract. If the employer allows the employee to keep working after the expiry date, the employee must be treated as a permanent employee. The employer impliedly waives the expiry date of the retirement age or the end date of the FTC as the case may be.

So the employer waived the retirement age of 60 in this case study. So the three employees remained as permanent employees and were entitled to their rights under the LRA. This included the right to a fair retrenchment process.

It follows that s187 (2)(b) did not protect the employer after the employees passed the age 60. Quite the contrary: the employer could be penalized for using their age to select the three for retrenchment. This would constitute discrimination based on age. Their dismissals would thus be automatically unfair and expose the employer to payment of 24 months’ compensation to each of the three.

[Michael Bagraim]

The very reason given by the employer shows that in fact it was a retrenchment.

Once people have passed their retirement age, you can’t willy nilly invoke the retirement clause retrospectively.

To invoke Section 187(2) is the same as claiming that it was a retirement, in other words the argument is merely repeated.
MICHAEL BAGRAIM

[Ingrid Lewin]

I agree with Michael. The real reason for the dismissal was for operational requirements and not due to their age as that horse bolted when they were kept on after the agreed or normal retirement age. Thus, if the operational requirements procedure was not followed they would, at the very least, have a claim for a procedurally unfair dismissal.
INGRID LEWIN

[Author]

Posts