Labour: Working beyond agreed retirement age 'not a waiver'

What are the legal consequences of an employee continuing to work after the employee has reached the agreed-upon retirement age? Does a new contract of employment come into force or does the old contract continue operating? Can an employer still terminate employment on the basis that the employee has reached, and passed, their retirement age? ENSafrica’s Nils Braatvedt and Peter le Roux say these questions were addressed in the recent decision of the Labour Appeal Court in MISA and Another v Great South Panel Beaters.

In this case, the employee worked up to and beyond the retirement age. After nine months of his continuing to render his services, his employer gave notice of the termination of his employment on the basis that he had reached the retirement age provided in his contract. The employee referred an automatically unfair dismissal dispute to the Labour Court in terms of section 187(1)(f) of the Labour Relations Act. Writing on the Daily Maverick site, the authors note the Labour Court found that because the dismissal took place based on the employee’s age after he had reached the agreed retirement age, section 187(2)(b) of the Act applied and the dismissal was not unfair. The employee appealed the decision in the Labour Appeal Court (LAC).

The employee’s case on appeal was that, when his employer permitted him to work beyond the retirement age, it waived the right to later rely on the retirement age to terminate the relationship. He also argued, according to Braatvedt and Le Roux, that when he worked past the retirement age, a new contract of employment came into existence through the conduct of the parties. However, the LAC found that if an employer permits an employee to work beyond an agreed or normal retirement age, this does not amount to a waiver of the right to rely on section 187(2)(b) of the Act to dismiss an employee unless the clear and unequivocal conduct of the employer indicates an intention to waive that right. It also found that a contract of employment does not automatically terminate by the effluxion of time when the retirement age is reached by an employee, nor is the contract tacitly renewed on different terms. Instead, the employment relationship continues, which means that the initial agreed or normal retirement age remains applicable.

The LAC accordingly agreed with the findings of the Labour Court and dismissed the appeal. The author’s comment: ‘The decision confirms that an employer may fairly terminate a contract of employment on the basis of age, even if an employee has worked beyond an agreed or normal retirement age. The mere fact that the employee has worked beyond their retirement age does not mean that the agreed or normal retirement age is rendered redundant. However, the court was careful to confirm that where the clear and unequivocal conduct of the employer indicates that there was a waiver of the right to rely on the retirement age, or where the employer has agreed to a further period of employment, the employer would be bound by this agreement.’