STATING RETIREMENT AGE IN CONTRACT A WISE DECISION

This is the post that should have been done on Thursday 6th September.

Many of my client's, particularly those who have a "letter of appointment" of sorts for their employees are absolutely gobsmacked at the amount of information that is required, mostly by law, to be in the contract.

Many of the other issues, such as this (the retirement age) are often only noted and realized as important when it is far too late. By that time they have well and truely bitten them in the arse!

Many people, think that they are exceptionally gifted, and without the benefit of a law degree - try and write their own "Letters of Appointment" and then wonder 'what happened' when the brown stuff hits the fan and they end up having to pay out expenses such at the one in the story.

Be warned, be prepared and above all have a 'proper' Labour Attorney! They do cost, but the reality is that they cost a lot less than what you will have to pay for one if you don't listen!

Stating retirement age in contract a wise decision
10 April 2007 at 06h00

The issue of retirement age is a thorny one for employers and employees alike. A recent labour court case highlights the rights of employees and the risks to employers who don't deal with the issue properly.

Let's look at the facts in the case of Evans v Japanese School of Johannesburg. Ms Evans had been employed by the school since 1988. Her contract said nothing about retirement, nor was anything said about the issue when she was employed. There was also no policy at the time. The practice at the school was that employees retired at 65. Evans said that on many occasions she had spoken about retiring at 65 and no one contradicted her.

Suddenly, in February 2004, Evans and all other employees received a letter saying that the retirement age for all employees would be 60, with effect from March 1, 2004. At the time Evans was already older than 60. She asked for clarity regarding her position. The school's management maintained that it was necessary to implement a retirement policy. Evans had not been consulted on the policy. Eventually, the school informed Evans that she would retire at the end of December and she was given three days' notice. If she had been allowed to work until the age of 65, she would have remained employed until the end of September, 2008.

Evans referred the dispute to the labour court, alleging that she had been dismissed unfairly on the basis of her age. She asked for compensation under the Labour Relations Act (LRA), damages under the Employment Equity Act (EEA) and notice pay.

The labour court found that the employer had tried to introduce a new term into her conditions of service when it tried to introduce a retirement age. This it couldn't do without her consent. There was no retirement policy at the time Evans was employed. It was up to the school, as the employer, to prove that she had reached the normal or agreed retirement age for persons in her capacity. Instead there was evidence that it had been agreed Evans would retire at 65. Therefore, her dismissal was unfair. It was not only unfair, it was automatically unfair because of the provisions of section 187(1)(f) of the LRA. The dismissal was by reason of her age, which was discriminatory. This meant she was entitled to compensation of up to 24 months' remuneration under the LRA. The court decided it was fair in the circumstances to award her the full 24 months which was R177 144, as she was earning R7 281 a month at the time of her dismissal. Then it considered her claim under the EEA and pointed out that under the EEA there is no limit to what the court may award. It considered that she would have worked until September 2008, which meant she had lost out on R359 823.75, in total, and decided that a fair award under the EEA would be R200 000. Her contract made provision for three months' notice and she was entitled to that as well. So, the employer was ordered to pay her a total of R406 668 made up of compensation under the LRA, damages under the EEA and notice pay. It was also ordered to pay her legal costs. Probably a fair outcome for the employee but a very expensive lesson for the employer. Employers would be advised to include a provision on retirement age in all employment contracts. But remember that a retirement age can't be unilaterally introduced for existing employees. If there is no agreed retirement age, employers need to prove a normal retirement age for persons in that capacity. To do so requires facts that show a pattern or practice of a reasonable number of people in that capacity retiring at a particular time.

By Susan

Stelzne is head of employment law at Edward Nathan Sonnenbergs.