Retirement Age

I have been asked the following question this morning:

"Can I be assisted on this matter, company policy states that the retirement age is 60 years with no extensions. Some years back employees were transferred to us (section 197 LRA) of which they still use their own pension fund which 65 years is the retirement age. The majority of employees are over 60 years of age and no longer productive. Any suggestions on how to retire them?"

Section 197(2)(a) of the LRA reads as follows: "If a business, trade or undertaking is transferred in the circumstances referred to in subsection (1)(a), unless otherwise agreed, all the rights and obligations between the old employer and each employee at the time of the transfer continue in force as if they were rights and obligations between the new employer and each employee and, anything done before the transfer by or in relation to the old employer will be considered to have been done by or in relation to the new employer."

The employer in question is facing the following problem.

Under the old regime (employer) the employees were used to the retirement age being 65. Should the new employer now decide to reduce the retirement age to 60 years of age, such variation of the employment contract will be regarded as a unilateral amendment of the employment contract.

The LRA allows employers to forcibly retire employees who have reached the "normal" retirement age, but fails to explain what constitutes normal retirement age.

Therefore, employers and employees need to look to case law for more detailed guidance and what would be fair in specific circumstances.

The employer's own rules and terms and conditions of employment can, within limits, play a significant role.

For example, in Rubin Sportswear v Sactwu and others, the employer took over a business and then introduced a rule changing the age at which employees were to take retirement.

The Labour Appeal Court found that the word "normal" means "the way things are normally done" and that the employer could not unilaterally change what was normal.

It is therefore imperative that employers have their rules reviewed in line with the latest interpretations of the courts.

In most circumstances, should any of these employees (60 years or older) then resign because they are not satisfied with such an amendment, the CCMA may find that the particular employees have been dismissed in terms of the provisions of Section 186. It will necessarily follow that such dismissal will be regarded as unfair, and the employer will end up re-instating these employees.

However, it is very difficult to say whether the new employer may find itself in the same detrimental position as described above. Firstly, it will depend on the terms and conditions of the existing employment contract. Then it will depend on the terms and conditions of the employment contract between the old employer and the relevant employees. An lastly, consideration will have to be given to the terms and conditions of the sales agreement between the old employer and the new employer.

Legal advice and assistance should be obtained to answer on the merits of each individual case..

It is advisable that the new employer commences a consultation process regarding early retirement and the official change of the retirement age. It allows the employer and the relevant employees to engage in a consultation process, which should in the end, be to the advantage of the employer. And yes, allow representatives of the relevant pension funds to address the relevant employees on the benefits of early retirement, if any. I will not even venture an opinion on this particular aspect, as I am not qualified and do not have the necessary knowledge on this topic.

Once the employees have accepted that they will benefit from early retirement, and they agree to accept early retirement, then the new employer may proceed to retire them.