Solidarity obo Johannes Jacobus Viljoen // Fedserv (Pty) Ltd (2020) 29 CCMA 7.1.16

South Africa has no legislated retirement age and often parties are left to agree on a retirement age. This could be done through either having an agreed retirement age recorded in an employment contract, a retirement age becoming an established practice through a policy or through a linked compulsory retirement fund. 

However, what happens where none of the above are in place? How and who determines at what age an employee must retire? 

A recent CCMA arbitration award, Solidarity obo Johannes Jacobus Viljoen // Fedserv (Pty) Ltd (2020), deals with an instance where there was no agreed retirement age prior to commencing an employment relationship. In this matter, Mr. Viljoen was employed as a HR manager by Fedserv in May 2014. At the time he was 59 years old and there was no agreed or company retirement age. 

During April 2018 a retirement policy with a retirement age of 65 years was implemented at Fedserv. At this time Mr. Viljoen was 65 years and 9 months old. The retirement policy provided that at least 6 months before an employee reaches retirement age, the company would provide the relevant employee with notice of his/her retirement date. It further recorded that, notwithstanding the retirement age of 65 years, Fedserv reserved the right to “… retain certain exceptional skills and productive staff beyond the normal age of retirement. Accordingly, Fedserv (Pty) Ltd may grant extensions beyond normal retirement to staff members who have reached normal retirement age. This will be done by manner of a contract, whereby the employee will consult his/her services to Fedserv (Pty) Ltd.“. 

According to the retirement policy, Mr. Viljoen was 9 months past this now compulsory retirement age. Fedserv alleges that, while Mr. Viljoen was eligible for retirement and he was so informed by his manager, Fedserv discussed retaining him beyond the age of 65 years. However, no other retirement date was agreed between the parties. Mr. Viljoen remained in Fedserv’s employ for a further 2 years and 10 months thereafter he was given further notice by Fedserv that his employment would terminate at the end of May 2019 due to his retirement. 

Mr. Viljoen referred a dispute to the CCMA claiming unfair dismissal citing procedural unfairness in that he had not received proper notice of the retirement in terms of Fedserv’s retirement policy, i.e. 6 months’ notice. Mr. Viljoen claimed, inter alia, that when he received notice of his retirement during May 2019 for the end of May 2019, Fedserv had only given him 14 days’ notice, and not 6 months nor was he consulted with beforehand regarding this retirement. Fedserv argued that, inter alia, when it initially spoke to Mr. Viljoen about him working beyond his retirement age in April 2018 (when the retirement policy was implemented) this constituted a consultation and the commencement of the 6 month notice to Mr. Viljoen. He thereafter worked in excess of the 6 month notice period, and Fedserv did not unfairly terminate the employment relationship when it asked him to retire at the end of May 2019. 

Based on the evidence lead at arbitration, Commissioner T. Ndlebe found inter alia that –

(a) Fedserv did have a discussion with Mr. Viljoen about continuing in its employ when the retirement age of 65 was implemented in April 2018;

(b) the retirement policy made provision for Fedserv continuing to employ an employee beyond the retirement age of 65 years; and

(c) in an email Fedserv sent Mr. Viljoen during April 2018, it was already made clear to Mr. Viljoen that the company wished him to retire at the given retirement age of 65 years. Notwithstanding this, he continued in employment all the while knowing that he had been given notice of his retirement. Mr. Viljoen did not object to the retirement age of 65 years nor the manner in which he was notified during April 2018 of the age at which he was meant to retire. 

In his award, Comm. Ndlebe relied on the Labour Appeal Court decision of Randall // Karan Beef Fedlot (2021) wherein it was stated that where an employer reserves its rights and elects to terminate an employee’s services at a later stage due to retirement, this does not constitute a dismissal even where an employee works beyond a retirement age.

In this instance, Mr. Viljoen worked beyond the retirement age set out in the retirement policy while having been given notice when the retirement policy was implemented, and he would be required to retire even though no new retirement age had been agreed. Comm. Ndlebe accordingly found that when Fedserv invoked its right to end the employment relationship due to the employee retiring, it had not unfairly dismissed the employee. The dismissal was therefore fair. 

The following can be taken away from the above award and cited judgment: 

1. Employers must have either an agreed retirement age in its signed employment contracts or it must be company culture / custom / policy for employees to retire at a certain age;

2. Where there is no contractually agreed retirement age nor a customary retirement age or retirement policy in place, the employer may rely on retirement age of a compulsory retirement fund established in the company; and

3. if neither of the above is applicable, a retirement age should be implemented through either a retirement policy and/or amending employment contracts after reaching agreement with its employees on a retirement age.  

Where an employer wishes to retain an employee’s services after the retirement age, the employer must enter into a fixed term contract setting out, inter alia, that the employee has been employed for a fixed term period based on, inter alia, section 198B (4)(i) of the LRA.  

It is also important to note that if an unfair process is followed in reaching an agreed retirement age, it could result in an employee successfully claiming either an unfair dismissal or even an automatically unfair dismissal (section 187 (1)(f) of the LRA). Claims of this nature may either be arbitrated in the CCMA or adjudicated in the Labour Court. 

Candace Bachmann – Associate Attorney

Justine Del Monte & Associates Incorporated