Working Beyond 60: When is it Legal to Dismiss an Employee?

6 Mar

What happens when an employee reaches retirement age but keeps working? Can an employer decide months—or even years—later to dismiss them simply because of their age? The Constitutional Court recently tackled two cases with these pressing questions. These rulings are not just another legal footnote, they have major implications for businesses, their retirement policies and workforce planning. For accountants advising clients on compliance, understanding this decision is crucial—because getting it wrong could mean costly legal battles and hefty payouts. We look at these cases in more detail below.

What were the cases about?

Two separate disputes were brought before the Constitutional Court because they raised the same fundamental legal question:

Can an employer dismiss an employee at any time after reaching the agreed or normal retirement age, or does the dismissal have to happen exactly on that date?

The two cases involved:

Case 1: Motor Industry Staff Association & Willem Landman v. Great South Autobody
This case centered around Willem Landman, who continued working past his agreed retirement age of 60. Later, his employer, Great South Autobody, dismissed him on the basis of age. The key legal question was whether an employer can dismiss an employee at any time after they reach retirement age or whether such a dismissal must happen exactly on the agreed date.
The Labour Court and the Labour Appeal Court upheld the employer’s decision, ruling that an employer may legally terminate employment at any point after the employee reaches the agreed retirement age.
Landman challenged this decision at the Constitutional Court, arguing that his dismissal was automatically unfair. He once again lost his case—his dismissal was considered lawful.
Case 2. Solidarity v. State Information Technology Agency (SITA)
Six employees were dismissed after working past their agreed retirement age of 60, even though their contracts allowed them to work until 67. They argued their dismissals were automatically unfair.
The Solidarity employees won—because their contracts allowed work until 67, their dismissals were automatically unfair, and they were awarded 24 months’ salary in compensation.

No legal costs were awarded to either party.

The legal background

The case focused on Section 187 of the Labour Relations Act (LRA), 1995, which regulates dismissals based on age:

Section 187(1)(f): A dismissal based on age is automatically unfair.
Section 187(2)(b): However, dismissal is fair if the employee has reached the normal or agreed retirement age.

The court debated what "has reached" means—whether dismissal must happen exactly on that date or if it could happen later.

Different views in the judgments

In the end, the court did not reach a unanimous interpretation of the law, as the ruling was divided into three distinct judgments.

View 1 (Zondo CJ & Others): Dismissals must happen on the exact retirement age date, or the employer loses the right to dismiss based on age. If an employer allows an employee to keep working, they must have a clear contractual arrangement.
View 2 (Van Zyl AJ): Employers have a right to choose when to terminate employment, as long as it is done within a reasonable time after the employee reaches retirement age.
View 3 (Rogers J & Others): Employers can dismiss at any time after retirement age, provided they give reasonable notice.

These judgments reinforce the principle that a decision to retire an employee must be both fair and rational.

How does this affect employers?

Employers must be more careful about handling retirement-related dismissals. If they allow employees to continue working beyond retirement age without a clear agreement, they may lose the right to dismiss them based purely on age. This could expose businesses to legal risks and costly claims for unfair dismissal. What this means in practice:

Employers should dismiss employees exactly on their retirement age if they plan to terminate based on age.
If they allow continued employment, they must have a clear contractual agreement or act within a reasonable timeframe.
Employers who delay too long without a clear reason may lose the right to dismiss employees based solely on age.

Help your clients stay compliant

Accountants are crucial in helping clients understand and comply with employment laws. If you advise businesses, now is the time to review their retirement policies and ensure they align with this latest legal precedent! Here’s a list of how you may assist your clients:

Review employment contracts and ensure contracts clearly define the normal or agreed retirement age and outline whether employees can work beyond that age.
Review the clients’ HR policies and advise on updates to include clear retirement termination procedures.
Help clients understand and manage payroll & compensation risks. If an employer dismisses an employee unfairly, they may have to pay up to 24 months’ salary in compensation. Ensure clients understand the financial risks.
Assist clients to have appropriate documentation, i.e. agreements and consent given for employees working beyond retirement age, to prevent future disputes.
Guide on proper notice periods when the employer intends to dismiss an employee after retirement age, they must give reasonable notice—this should be clearly structured in their policies.
Offer to review clients’ compliance with labour laws and retirement policies to prevent potential lawsuits.
Note: Remember to seek legal advice from experts where necessary.