Your Employee Reaches Retirement Age and Wants to Keep Working – What Should You Do?

“For many, many people, I’m a firm believer that 60 is the new 50.” (Carolyn Aldwin, director of Oregon State University’s Center for Healthy Aging Research)

As even the youngest Boomers (the generation born between 1946 and 1964) approach the “Big Sixty”, an increasing number of employees will be thinking about whether or not they want to retire. And an increasing number of employers will be wondering whether to ask them to stay on or to retire them (and if so, when).

Bear in mind that our law does not recognise any concept of a general “normal/standard retirement age” and that you need to tread carefully here because a dismissal is automatically unfair if the reason for the dismissal is that the employer unfairly discriminates against an employee, directly or indirectly, on any arbitrary ground such as age. 

Our courts look upon automatically unfair dismissals with particular disfavour, and a guilty employer can expect harsh penalties.

When is age-related dismissal fair?

As an employer you can avoid a finding of automatically unfair dismissal if you prove –

  1. That there is a clause in your employment contract specifying an agreed retirement date, or 
  2. That there is a “normal or agreed retirement age” for employees “employed in the capacity of the employee concerned”, and
  3. That the dismissal is based on age and not, for example, a disguised retrenchment or dismissal for some other reason.
What if your employee wants to stay on after retirement date?

“Sixty really is the new Fifty” says at least one recent scientific study, and it certainly is the case that many employees want to carry on working long after 60 or 65. Sometimes economic necessity is the motivation, sometimes a need to carry on being useful, sometimes just a reluctance to “retire and go fishing”. 

Equally, many employers are reluctant to lose the experience, loyalty and talent of senior staff and will happily accept a request to stay on.

However, a recent Labour Appeal Court case confirms the need for all concerned to tread carefully in such a situation –

Dismissed 9 months after reaching 60
  • An employee turned 60 but carried on working and being paid as normal. No mention was made of the fact that he had reached the agreed retirement age set out in his employment contract. 
  • Nine months later however, his employer told him that his services would now terminate as he had reached the agreed retirement age. 
  • He disputed this as an automatically unfair dismissal, arguing in the Labour Appeal Court that a new employment contract or “tacit” (implied) contract had come into effect, and that this contract extended his employment indefinitely or at least to 65. Alternatively, he said, his employer had waived (relinquished) the retirement clause.
  • The Court disagreed, holding that the employment contract and its agreed retirement date had continued uninterrupted, with both employer and employee having a right to terminate employment at any time thereafter. 
  • Per the Court: “The focus is not so much on when the employee reached his or her retirement date, but rather that the employee has already reached or passed the normal or agreed retirement age.” There was also nothing in the conduct of the parties to suggest they had entered into a new tacit contract or that the employer had waived its rights. 
  • The employee’s enforced retirement stands.
An action list for employers 
  • Avoid a situation where your employee can no longer do the job but there is no agreed retirement date. That would leave you trying to prove a valid ground for dismissal – incapacity or incompetence perhaps. Not easily done, and traumatic for you both. 
  • Moreover, it’s not always easy to prove what a “normal” or “standard practice” retirement age is for your industry and circumstances. Much safer to have a specific retirement clause in all your employment contracts. 
  • Don’t try to unilaterally impose retirement clauses on employees if their existing contracts don’t already have them – this is a matter for negotiation and agreement.
  • Diarise each employee’s retirement date and before that date rolls around, either make it clear to the employee that their employment is about to end automatically or put in place a new employment contract. 
Notes for employees 
  • If you work beyond an agreed or normal retirement age, the harsh reality is that you are, as the Labour Court has put it before “working on borrowed time”. 
  • Without a written agreement, setting out clearly when your new retirement date is, you have no guarantee that your post-retirement employment is in any way secure or legally protected.

As always with employment law matters there are complexities, grey areas and substantial downsides to getting it wrong, so seek specific professional advice!

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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The LawDotNews client newsletter was started in 2005 to provide law firms with a highly professional, effective, low effort, low cost marketing service in the form of the LawDotNews client newsletter. Grow your practice with regular, quality communication! For the cost of a business lunch, imprint your firm’s name in the minds of your best clients and prospective clients!