BCHC: When can employers expect employees to retire?

Written by Danny Hodgson

Traditionally, most employees retired around the age of 65. However, there is now a growing trend to work beyond that age. This could be due to increasing life expectancy, economic hardship or a failure to plan properly for the future.

Whatever the reason, it is important for employers to know how to apply a retirement age in their companies, should they wish to regulate it.

There are three ways in which employment can terminate due to the employee reaching the age of retirement:

• where the retirement age is contained in the employee’s contract of employment;
• where the retirement age is stated in a valid company policy applicable to all employees; or
• where there is an established practice at a company that employees retire once they reach a certain age.

If none of these grounds is present, terminating an employee’s employment due to them reaching an age which the employer unilaterally proclaims to be the age of retirement will probably amount to an automatically unfair dismissal in terms of section 187(1)(f) of the Labour Relations Act, making the employer liable for up to 24 months’ compensation.

The most flexible way for employers to regulate the age of retirement is through a company policy which is incorporated into an employee’s contract of employment by saying so in the contract. If the employer wants to raise or lower the retirement age, it can amend the policy and it will change for all employees without having to change each employment contract.

However, this may not be done unilaterally and it will be necessary to consult with employees or trade unions, and reach agreement if it means a change in the existing terms of employment, before the policy is amended. In practice, retirement is frequently regulated by collective agreement.

Should employees or unions refuse to agree to a change, the employer may still be able to vary the policy based on its operational requirements after following a fair procedure, including consultation with the affected employees or their union. This means that the employer should be able to show objective grounds to justify the change.

In short: if employers have good reason for not wanting employees to continue working beyond a certain age, that age must be stated in the employees’ employment contracts, a company policy or be an established practice. However, employers also have the option of allowing employees to continue working for as long as they are able to. Employment can then be terminated by agreement, failing which the employer can follow an incapacity process to dismiss employees if symptoms of old age begin to affect their performance.