New owner, same employment contract: Court reiterates original retirement age applies

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The judgment arose in the context of an automatically unfair dismissal claim in terms of section 187(1)(f) of the LRA. In terms of this section, read with section 187(2) of the LRA, a dismissal based on age will be automatically unfair (and constitute unfair discrimination), unless it can be shown that the employee has reached the normal or agreed retirement age for persons employed in that capacity.

These provisions have recently been considered by our courts in a number of decisions, most notably, in the decision of the Constitutional Court in Motor Industry Staff Association and Another v Great South Autobody t/a Great South Panelbeaters; and Solidarity obo Strydom and Others v State Information Technology Agency SOC Ltd.

In these cases, the vexed question has been whether an employer is entitled to rely on section 187(2) to retire an employee where the employee has continued working beyond the normal or agreed retirement age.

In Steyn, the Labour Court was again faced with these provisions. However, the point of contention in this case was whether or not the employee had, in fact, reached the agreed retirement age in circumstances where her employment had been transferred by operation of law to the new employer in terms of section 197 of the LRA.

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The employee’s case

Steyn argued in this case that she had not reached retirement age and that her employer’s decision to retire or dismiss her three months after she had reached the age of 60 was automatically unfair, based on unfair age discrimination, in terms of section 187(1)(f).

Steyn had originally been employed by UCS Solutions and in terms of her employment contract with UCS, her retirement age was 60. UCS was later transferred to Business Connexion Group (BCX) in terms of section 197 of the LRA. Two other companies were transferred to BCX at the same time. All three companies were subsidiaries of BCX. The retirement ages at these subsidiaries varied between ages 60 and 65.

Subsequent to the transfer, BCX attempted to conclude a new employment contract with Steyn. She refused to sign the contract due to the onerous restraint of trade clause and, allegedly, the stipulated retirement age of 60.

Sometime later, BCX informed employees, including Steyn, that it intended to harmonise all its employees’ employment contracts so that everyone would enjoy the same or similar terms and conditions of employment and benefits. As part of the harmonisation process, it sought to have one retirement age of 65 for all employees. No time period was set regarding the commencement date or finalisation of this process.

Shortly after Steyn reached age 60, she enquired about BCX’s retirement age, stating that she thought it now had a retirement age of 65. The company responded, explaining that the new retirement age of 65 only applied to staff who were employed under the new terms and conditions and that not all staff had moved across to these conditions. BCX then offered her a fixed-term contract. She refused, stating that she was a permanent employee and would not consider a contract that limited her employment conditions. Her employment was subsequently terminated based on retirement.

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A fanciful and fallacious argument

The crux of Steyn’s argument at the Labour Court was that the section 197 transfer did not amount to a transfer of her condition of retirement age, which she had agreed with UCS, and that the ‘agreed retirement age’ envisaged in section 187(2) of the LRA excludes any retirement age agreed between the employee and an old employer whose business transfers.

The Labour Court described this argument as ‘fanciful and fallacious’. It held that the Constitutional Court had made it clear that all the terms and conditions of the employment contract are transferred to the new employer when there is a transfer of business as a going concern, and that the new employer is automatically substituted in the place of the old employer in respect of all contracts of employment in existence immediately before the transfer date.

Steyn’s refusal to sign the new employment contract did not change the fact that there was a transfer of a business as a going concern from UCS to BCX and that all her terms and conditions with UCS were transferred to BCX. Further, the promise by BCX that employees would transition to a retirement age of 65 did not amount to an amendment of her terms and conditions. There was no deadline for the harmonisation process and, at the time of Steyn’s dismissal, it had only just started the process with newly appointed employees and those who accepted alternative employment pursuant to a retrenchment process.

Accordingly, the retirement age that applied to Steyn at the time of her dismissal was the age of 60, as contained in her employment contract with UCS and which had transferred to BCX. Following the applicable precedent, the Court decided that, as Steyn had already reached age 60 at the time she was dismissed, BCX was entitled to invoke the defence in section 187(2) of the LRA. There was, accordingly, no automatically unfair dismissal and Steyn’s claim was dismissed.

The Court further ordered Steyn to pay BCX’s costs, commenting that discrimination cases in the workplace should be viewed from the lenses of both employers and employees and that ‘the same energy used to condemn employers for having discriminatory practices should equally be used to condemn employees who make unfounded and wild allegations of discrimination against their employers’.