REPUBLIC OF SOUTH AFRICA
IN THE LABOUR COURT OF SOUTH AFRICA, CAPE TOWN
		JUDGMENT
								         									  	Not Reportable
C318/2012
In the matter between:
MICHAEL ANTHONY MEYER							Applicant
And
DIAMOND’S LIQUOR STORE	 Respondent

Date heard:	25-27 August 2014
Delivered:	3 March 2015
___________________________________________________________________
JUDGMENT
___________________________________________________________________
RABKIN-NAICKER J 
[1]	The applicant referred a claim for automatically unfair dismissal to this court. The respondent company relies on section 187(1)(b) of the LRA in response to this claim i.e. that a dismissal based on age is fair if the employee has  reached the normal or agreed retirement age for persons employed in that capacity. His letter of dismissal read as follows:
		“DISMISSAL BECAUSE YOU ARE OVER RETIREMENT AGE
	Your age is 71. Our Company retirement age is 65. We have to apply our retirement policy and the law consistently. We cannot allow you to carry on working because we do not have work for you anymore. We therefore propose that we terminate your employment.
	The following arrangement will apply: The company will give you four weeks notice from today so your employment will end on 13 February 2012. You need not work your notice period. We will pay your final pay including leave accrued on 28 February 2012. You will be allowed to buy your Toyota Camry, CA 508 268, cash at the book value of our fixed assets register, R31,300.00.
		We thank you for your loyalty and hard work”
[2]	The following facts were common cause between the parties:
2.1	Prior to 2008, the respondents business was owned and operated by another company trading under the name Diamond Discount Liquors. The applicant commenced his employment with the respondent’s predecessor on the 15 September 1992 as its operations and merchandising manager. His letter of appointment at that time did not specify a retirement age.
2.2	The applicant became and remained a member of his employer’s Provident fund, which provided for a normal retirement age of 65 years. He continued his employment with the respondent predecessor after reaching the age of 65 in October 2005.
2.3	The business was transferred to the respondent in 2008 and the applicant’s employment was also transferred to the respondent. He  received certain ex gratia payments from the predecessor company.
2.4	At the time of the transfer the applicant was 68 years old. He was not informed that his age was a problem with that he would have to retire.
2.5	The applicant and the respondents managing director met in February 2011. They discussed the respondent’s retirement policy. The managing director emphasised to the applicant that the policy would have to be implemented against him and he should in the circumstances retire from the Provident Fund. He was also told that the respondent was prepared to enter into a new one-year fixed term post retirement contract of employment with him.	
2.6	Subsequent to the meeting an application was made to respondent’s Provident fund on 4 July 2011 for the full payment of applicant’s  member benefits on the basis of his late retirement. He applied to SARS for a tax directive and received such a directive, and subsequent payment of his member benefits from the Provident fund in November 2011.
2.7	Following the meeting of February 2011, in about March, the respondent drafted a one-year fixed term post retirement contract for his acceptance. The Pre-trial Minute specifically records that the applicant never did accept the draft contract.
2.8	At around this time the applicant was initially working a six-day week and spent time on Sundays preparing for the week ahead. His primary duties included controlling and checking weekly orders for the 30 stores in the Western Cape and four stores in Mpumalanga; buying and ordering “known value items”; coordinating the multi-page Christmas catalogue; placing all major press advertisements on a monthly basis in seven newspapers; dealing with customer complaints; and handling Jewish functions and coordinating this with store managers.
2.9	On the 17 October 2011, a retirement policy was circulated to all employees by the managing director. A memo detailing the retirement policy was also emailed to all employees.
2.10	On 16 January 2012, the managing director advised applicant by letter that his services would be terminated 13 February 2012. The applicant was required to leave the premises immediately. He then referred a dispute to the CCMA.
Evidence at trial
[3]	The employer’s human resources manager Mr Jacob Bothma (Bothma) gave evidence as to how the company had evolved in the past 14 years from a family business. In 2008, it was sold to a private equity fund in Rand Merchant bank, which owned 100% of the company at that point. In 2011, 50% of the company was bought by Fruit and Veg City. In as far as the Provident Fund rules were concerned the relevant rules in 2001 were that the date of retirement was 65 years of age. In 2005, the Provident fund was taken over by the Dynam-ique SA Provident Fund. The normal retirement age was 65 and the applicant and other members of the fund were all transferred to this it.
[4]	Bothma testified that all employees, including applicant were given a booklet of the new fund which stated that “all permanent and full-time employees over the age of 18 are required to join the fund as a condition of service.”  He explained that the company could only get a tax benefit for its contributions under the Income Tax Act if fund membership was a condition of employment for its employees. These rules were effective as from the 1 September 2005 and the applicant turned 65 on 10 October 2005. Although Bothma warned the then managing director, Mr Michael Sternberg, that if the applicant stayed on as a member of the Provident Fund it would  cause a precedent, nothing was done about it.
[5]	In January 2006, Bothtma drafted a new standard employment contract for the company, which the applicant signed and which included an automatic termination clause when an employee reached 65 years old.   Bothma testified that there were numerous changes in the top management of company after 2008. In 2009 a Mr Steenkamp, was appointed as operations executive with the same job description as applicant to shadow him and learn the duties from him. In 2010 Steenkamp was appointed as operations director, which led to the change of applicants duties in that he was no longer the line manager. The managers now reported to Steenkamp. He emphasized that the company’s policy was that when you reach 65 you retire from the Provident fund. If the company needed your serves it would enter into a fixed term contract with you. This had happened to other employees, a certain Taffy Davies and Steve Black, who had been put on fixed term contracts of six months at a time.
[6]	In February 2011, the new managing director, Paul O’Lyn and Bothma held a meeting with the applicant. The purpose of this was to speak to him and tell him to withdraw from the Provident Fund and enter into a fixed term contract in line with company policy. The applicant was 70 years old at that point. He testified that the applicant didn’t disagree and accepted that he would withdraw from the fund that enter into a one year fixed term contract. This was drafted and presented to the applicant in March 2011. The applicant said he wanted to discuss it with his family. By 1 June 2011, it had not been signed and the item of his contract was outstanding in the weekly management meeting and Bothma was urged to raise it with him.   and to change the starting date of applicant’s new fixed term contract to be 1 June 2011, and not 1 April 2011.
[7]	Bothma  referred to the member benefit claim form signed by applicant on 4 July 2011, in which he ticked the box indicating that the type of retirement he was taking was ‘late retirement’. Bothma testified that he also signed the form. The next day he sent it into the Provident Fund. He stated that in terms of the rules of the Provident fund the employment relationship ends. When this was handed in the applicant had still to sign the fixed term contract. In September the applicant asked for certain changes to it. These involved clauses regarding working hours; restraint of trade and polygraph test. These amendments were accommodated and there were no outstanding issues, but the applicant still did not sign the new contract. Bothma stated that the applicant was his senior, and he has a lot of respect for him but he was under huge pressure from the managing director. He stated that he felt there was an agreement and he knew there was a risk with SARS and he was also at risk with the managing director. He also felt that applicant was delaying for his own benefit and not in the best interests of the company.
[8]	He referred the court to the letter, dismissing the applicant, which was drafted by the managing director. He was present when the letter was given to applicant who was very deflated. He took the applicant home. Under cross-examination, it was put to him that the retirement fund can’t dictate the termination of a person’s employment. It was also put to him that there was a specific provision for late retirement. He agreed, but stated that in terms of the general rules of the Provident fund late retirement is not optional.
[9]	The general rules of the fund were not discovered before the trial and I asked that these be made available for the court. Clause 6.4.1 of these rules provide that:
“subject to the written consent of the participating employer, which shall lapse 12 months after it was granted unless it is renewed, a member may retire late at any time prior to his 70th birthday in which case contributions in respect of the member shall continue until the actual date of such late retirement and best otherwise specified in the Special Rules.”
[10]	It was asked under cross-examination whether the company received notification from the fund that he was not eligible or should withdraw his benefit. Bothma conceded that it did not. He was asked who had taken the decision that he had to withdraw from the fund and Bohmat said it could be the managing director, Paul O’Lyn, who proposed it. He testified that the fact that applicant withdrew from the fund and didn’t end his employment with the company was what had tax implications for it. He was asked why the applicant was advised to withdraw from the fund and agree to a fixed term contract. Bothma stated that the company rule is you retire at 65. He agreed under cross-examination that applicant probably believed that the fixed term contract was just a formality and it would certainly be renewed. The applicant had asked to sign the fixed term contract and Bothma testified he told him he could not sign it without discussing it with Mr O’Lynn. O’Lynn  had instead drafted the dismissal letter.
[11]	The applicant testified that he was employed in 1992 and by 2006, he was third in charge of the company. He had celebrated his 65th birthday and life went on. After the business was sold, he agreed to help coach the new managing director Paul O’Lyn who only took over effectively sometime in 2010. Up to then the policy on retirement of the previous owners had been that those for who were hard-working and faithful, age was of no consequence. He had never asked been asked by anyone to retire. He thought that during 2009 and 2010  the new managing director wanted to be harder on the issue of retirement at 65, but he didn’t the implement policy. In He was about 69 when O’Lynn had started as Managing Director  of the company. When he was 70, He testified that he was honoured by the company and a party was held at Maitland. At the function O’Lynn had thanked him for 20 years of service and said he was exemplary and there would always be a place for him at the company. He got the impression that as long as he was fit and healthy, he would be at the company.
[12]	He testified that at the retirement meeting he held with Bothma and O’Lynn he was told that because he was over 70, he should go onto a contract. He understood nothing would change and that there would be a renewal every year. He was advised at that meeting to withdraw from the Provident fund. The applicant acknowledged that he did agree and he had taken the draft contract home to discuss with his family in about March. He also discussed with the former managing director because he had worked for him for 20 years and he had advised him about certain clauses which needed to be reviewed. The changes were made after a few meetings between Mr Bothma and himself.
[13]	The applicant testified that after the changes had been made, the whole of the office was being packed up and moved. Things were quite hectic, so the contract signing was left while the office moved. He said that whenit  was given back to him, which would have been around October or November 2011, there was a very fast pace of work in the run-up to Christmas and he then travelled up to Mpumalanga and it got left on the backburner. He wasn’t asked to finalise it. So he did his day-to-day work. It was only after Christmas when he himself called a meeting with Bothma and  said you and I are the two signatories, so let’s sign and  seal it. Bothma said  that he could not sign it without approval and clearance from O’Lynn , who was still away in Leopard’s Creek.
[14]	The applicant denied delaying or employing delaying tactics in signing the contract. It was because of the disruption of the move and the time of year and that no one had knocked on his door or pressurized him to sign. He was called into a meeting with O’Lynn on 16 January 2012. He walked in and said, welcome back to O’Lynn who asked him to sit down and pushed a letter across the table, which was the dismissal letter. He asked what had he done wrong, and the reply was short and sharp. He said nothing, you are too old. That was the end of the meeting.
[15]	 The applicant testified that he had satisfied himself that he was physically fit to do his work and approached his general practitioner to give an honest assessment which he had done. He works currently for the opposition Picardie Rebel doing contract work five days a week. He earns R10,000 a month doing this and works for both the financial and mental stimulation.

Evaluation
[16]	Under cross examination the applicant agreed that the company’s policy was that employees would retire at 65, after which the company might enter into fixed term contracts with those who services was still required.  The rules of the Provident fund, of which he was a member as a condition of his employment, defined “normal retirement age” as 65. He also confirmed that this was the reason he characterized his own retirement as “late” when he completed his Provident fund claim form on 4 July 2011 at the age of 70.
[17]	It was not in dispute that the applicant met with the managing director and Bothma in February 2011. It was also common cause that at this meeting, the applicant agreed to retire from the Provident fund and to enter into a fixed term contract with the company. The applicant testified that his understanding was that he had only agreed to retire from the Provident fund, and not from his employment. 
[18]	It was submitted on behalf of the company that the applicant’s agreement to retire and to resign from the Provident fund and to work thereafter on a fixed term contract was borne out by his subsequent conduct. On 4 July 2011 he applied to withdraw his benefits from the Provident fund and cited “late retirement” as his reason for withdrawing his benefits. Further, between March and October 2011 he negotiated with Bothma over the final details of his fixed term contract. 
[19]	The Rules of the Provident fund provided for a normal retirement age of 65 and permitted members to take late retirement up to age 70 with the employer’s written consent. They also provide that no fund member may terminate membership whilst remaining in service. “Service” in the rules means service as an “eligible employee” of one of more of the participating employers as set out in the special rules relating to that participating employer. It was submitted that this rule was applied by the company by re-employing retirees, where their skills were required, on fixed term contracts of six months or one year.
[20]	It was argued by Ms Harvey on behalf of the company that because legislation governing pension funds and income tax define “retirement date” and “retirement”, South African law is to the effect that the “normal retirement age” specified in the Rules of a Provident Fund is the applicable “normal retirement age” for the purposes of the section 187(2)(b) special defence. This conflation of the ‘normal retirement age’ in terms of a pension fund’s rules with its meaning in terms of section 187(1)(b)of the LRA cannot be correct. As Waglay J (as he then was) stated in SA Clothing & Textile Workers Union & others v Rubin Sportswear 
“[12]	…….. respondent's reliance on the terms of the provident fund is misplaced. The provident fund defines retirement age as 'the age of 55 or any age thereafter, but not later than the contributors 65th birthday'. This formulation does not help respondent. It does not stipulate an age for retirement but merely confers a right upon an employee who is a member of the provident fund to claim his/her benefits within a set age bracket.”
[21]	On the facts in casu the employment relationship between the parties continued past the normal retirement age of the company (as contained in the standard employment contract), and indeed past the date stipulated for late retirement in terms of the applicable pension fund rules. Finally after his 70th birthday the applicant was approached by the company and agreed in principle to go onto a fixed term contract. The company pleads that what applicant then did was to seek to put off accepting the offer contained in the draft fixed term contract for as long as possible. The draft contract’s starting date, as a result, was amended and moved from April through June to October 2011. It would seem that when the applicant finally suggested it move to the 1 January 2012, the CEO’s patience had become exhausted. It is significant that one of the common cause facts that the parties recorded in the pre-trial minute was  that the applicant never accepted the draft contract.
[22]	In Rubin Sportswear v SA Clothing & Textile Workers Union & others  the court considered what ‘normal retirement age’ meant and found that it means ‘accords with the norm’ and is applied in relation to persons employed in the same capacity as the person whose dismissal is in issue. A retirement age that is not an agreed retirement age becomes a normal retirement age when employees have been retiring at that age for so long that it can be said that it has become the norm for employees to retire at that particular age. The LAC held that Section 187(1)(b) creates only two bases upon which an employer can justify the dismissal of an employee on grounds of  retirement age - the one is the agreed retirement age and the other is normal retirement age. 
[23]	The applicant’s evidence was that he agreed to go onto a contract and he understood this to mean that nothing would change, but the contract would be renewed every year. In my judgment, the agreement in principle to go on to a  contract constituted an acceptance by the applicant that the normal retirement age was 65 and that he could no longer be in permanent  employment after the age of 70. His evidence that he understood the situation to mean that nothing would change and the contract would be renewed each year was not convincing given his requests that the dates on the draft contract be changed on a number of occasions. It is far more probable that he was very concerned that for the first time in his career his job security was threatened and that he wanted to put off the date of commencement of the fixed term contract for as long as possible.
[24]	There is no doubt that the unceremonious way in which the applicant was finally told to leave 	caused him a great deal of hurt and was an affront to his dignity.  However, his agreement in principle to go onto a fixed term contract constituted an acceptance that the company’s policy was that of a normal retirement age of 65, and that employees may thereafter be asked to enter into fixed term contracts. He did not dispute that the normal retirement age was 65. He did not put up a case that this normal retirement age did not apply to him in his specific capacity. The agreement in principle to enter into the fixed term contract allows the company to rely on the ‘normal retirement age’ defence. In all these circumstances, the claim of an automatically unfair dismissal must fail. The respondent company does not seek costs in the event that applicant’s claim is dismissed. I therefore make the following order:

	Order:
1.	The applicant’s claim is dismissed.
2.	There is no order as to costs.

								______________________	
H. Rabkin-Naicker
Judge of the Labour Court

Appearances:
Applicant: Adv L Myburgh instructed by Greenberg and Associates
Respondent: Adv S Harvey instructed by Guy and Associates