December 13, 2018
“Neither a borrower nor a lender be
For loan oft loses both itself and friend” (Shakespeare)
It seems logical that the very strong consumer protections in the NCA (National Credit Act) are designed for commercial situations in which credit is advanced by “credit provider” businesses to “credit consumers”.
But does the NCA also apply to non-commercial, once-off loans? Like a loan to a friend or relative? And what about property sales?
Why should you be worried?
If you aren’t in the business of providing credit it seems counter-intuitive that you should have to worry about NCA registration when making a single loan or giving credit on a once-off basis. And in fact until now our various High Courts have been split over the question.
But that has all changed with a recent Supreme Court of Appeal (SCA) decision, and your danger is this – if you should have registered as a credit provider but didn’t, your agreement is unlawful and could be declared void. You might have to write off your whole loan.
A “family” fall out and a R2m “time to pay” share purchase deal
- A couple brought into their business a businessman who was “like a son” to them. The idea was that eventually he would take over the business and over time he became a substantial shareholder. Alas however some 12 years down the line there was a falling-out and a mutual decision to part ways.
- It was agreed that the businessman would sell his interest in the business to the couple for R2m, to be paid by way of a R500,000 deposit and monthly instalments of R30,000 p.m. Interest was payable on the deferred amount and a mortgage bond registered over the couple’s house as security.
- The businessman (as seller) registered as a credit provider (in order to get the mortgage bond registered in his favour) but only after the credit agreement was signed.
- When the business ran into trouble the couple couldn’t continue paying and the seller sued them for the outstanding balance of R1.13m. The couples’ defence was that the agreements were null and void due to non-compliance with the NCA.
- The SCA held that the seller should have registered as a credit provider before the credit agreement was entered into. He didn’t, the agreement was thus unlawful, and he loses his R1.13m.
What is excluded from the registration requirement?
So are you at risk? Firstly, the NCA has many general exclusions and situations of limited application, such as to “incidental” credit agreements, interest-free loans, larger corporates and agreements (thresholds apply – take advice for details).
Secondly, the NCA only applies if you are “dealing at arm’s length”. What does that mean in practice?
- To start with, there are specified exclusions for certain shareholder loans and for loans between family members who are “co-dependent” or “dependent” on each other. Think for example of parents supporting a student daughter or the daughter supporting her parents.
- Then there’s the much wider provision excluding “any other arrangement … in which each party is not independent of the other and consequently does not necessarily strive to obtain the utmost possible advantage out of the transaction”. That might suggest that loans to close friends are also excluded, but it’s not nearly as simple as that.The lender in this case couldn’t of course claim to be an actual family member of the couple. But he did argue that because of his “almost familial relationship” with them, he didn’t try to get the “utmost possible advantage” out of the deal and therefore the NCA didn’t apply. On the facts however the SCA disagreed, the relationship between the parties having become hostile and threatening prior to signature of the agreement. The point is that if there is an element of “independence” between you and the debtor, you are at risk.
Outside those specific exclusions, deciding whether or not a court will consider you to be “at arm’s length” is always going to involve grey areas.
Sale of property with deferred payments
There’s particular danger here for the increasing number of property sellers who, in order to attract cash-strapped buyers in these tough times, are agreeing to sell their properties on a deferred payment or instalment sale basis rather than the standard “pay in full against transfer” basis. Watch out also for a normal “pay in full” deal morphing into a “pay me the rest later” sale when the buyer can only get a bank loan for part of the total price.
If either of those scenarios apply, your sale may have to comply with both the NCA’s obligation to register as a credit provider and with the strict requirements of the Alienation of Land Act. Specific legal advice is essential before you agree to any form of “deferred payment” property sale.
The bottom line
Unless and until the NCA is amended to make it clearer, less confusing and more pragmatic, tread very carefully in lending money or giving credit – in relation to a property sale or otherwise – to anyone. Even family and friends.
Ask your lawyer for advice on your specific circumstances – do you fall into one of the exceptions or must you register as a credit provider? If you do need to register, prepare for lots of red tape and delay!
December 13, 2018
“Don’t wait to buy land, buy land and wait” (Will Rogers)
If you plan to buy property this Festive Season – perhaps your new dream house, or a holiday home, or an office for your business, or purely as an investment – check the title deed of the property you have your eye on before you sign anything.
Why is that so important?
Firstly, what exactly is a title deed and why check it?
In a nutshell, a “Title Deed” (also called a “Deed of Transfer” – they’re the same thing) is proof of who owns a particular property. It’s issued by the local Deeds Office after a conveyancing attorney has registered transfer to a new owner.
The title deed is a mine of crucial information relating to the property, its history, and conditions attaching to it. So check it thoroughly, it’s well worth the effort –
- You may well pick up valuable pointers to the property’s value, such as what the seller paid for it and when, things that could affect what it’s actually worth to you, and so on.
- If you don’t do a proper check, you could be in for a very nasty surprise down the line. To take just one example, you really don’t want to find out after you buy that servitudes apply and you must now live with neighbours crossing your property whenever they feel like it, or that you can never build that double-story you have dreamed of, nor subdivide when you decide to retire.
The reality is that our courts regularly have to deal with disputes arising from title deed conditions of which the buyer was blissfully unaware – until it was too late. And it’s no use crying “but I had no idea I was buying a property with a zoning restriction/height restriction/right-of-way servitude”. Because the property register kept by the Deeds Office is open to the public, everyone, including you, is presumed to have notice of registered rights like those.
You can get a copy of the title deed direct from the Deeds Office or online, but it will be easier to ask the seller (estate agent if applicable) or your lawyer for one.
So what should you look for before buying?
Look for the following in particular –
- Who the current registered owner is, when they bought the property and what they paid for it.
- What the property’s history is.
- The full description of the property, its erf or section number, exact size and references to boundaries.
- Any rules or contracts applying to it. For example if you are buying into a residential complex managed by a Home Owners Association, there is likely to be an obligation to join the HOA.
- “Restrictive conditions” relating to your rights to use, build, sell the property and so on. For example, no matter what the local zoning laws allow, you could find that you are specifically limited to residential usage only, or to a single story house built on no more than 50% of the erf, or you may not be able to subdivide a large piece of land.
- Real rights registered over the property. Because they are “real”, they come with the property and will be enforceable against you if you buy. And they can seriously limit not only the property’s value but also your use and enjoyment of it. Imagine for example if all the neighbours have a “right of way” servitude to use a road or footpath through your property. Or that someone has a lifetime usufruct giving them the right to live in your new house until they die.
- Any mortgage bond will also be endorsed on the title deed, as will the fact that it has been cancelled if the owner has paid it off in full – factors that may help you in deciding on where to pitch your offer.
- Each title deed will be different. Scrutinise it for anything else that may be relevant to your decision whether or not to buy, or to the price you are willing to pay.
Check that everything in the title deed ties in with the offer you are being asked to sign. And that you are happy with all obligations and restrictions on your use of the property.
Most importantly, even the simplest title deed can be full of legalese and pitfalls for the unwary. So as always, ask your lawyer for help before you sign anything!
December 13, 2018
Believing someone to be guilty of a crime you call the police and have the suspect arrested, only to have the charges dropped. Can you be sued for defamation?
A recent High Court case provides some answers.
A fraudulent iPad order, an arrest and a R1.6m claim
- A government employee was, at the instigation of officials in his department, arrested and taken in for questioning by police on suspicion of fraudulently ordering R138,000 worth of 14 iPads on departmental letterheads.
- The police released him after taking a statement and his employers did not pursue disciplinary charges against him. They also withdrew an accusation of unlawful conduct in the workplace, with however an indication that the matter might be revisited if further information came to light.
- The employee accused his employers of defamation and sued them for R1.6m in damages for his tarnished dignity and reputation at work, trauma, post-traumatic stress, medical expenses and loss of earnings
Holding that the publication or allegation of a suspicion of a criminal offence is defamatory and the onus is upon the accuser “to prove justification”, the Court concluded, on the facts of this particular case, that there was indeed a “reasonable suspicion” that the employee had been involved in the fraudulent order. The employer had therefore been justified in its conduct.
The employee’s claim for damages accordingly failed and he is lumbered with a (no doubt substantial) legal bill.
The acid test – 3 things an accuser must prove
An accuser relying on reasonableness of the publication as a defence must prove, held the Court, that he or she –
- Had reason to believe in the truth of the statement,
- Took reasonable steps to verify its correctness, and
- Acted reasonably when reporting the matter to the police, or that publication of the statement was reasonable in all the circumstances of the case.
What that all boils down to is this – whether in the workplace or out of it, you aren’t automatically guilty of defamation just because no prosecution ensues.
What is vital is that you have enough evidence to prove all three legs of the reasonableness test if it comes to justifying your actions in court.
December 13, 2018
“… this is a matter of national security and… something of the order of 450,000 gun owners with their expired licences form part of this equation… in a country riddled with crime…” (Extracts from judgment below)
Possession of an unlicensed firearm is, for good reason, a serious offence carrying heavy penalties, and law abiding citizens will support the police in their efforts to rid our country of illegally-held firearms. It’s a major problem, with media reports suggesting that only 3m out of a total of 5.3m guns are registered and legally owned. That’s 2.3m illegal firearms out there!
Caught up in this are the almost half a million South African gun owners who have always held their firearms legally in terms of valid licences but have, for whatever reason, not renewed them on time. Not only private citizens are involved but also security service providers, and it’s a big issue – the Court in this case estimated that up to 60 million rounds of ammunition are involved.
These gun owners are faced with a serious quandary in that, following a Constitutional Court finding that the Firearms Act’s provisions pass constitutional muster, the police have been pressuring them to surrender their firearms for destruction or face arrest and prosecution. The argument is that once a licence has expired it comes to an end and cannot therefore be renewed, rendering possession of the firearm/s unlawful.
Of course the best advice is to always apply for renewal of your licence in good time (at least 90 days before expiry). But now holders of expired licences at least have some interim respite following a High Court decision. The Court has, pending determination of a full application by GOSA (Gun Owners of South Africa) to resolve the situation, ordered that SAPS “…are prohibited from implementing any plans of action or from accepting any firearms for which the licence [has] expired at its police stations or at any place, for the sole reason that the licence for the firearm expired and… from demanding that such firearms be handed over to it for the sole reason that the licence of such a firearm has expired…”.
Note that this is only interim relief and that there is still much uncertainty over what the final outcome of this case will be, over the validity of old “green” licences, over talk of a possible upcoming amnesty, and over an initiative to amend the Firearms Control Act to allow grace periods in which to apply for renewals.
Until there is clarity on all these issues ask your lawyer urgently for specific advice if you have a problem.
November 21, 2018
“To my mind the best proof of solvency is that a man should pay his debts” (quoted in the judgment below)
If you are owed maintenance you have a variety of enforcement options open to you and should ask your lawyer for advice on which is the best for your particular claim and circumstances.
A recent High Court judgment confirms that one of the weapons in your legal armoury is the sequestration application. And as the defaulter’s desperate attempt to avoid sequestration in this particular case illustrates, even just the threat of sequestration can be a powerful motivator to settle up, regardless of whether your claim is based on maintenance arrears or on any other form of debt.
The reason is that an insolvent has to surrender control of his/her estate to a Trustee, who collects and sells all the insolvent’s assets and divides the proceeds between the creditors. The insolvent can also be ordered to pay over any excess earnings – such as for example monthly salary less reasonable expenses – to the Insolvent Estate. That’s a lot of control to lose over one’s own affairs.
Maintenance arrears and a “no goods” return
In this particular case –
- As part of a divorce settlement, a father was ordered to pay child maintenance, but fell behind and ran up substantial arrears.
- His ex-wife obtained judgment against him in the maintenance court for R45k and the sheriff, with a warrant of execution against property in hand, attached a motor vehicle belonging to the father.
- Unfortunately the sheriff did not actually remove and sell the vehicle at the time and three months later it was gone. The sheriff then rendered a nulla bona (“no goods”) return when the husband claimed to have no money or attachable assets.
- The mother then applied for the sequestration of the father’s estate, and the father raised two main defences –
“I’m not actually insolvent”
To sequestrate someone’s estate you have to prove either actual insolvency (not always easy to do) or an “act of insolvency”. And although the sheriff’s nulla bona return in this matter qualified as an act of insolvency, the husband still insisted that he was actually solvent. He didn’t deny owing the R45k (plus by that stage another R183k) but said that he would make payment once he received tax refunds from SARS in the future.
The Court dismissed this argument, quoting from a 1907 judgment: “Speaking for myself, I always look with great suspicion upon, and examine very narrowly, the position of a debtor who says, ‘I am sorry that I cannot pay my creditor, but my assets far exceed my liabilities’. To my mind the best proof of solvency is that a man should pay his debts; and therefore I always examine in a critical spirit the case of a man who does not pay what he owes” (our emphasis).
It was just not good enough, said the Court, for the father to say that he would eventually pay.
“Sequestration won’t be to the advantage of my creditors”
To get a sequestration order you must also prove that “there is reason to believe that it will be to the advantage of creditors of the debtor if his estate is sequestrated”.
The husband’s contention here was that he was under debt review in terms of the National Credit Act, and was making payments to his creditors. The flaw in this argument, said the Court, was that only listed creditors were being paid under the debt review arrangement. Nothing at all had been paid towards maintenance for almost four years, and the arrears were increasing at a rate of some R7k every month.
In those circumstances the Court was satisfied that sequestration would indeed be to the advantage of the husband’s creditors.
The Court’s discretion
Even after you have proved that you have a “liquidated” (agreed or easily-established amount) claim of at least R100, plus insolvency and advantage to creditors as above, the court can still refuse to order sequestration. In this regard it has a wide discretion “to be exercised judicially taking into account all the facts as well as the general history and circumstances of the case”.
Finding there to be “no reasons or circumstances to disentitle her of this order”, the Court held for the mother and sequestrated the defaulting husband’s estate.
November 21, 2018
“Ignorance of the law is no excuse” (old Roman law principle applied in many legal systems worldwide)
Whether you travel abroad on business or on holiday, ignorance of local laws can easily land you in a situation where your protestations of “But I had no idea that that is illegal here, it’s totally legal in South Africa” are met with stony faces and a complete lack of sympathy from your destination’s law enforcement authorities. And whilst the nearest South African embassy or consulate can offer you some basic support, it’s the local laws – and penalties for contravening them – that could put you in jail (or worse).
Recently government has specifically warned travellers to acquaint themselves with the laws and customs of their destination countries. This follows the death sentence imposed on a South African drug smuggler in Vietnam, and reports that some 800 South Africans are currently doing time in foreign jails, not only on drug-related charges (see “Know your foreign laws before travelling” on the South African Government News Agency’s website).
In regard to drug laws the problem is that, with many countries in the process of either legalising or easing their stance on marijuana and other “soft” drugs, it can be difficult to keep up with what’s legal where.
And remember that even prescription drugs can put you behind bars – in some countries medicines which are legal in South Africa could land you in prison (in the case of Dubai for example, for 6 months to 2 years unless you are carrying the required “medical certificate” – see here).
Moreover the warning goes far beyond illegal drugs, and applies to you even if you have never had anything to do with them. In Thailand for example, you can be imprisoned for disrespecting the Thai Royal Family in any way – see here for details of how much trouble you can land in for not obeying that particular law.
There are many other such examples from around the world, and whilst some general articles are interesting for an overview of some unexpected laws in popular destinations (this one for example), rather Google specifically for the laws of the particular country or countries you are visiting. Just make sure that whatever webpage you land on is (a) authoritative and (b) up to date. A good place to start is perhaps the UK Government’s “Foreign travel advice” page.
DIRCO (the Department of International Relations and Cooperation) has plenty of guidance on its “Advice for South African Citizens Travelling Abroad” page here.
If you’re unsure of anything don’t take any chances, rather ask your lawyer for help.
November 21, 2018
Once again November is upon us, and no doubt employees around the country are starting to dream of all the good things they can do with that “Christmas” bonus coming their way. If you are one of them perhaps you plan to pay off debt or to re-charge the family’s batteries with a special holiday. Or perhaps you just want to reward yourself and your loved ones with a bit of free-spending on a luxury or two to celebrate a special time of year.
That’s all well and good, but the hard reality is that every year a percentage of employers decide that they can’t afford a sudden doubling of their staff costs and will call everyone together to say something like “Sorry guys, times are really tough so no bonuses this year. You’re lucky to still have jobs”.
Disappointment and anger will no doubt lead to thoughts of CCMA referral and legal action, but none of that is necessary if both employers and employees (a) understand the law, (b) prepare and plan properly, and (c) communicate effectively long before hopes are raised then shattered.
Firstly, what does our law say?
It is a persistent myth that our law automatically forces employers to pay annual bonuses. Not so – nothing in our labour legislation or employment law says anything of the sort.
What our law does say to employers is this –
- If your employment contracts say you must pay bonuses, your employees have an enforceable legal right to receive them. This is just standard contractual law – both you and your employees are held to your agreements.
- You must consider not only what your employment contracts themselves provide, but also any company policies, collective agreements and the like.
- Check also whether any conditions – like profitability of the business or employee performance or contribution to profitability – are specified. And are you given unlimited discretion in deciding whether or not to award bonuses?
- Even where nothing has actually been agreed as above, you may still be bound to pay annual bonuses if you have paid them regularly in the past. This is because departing from any established practice or custom without prior employee consultation can be seen as an unfair labour practice. The law aside, employee morale will naturally plummet if expectations of a bonus have been built up over the years but are then dashed at short notice.
- Be careful of differentiating between employees performing the same or similar work – that’s a recipe for dispute and accusations of unfair labour practice.
Prepare and plan
Employers: Have your lawyer check all your employment contracts and company policies to make sure that you have full discretion and will never be forced to pay bonuses your business can’t afford. Take advice on how you can regularly pay bonuses in good years without creating “rights of expectation” enforceable by your employees in bad years. Use cash flow projections to give you (and your employees) early warning of any inability to pay bonuses this year.
Employees: Don’t spend your bonus until you know for certain how much (if anything) is actually coming your way. And remember that SARS could be taking a bigger than normal slice out of this particular pie – ask your employer for an estimate of how much from the PAYE deduction tables. And in planning how to spend your bonus you can do a lot worse than follow the tips in an article like The Post’s “Use your 13th cheque wisely” here.
Whichever side of the employment contract you are on, open and effective communication will always be the key to avoiding false hope and bitter disappointment when it comes to bonus time.
So as an employee don’t be shy to ask the boss about his/her bonus plans and if as an employer you have any doubt at all about your business’ capacity and/or willingness to pay bonuses this year, tell your employees what to expect before expectations build up. After, of course, taking legal advice if you have any doubt as to your legal position in this regard – our labour laws are complex and getting them wrong can be costly!
November 21, 2018
“I never married because there was no need. I have three pets at home which answer the same purpose as a husband. I have a dog which growls every morning, a parrot which swears all afternoon, and a cat that comes home late at night” (Marie Corelli, English novelist)
Residential complexes and estates are becoming more and more popular for the many advantages they provide. Remember however that – in everyone’s interests – they also come with restrictions on your freedom to use and enjoy your property, and that you bind yourself to whatever Conduct Rules apply in your community scheme.
One of those restrictions is likely to be your right to keep a pet, and that’s a topic that can be a source of much conflict and unhappiness.
Residents tend to fall into one of three camps –
- “I really need to have my little dog/cat/parrot/lizard living with me”
- “I simply cannot handle any more of that parrot-screeching/lapdog-yapping/midnight-cat-yowling – it has to go!” or
- “Pets – don’t need them myself but hey, fine so long as they don’t cause me any trouble”.
Regardless of which category you fall into, it’s important to understand before you move into any form of residential complex whether or not you and other residents are allowed to keep pets, and to obtain any necessary prior authority to do so.
Sellers, buyers and estate agents would do well to address this specifically in sale agreements to avoid disappointment and dispute down the line.
Sectional title schemes
Your Body Corporate has the right to impose limits on pet ownership. It can for example prohibit pets altogether, or it can impose limits on the number of pets allowed, types of pet, breeds or sizes allowed, access to common areas, noise-control, replacement on the pet’s death and so on. Trustees should take care here to define clearly what is allowed and what isn’t. Are only dogs banned or also cats and cage birds? What about pet pigs? Guide dogs? Hamsters? Pet snakes? Goldfish? The more detail the better.
You need to find out exactly what rules apply in your particular complex, but the standard “Prescribed Conduct Rule” below will be in force unless your Body Corporate has amended it. This Rule reads –
“Keeping of animals, reptiles and birds
- The owner or occupier of a section must not, without the trustees’ written consent, which must not be unreasonably withheld, keep an animal, reptile or bird in a section or on the common property.
- An owner or occupier suffering from a disability and who reasonably requires a guide, hearing or assistance dog must be considered to have the trustees’ consent to keep that animal in a section and to accompany it on the common property.
- The trustees may provide for any reasonable condition in regard to the keeping of an animal, reptile or bird in a section or on the common property.
- The trustees may withdraw any consent if the owner or occupier of a section breaches any condition imposed in terms of sub-rule (3).”
Note that where this Prescribed Rule applies unamended, the body corporate is specifically required to act “reasonably” in all the circumstances of each matter. That entails a delicate balancing act between the competing rights of pet-owning residents and their neighbours, which means grey areas and fertile ground for dispute.
Hence the advice to get clarity on your rights before buying into a complex.
Home Owners Associations (HOAs)
HOAs have similar rights to restrict the keeping of pets, but no “Prescribed Rules” apply as they do with sectional title and their powers will depend on whatever founding documentation underlies them. HOAs normally govern free-standing estate houses rather than apartments and so are perhaps more likely to be pet-friendly but again, find out what the complex’s Rules say before you buy.
Trustees barking up the wrong tree? Polly ruffling feathers? The ADR alternative
If you find yourself embroiled in a dispute with your body corporate/HOA or a fellow resident or owner, first prize will of course always be a chat over a friendly cup of coffee to find common ground and a win-win outcome.
If that fails, the (relatively) new Community Schemes Ombud Service provides an alternate dispute resolution (ADR) service designed to assist with just this sort of situation. Ask your lawyer for help in any doubt.
November 21, 2018
I was once told a story of a Wiseman, a young boy and a butterfly. I do not know the origins of this story nor am I familiar with the originator. Hence you will not see any credit given for the story. But the following is fact: the story is not mine. It is one of those long African tales with all dramatic echoes whenever they are told. I repeated this story to a group of students at the North West University (Potchefstroom Campus) who had just been elected to form the Radio PUK committee. I was a new member of the committee and looking forward to my gig as a news reader. The story went down so well with my fellow students who were encouraged and I won myself a slab of chocolate. I repeat this story for you, not for the prize but for the moral of the story. Even though this is not my story it is, arguably perhaps, a true story about everyone’s life.
For the sake of brevity I will sever all the linguistic gymnastics that goes with the story and cut to the chase. For those who may not reach the end, the story is about choices and understanding what powers we have when taking decisions and making choices about the future.
There was once a critically acclaimed Wiseman who lived in the hills surrounding a village. To all the elders who had consulted the Wiseman for counsel, his wisdom was unquestionable. A young villager sought to challenge the Wiseman by proving that he too (the Wiseman) had fallible wisdom. He planned his trick to expose the Wiseman. The trick involved a trip to the hills and a butterfly to be caught on the way to the hills. The young man had planned the trick to the last detail. He would approach the Wiseman with a butterfly in his hand and confront the Wiseman with two questions. The first one he was certain the Wiseman would answer. It is the second question which he was certain the Wiseman would never have the correct answer to, as he (the young boy) would manipulate the answer.
The young boy made his way to the hills. On the way he grabbed a butterfly. Wrapped it nicely inside his hand to be comfortable. When he reached the hills and was in the presence of the Wiseman he asked the first question with the arrogance that sometimes accompanies youth, “what is in my hand”. As expected the Wiseman answered and said “son you have a butterfly in your hand”. Then came the second question, the one to which only the boy could give an answer to. The boy asked the Wiseman, “is the butterfly in my hand dead or alive”.
Here is how the boy had planned his trick, if the Wiseman said the butterfly was “alive” he would simply squeeze his hand before opening it to the Wiseman, this he thought, would ensure that the wise man, through a trick, gets the answer wrong. Should the Wiseman say that the butterfly is dead, he would release the butterfly to fly freely.
The Wiseman, with all the wisdom that came with his age looked at the boy straight in his face, looked at his hand and looked at his face again. Then he answered. He said “son the life of that butterfly is in your hands”.
Never mind the tale of a Wiseman, the boy and the butterfly and all its drama. The moral of the story is that the future is in our hands and it is as fragile as the butterfly in the boy’s hands.
Have you ever noticed how we sometimes trick ourselves? We do this by the decisions we take and the choices we make. As individuals or as a collective we can decide what to do with the future. As we approach the end of the year let us use the power we have even when doing simple but important things. During this busy season we must be mindful of the decisions we take and the choices we make. Make good choices when you are on the road. Make good choices when you spend. Make good choices when you relate with family and friends. Let us look forward to the future we make today. Have a Happy Festive Season filled with good choices.
October 24, 2018
“Retirement at sixty-five is ridiculous. When I was sixty-five I still had pimples” (Comedian George Burns)
Record numbers of Baby Boomers are now reaching their 60s, and if you are an employer in any size of business (from the smallest family-owned enterprise to the largest corporate), make sure now that you have a policy in place to handle the thorny question of compulsory retirement.
This is vital – sooner or later you are going to have an employee turning 55 or 60 or 65, and if you think you can just say “Happy Birthday Kim, time for you to retire, see you around” you are in for big trouble.
So what’s the legally required retirement age?
The problem is that nothing in our law imposes a standard retirement age on employees. So trying to force someone to retire at an age that you unilaterally choose (no matter how much you may think that 65 is the universally-accepted gold standard for being put out to pasture) opens you up to a claim for ‘age discrimination’. And that would amount to an automatically unfair dismissal, for which our courts will make you pay dearly.
What our law does say is 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” (our emphasis).
Let’s look at each of those options –
- “Agreed”: Clearly your best course of action is to have a written agreement with every employee specifying a compulsory retirement date. Ideally have such a clause in every new employment contract, and if any existing contracts have no such clause, negotiate one now (it’s essential to do this bilaterally not unilaterally – see case below).
- “Normal”: You can always try to convince a court that you have, through past practice in your business, established a “normal” retirement age. You will have to prove that you have consistently applied this age in previous retirement situations and that the employee in question was aware of it. Far safer of course is to have in place a formal “retirement policy”.
Whatever you do, don’t act unilaterally
A recent Labour Court case shows how dangerous it can be to try to alter any term of employment without negotiating and agreeing it with your employees –
- An employee’s employment contract made no direct mention of a compulsory or automatic retirement age, but his employer’s ‘Human Resources Policy and Procedure Manual’, which was incorporated into and formed part of his contract, stipulated a retirement age of 65.
- This was reduced to 60 when the Manual was replaced by a “Terms and Conditions of Employment” policy. The new policy excluded employees “expressly entitled to retire at 65 in terms of their individual contracts of employment”.
- The employee’s services were terminated when he turned 60 and he approached the Labour Court for assistance.
- The Court held that the employer is “not permitted to unilaterally amend terms and conditions contractually agreed to” and was therefore in breach of contract. The employer must now reinstate the employee retrospectively to the date of termination, his compulsory retirement age being confirmed at 65.
What to do when retirement age is reached
Preferably your employment contracts should specify an agreed procedure to be followed on retirement date, but in any event don’t let the date just float past. Rather, if you agree on an extension period, have your lawyer draw up an amended employment contract to avoid any uncertainty or dispute.
Employees – know your rights
Age discrimination is just one form of automatically unfair discrimination prohibited by law. Stand up for your rights if you think you are being discriminated against, directly or indirectly, “on any arbitrary ground, including, but not limited to race, gender, sex, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, political opinion, culture, language, marital status or family responsibility.”