Work Till you drop

Siva Kumar addresses the retirement age issue in employment contracts.

 


Employment contracts often make no mention of a retirement age. This omission is often normally caused by the employer’s and employee’s failure to give thought to the latter’s retirement. Eventually time does pass, and unsuspecting employer find themselves in the awkward position of being unable to terminate their employee’s contract on the basis of retirement, due to the absence of a retirement age clause.

 

It is well settled that when there exist a ‘retirement age’ clause in a contract of employment, an employee’s contract may be terminated upon him reaching the specified retirement age. The problem arises where the contract is silent on this issue. In such an instance, whether or not the employee can claim to be entitled to work for as long as he wants to, or until he can work no longer, is dependent on the facts surrounding his employment. Several possible situations could arise such as;

 

  1. a) where an employee has received a pre contract promise that he could work ‘as long as he liked’; or
  2. b) where there is no ‘retirement age’ clause in the contract of employment: or
  3. c) where the employee continues working in the company after his ‘retirement age’.

PRE- CONTRACT PROMISE

In the case of Dr. Satwant Singh v Hospital Assunta [1998] 4 CLJ 47, the employee commenced employment with the hospital on a fixed term contract for a duration of three years in 1963. His contract was renewed for a further period of three years in 1967, and finally in 1970 he was issued with a permanent employment contract. None of these written contracts contained a retirement clause. The employee claimed that when he left the government service to join the hospital in 1963, he was promised by one ‘Mother Mary’ that he could work for the hospital for ‘as long as he liked’. He said that this promise, made when he was 30 years old, induced him to leave his government job and join the hospital. At the time he joined the hospital, there was no retirement age policy. The hospital did however subsequently introduce a retirement age policy of 55 years. As a result, when Dr. Satwant reached the age of 55, the hospital notified him in writing that he had reached the retirement age and that his contract was being extended for a further period of five years. Dr. Satwant then responded in writing to the hospital that he was not subject to a retirement age. In 1993, at the age of 60, Dr. Satwant was retired by the hospital.

 

Consequently, Dr. Satwant made a claim for ‘unjust dismissal’ under sec. 20 of the Industrial Relations Act 1967. The Industrial Court dismissed his claim. However, on an application to the High Court for judicial review, the Industrial Court’s award was quashed and Dr. Satwant was reinstated. The High Court held that there was a collateral contract which existed at the time Dr. Satwant joined the hospital due to the promise made by Mother Mary. The High Court also held that the variation which was attempted to be introduced in 1988 was not valid and a violation of Dr Satwant’s right to livelihood which is guaranteed by the Federal Constitution. The Court further held that at the age of 60 (and his then age of 65), it was not unreasonable for Dr. Satwant to continue being active in his profession as a consultant at the hospital. Hospital Assunta’s appeal to the Court of Appeal was dismissed. It should be noted that Mother Mary was never called as a witness to prove Dr. Satwant’s pre-contract promise and that the issue of proof was not addressed by the High Court in its judgment.

 

 

ABSENCE OF A RETIREMENT AGE CLAUSE

In the absence of a ‘retirement age’ clause, the law was unsettled for a while as to whether it would be justified for an employee to be required to retire. However the Court of Appeal case of Colgate Palmolive (M) Sdn. Bhd. v Yap Kok Foong [2001] 3 CLJ 9 has removed some doubt in this area.

 

In this case, the company was unable to rely on a contractual provision that stipulated that the employee ought to retire at 55 years. This was because the Court refused to accept a unilateral variation of the contract of employment by the introduction of a retirement age policy after the employee had joined. The employee complained that he had been dismissed without just cause or excuse when he was retired a year and three months after he attained the age of 55. The Court of Appeal endorsed the following passage from the award of the Industrial Court which dismissed his claim:-

 

“The Court is of the opinion that the Claimant ought to be permitted to contend that in the absence of a contractually agreed retirement age, he is entitled to work up to the normal retirement age of employees in his category. This requires a determination of what that normal retirement age is, an issue which the Court will now address.


The non-existence of a retirement clause in an employment contract cannot mean that no employer can ever bring an employee's service to an end by retiring him at a certain retirement age, or that such an action would tantamount to dismissal without just cause or excuse. The Court has to constantly remind itself - and the parties before it that in reference under Section 20, the true question posed to the Court for adjudication is not whether a termination of an employee's services is lawful in that it was pursuant to a contractual provision or otherwise, but whether the same was for just cause or excuse. A justification based on contractual grounds might be a relevant factor; however, it will certainly not be conclusive of the matter.”


In the Colgate-Palmolive Case, the Court of Appeal held that as the employee was retired at the normal retirement age for someone in his category, there was just cause or excuse for his dismissal. However, this case does leave open the situation where the employer has no track record for retiring employees and retires an employee for the first time.

 

 

WHERE AN EMPLOYEE IS RETIRED AFTER HIS CONTRACTUAL RETIREMENT AGE

In the very recent case of MBf Country Homes & Resorts Sdn. Bhd. v Suppiah Manickam [2003] 5 CLJ 459, the High Court had to deal with the issue of whether employees who had been retired after their retirement age were entitled to termination benefits under the Employment (Termination & Lay-Off Benefits) Regulations 1980. Regulation 4(1) essentially states that an employee is not entitled to termination benefits upon retirement, unless there is a stipulation on ‘retirement’ in the contract of employment.

 

Here, each of the four respondents who were employed by the company, received a letter informing them of the company's intention to discontinue their employment as they had attained the age of retirement. Therefore, pursuant to art. 44 of the MAPA/AMESU Collective Agreement 1995, the company was giving them the required eight weeks notice. The respondents claimed that they were entitled to termination lay-off benefits as their services were being terminated prior to the mandatory retirement age of 60 years. The appellants however, refuted their claims on the ground that the mandatory retirement age was not 60 but 55 years. Article 44(a) of the Collective Agreement stated that "the age of retirement of employees shall be 55 years". The proviso in art. 44 was that "employment may be continued thereafter by mutual agreement between the employer and the employee concerned up to the age of 60 years". The High Court held that just because the employee had not been retired at 55 years, it did not mean that they were guaranteed work until 60 years, and dismissed their claim. In His Lordship’s judgment, Vincent Ng J stated as follows:-

 

In my judgment this article has been so specifically couched in order to enable the employer and employee to enter into a fresh employment contract for any period of service, such that the period so agreed upon does not extend beyond the employee attaining 60 years of age. And, should the parties fail to enter into such fresh employment contracts, the employee is deemed to have continued employment on a month to month basis. This must be so, otherwise an employee who continues in employment after he or she has attained 60 years of age (as happened in the case of the third respondent) would ipso facto contend that the retirement age set in art. 44(a) of the CA has been uncapped and he or she need not retire at all. Most importantly in the instant case, it has to be concluded, and I would hold, on the evidence adduced, that the proviso (second limb) in art. 44(a) was not triggered into operation, as clearly, no fresh employment agreement, in writing or orally, has been entered into between the appellant and any of the respondents to re-cap the retirement age at 60. It cannot in law or logic be concluded or presumed, bereft of any evidential basis, that the appellants had agreed to re-cap the retirement age at 60 on the sole basis that the appellants had in fact allowed the respondents to continue in employment after they had turned 55 years of age.

 

The interesting aspect of this case is that, in effect, the judgment above results in an automatic retirement of an employee upon the retirement age, even without a formal letter confirming the same. The Court also held that the period following the retirement age is deemed to be month to month unless the parties contractually agree otherwise.

 

Siva Kumar Kanagasabai ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

 
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