Q We have an employee who will be retiring in July after eight years of service with the company who is employed in our Melbourne office. The employee has enquired as to what employment entitlements (if any) may be due upon his retirement because he will have reached the age of 65. The employee has indicated they will be eligible to receive an aged pension from the Commonwealth Government. Because the employee is entitled to receive an aged pension, are there any employment entitlements that may be due to an employee because the reason for their resignation is 'retirement'?

A  Generally, the answer is no. Most modern awards, enterprise agreements and employment legislation do not regard an employee’s 'retirement' as a specific reason to provide any additional employment entitlements because of the circumstances of their resignation.

 

Long-service leave – pro rata payment on termination

Under the Long Service Leave Act 1992 [Vic], an employee with at least seven years of service with the employer is entitled to pro rata leave on termination regardless of the reason for terminating the employment. In some jurisdictions, such as Tasmania, Northern Territory and the Australian Capital Territory, an employee is entitled to pro rata long service leave, after serving the relevant qualifying period, if the employee’s reason for terminating is because they have reached the relevant age for the aged pension.

In the absence of a specific provision in the award or agreement, the ‘retirement age’ is defined by the relevant state or territory long service leave legislation to mean:

  • Long Service Leave Act 1976 [ACT] – 65 years (s.11C(3)(b))
  • Long Service Leave Act [NT] – age at which employees is eligible for aged pension under the Social Security Act 1991 [Cth] (s.10(2)(a))
  • Long Service Leave Act 1976 [Tas] – an employee who attains the age for retirement (s.8(2)(a)) – the age of 65 years in the case of males, or 60 years in the case of females

It should be noted that in all jurisdictions, once an employee’s period of service with their employer entitles an employee to take long-service leave (usually 10 years or more), payment of accrued long-service leave on termination would usually apply regardless of the circumstances surrounding the termination.

Also, if an employee retires due to ‘ill health or incapacity’ then there would usually be an entitlement to pro rata long service leave, subject to having completed the qualifying period of continuous service with the employer.

 

Other entitlements

Other entitlements that may be due on termination are not usually payable when an employee 'retires', such as annual leave or redundancy pay, although reference should be made to the applicable modern award or enterprise agreement to determine an employee’s entitlement in this circumstance.

 

Forced ‘retirement’ by employer

While not applicable in the above situation, there are a number of statutory protections which prevent an employer from dismissing an employee due to having reached a compulsory retirement age, such as 65 years. These protections are provided by the Age Discrimination Act 2004 [Cth], general protections under the Fair Work Act 2009 (s.351), and the relevant state or territory anti-discrimination legislation.

Situations in the workplace that could be regarded as ‘compulsory retirement’ include when an employer:

  • compulsory retires an employee;
  • persuades an employee to retire; or
  • treats an employee in such a way that they are ultimately forced to retire.

Therefore, the employer is prohibited from dismissing an employee on the grounds they have reached a certain age, while any agreement between the employer and an employee to that effect would be invalid.

 

Exceptions

The Age Discrimination Act exempts certain circumstances when discrimination on the basis of age does not breach the legislation. These include:

  • compliance with a Commonwealth law
  • compliance with a state or a territory law
  • certain health and employment programmes
  • direct compliance with a modern award or an enterprise agreement.

 

Inherent requirements of the job

The employer should not be concerned with an employee’s age, rather whether the employee can perform the inherent requirements of the job. If this is so, the employer has a valid reason for dismissal, regardless of the employee’s age. This does not mean

the employer can presume the employee is incapable of performing the inherent requirements of the job because the employee has reached a certain age.

 

Bottom line

Retirement does not usually bestow any additional entitlements to an employee upon termination, except in relation to payment of pro rata long service leave in certain jurisdictions.