At a glance
- The High Court has confirmed that employers need only pay severance pay to an employee who resigns or retires if they have both 12 months' continuous service and have also reached the age of 65.
- The High Court rejected a claim for severance pay made by an employee who had the requisite service but was only aged 45.
In Hardap Regional Council v The Labour Commissioner (27 February 2025) (Hardap), the court clarified the long-standing debate on severance pay upon resignation. It ruled that an employer must pay severance to an employee only if they resign or retire upon reaching the age of 65, provided they have completed at least 12 months of continuous employment.
Mitchel Mwabi was employed by the Hardap Regional Council as Chief Human Resources Practitioner. After ten years of continuous service, he resigned at the age of 45 and demanded severance pay under section 35(1)(c) Labour Act 11 of 2007 (Labour Act), which states:
'Subject to subsection (2), an employer must pay severance pay to an employee who has completed 12 months of continuous service, if the employee resigns or retires on reaching the age of 65 years'.
The employer refused to pay severance, arguing that Mwabi was not entitled to severance under the Labour Act. Mwabi then referred the dispute to the Labour Commissioner, where the arbitrator ruled in his favour, awarding him NAD62,756.08. The arbitrator based the decision on the Gibeon Village Council v Labour Commissioner judgement (Gibeon).
In Gibeon, Judge Parker AJ stated that an employee is entitled to severance pay upon resignation. However, this was merely obiter dicta (something said in passing), as the court was not specifically asked to rule on severance pay entitlement.
Judge Schimming-Chase, in Hardap, declined to follow Judge Parker’s remarks. She noted that the issue of severance pay was not properly argued before the court in Gibeon, nor had it been the subject of legal submissions. Instead, she found that, on a proper interpretation of section 35(1)(c) Labour Act, an employee must first reach the age of 65 to qualify for severance pay upon resignation.
Judge Schimming-Chase further acknowledged that the way the subsection was drafted is not a model of clarity, as it includes the word 'or' between 'resigns' and 'retires', along with the phrase 'upon reaching the age of 65'. However, she found that a key jurisdictional requirement is that the employee must have reached the age of 65. Whether an employee resigns or retires, severance pay is only payable once they have reached the age of 65. As a result, the court dismissed the employee’s claim for severance pay.
The position adopted in the Hardap matter was reaffirmed in a more recent judgment: Shiyamba v Retailability (Pty) Ltd t/a Edgars Store (Grove Mall) (10 April 2025). In this case, the employee resigned before reaching the age of 65 years and claimed severance pay. The employer rejected the claim, arguing that the employee was not entitled to severance pay.
The employee subsequently referred a dispute to the Office of the Labour Commissioner, relying on the Gibeon judgement. However, the employee was unsuccessful at arbitration and appealed the award (ruling of the arbitrator) to the Labour Court. The court held that, in order to qualify for severance pay upon resignation or retirement, an employee must not only resign or retire, but must also have reached the age of 65 years at the time of resignation or retirement to be entitled to severance pay.
Further, the court clarified that the Gibeon judgement cannot be treated as binding authority; that decision is regarded as sub silentio. In other words, the court in Gibeon made a ruling on a legal issue without having heard arguments or submissions on that particular point. As a result, the judgment does not carry binding legal authority on the matter and is therefore regarded as sub silentio.
In light of the above, severance pay is, by definition, only payable upon resignation or retirement at the age of 65, provided the employee has completed 12 months of continuous employment. Reaching this age is a peremptory jurisdictional requirement that must be present for a successful severance pay claim.
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