Newsletter January 2018: A Brief Guide to termination of employment upon reaching pension age (labor law)
A question that is often asked is whether, under Aruban law, an employment agreement automatically terminates when the employee reaches pension age.The answer to that question is a simple NO. In order for employment to terminate automatically upon reaching pension age a valid, binding and enforceable contractual pension clause is required. We will therefore discuss what is required for such a contractual pension clause to be valid, binding and enforceable.
Because of certain changes in Aruban labor law, one must distinguish between the following situations:
- Employment contracts entered into prior to July 9, 1992 If the employment contract was entered into prior to July 9, 1992, and it contains a clause stipulating the the employment will automatically terminate when the employee reaches a certain pension age, stipulated in the employment contract, then such a pension clause is valid, binding and enforceable.
- Employment contracts entered into after July 9, 1992 but before April 1, 2013 If the employment contract was entered into after July 9, 1992 but before April 1, 2013, and it contains a clause stipulating the the employment will automatically terminate when the employee reaches a certain pension age, stipulated in the employment contract, then such a pension clause is not valid, binding and enforceable.
- Employment contracts entered into after April 1, 2013 If the employment contract was entered into after April 1, 2013 and it contains a clause stipulating the the employment will automatically terminate when the employee reaches the official pension age, or the extended pension age, in accordance with the general old age insurance law, then such a pension clause is valid, binding and enforceable.
- Employment contracts without a valid, binding and enforceable pension clause Therefore employment contracts that either fall into category 2 above, or that do not contain a contactual pension clause yet, do not terminate automatically when the employee reaches the official pension age. It is necessary to incorporate a pension clause as described in paragraph 3 above in the employment contract in order to cause automatic termination of employment to occur when the employee reaches the offical pension age, or the extended pension age , in accordance with the general old age insurance law. Of course incorporation of such a pension clause requires consent of the employee.
Aruba, January 2018.
Please contact one of our attorneys in case you require further guidance
Johan Sjiem Fat [email protected]
Gabriela Sjiem Fat [email protected]
Olivia Sjiem Fat [email protected]
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