An employer’s vicarious liability for the tort of its employee, who later transferred under TUPE, does not transfer with the wrongdoer to the transferee
ABC v Huntercombe (No 12) Ltd and others [2025] EWHC 1000 (KB) is the fourth in a line of authorities addressing Regulation 4(2) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) and the extent to which “liabilities under or in connection with” the employment contract of an individual transferring under TUPE transfer to the transferee. This decision of the High Court anchors its interpretation of the domestic regulations on an interpretation of the wording and purpose of the Directive they seek to implement, holding that where an employer is vicariously liable to a third party for the tortious wrongs of its employee, and that employee later transfers to another employer under TUPE, that vicarious liability does not transfer with them. This produces a similar outcome to that in Sean Pong Tyres Ltd v Moore [2024] EAT 1, which held that vicarious liability for direct discrimination against a current employee under s.109 of the Equality Act 2010 does not transfer with the wrongdoer employee when that employee is subject to a TUPE transfer. The High Court observed that the County Court decision in Doane v Wimbledon FC [2007] 12 WLUK 2, which held that vicarious liability for tort did transfer with the wrongdoing employee, should not be followed.
ABC sought damages for wrongs suffered by her whilst an in-patient at a hospital owned and operated by Huntercombe, with the wrongs carried out by Huntercombe’s employees. Huntercombe’s business was later sold to Active Young People Ltd, with its employees transferring under TUPE. This judgment concerns the determination of two preliminary issues, namely whether the effect of Regulation 4(2) of TUPE was to transfer the alleged vicarious liability for the wrongdoing to Active Young People Ltd, and if yes, whether Huntercombe’s right to an indemnity by its public liability insurers in respect of that vicarious liability also transferred. The Court identified that words “in connection with” are capable of capturing a wide spectrum of liabilities, not all of which would have a sufficiently strong connection with the transferring employment contract. The question to be determined was therefore whether the connection between the relevant liability and the relevant contract was sufficient to bring the liability within Regulation 4(2) so that it transferred from the transferor to the transferee. For liability to transfer, the connection with the transferring employment contract must be “direct”.
The focus of the Court’s decision is the interpretation of Regulation 4(2), applying the guidance set out in Swift Trading v Robertson [2014] UKSC 50 at paragraphs 20 to 22, that domestic Courts are under an obligation to interpret domestic legislation, so far as possible, in the light of the wording and purpose of the Directive which it seeks to implement. The Court identified the purpose of the Directive as the protection of employees in the event of a change of employer, and in particular to ensure that their rights are safeguarded.
The Court analysed previous judgments interpreting Regulation 4(2):
The joined appeals in Martin v Lancashire County Council and Bernadone v Pall Mall Services Group Ltd and others[2001] ICR 197 were considered, in which the employers’ liabilities for breach of tortious and contractual duties to provide a safe working environment for their employees were held to transfer with their employees, with the nature of those obligations viewed as “fundamental” to their contracts of employment, and to the protection of the employees. The transferor’s vested or contingent right to recover from its insurer in respect of the liability to their employees for this injury was also held to transfer, because the liability arose from and was in connection with the employment contract: the connection with the liability was direct, with the effect desirable that the employee would not be disadvantaged by the fact of the transfer.
The decision in Doane was also analysed, where the County Court had held that vicarious liability for an allegedly negligent tackle by a Wimbledon FC player on a player from the opposing team transferred to MK Dons when the wrongdoer’s employment transferred to MK Dons under TUPE. The Court in ABC concluded that a “but for” connection had been applied, with the County Court concluding that the vicarious liability was connected to the employment contract because without the contract the liability would not arise. This Court held that that was the wrong approach, it treated the question of construction of Regulation 4(2) as “an exercise in semantics or linguistics”, which was an impermissible approach. Further, whereas the rights that transferred in Bernadone were identical to fundamental rights under the transferring contract of employment, the obligations transferred in Doanewere of an entirely different character, the primary obligations were not owed by the employer to the employee but by the employee wrongdoer to the third party.
In Sean Pong Tyres Ltd the EAT held that vicarious liability for direct discrimination against a current employee under s.109 of the Equality Act 2010 does not transfer with the wrongdoer employee when that employee is subject to a TUPE transfer. At paragraph 32(c) Judge Stout identified from previous authorities the direct connection found between the rights and obligations that transferred, and the transferring employment contract, such that (other than with the indemnity in Bernadone), “the right or liability has arisen under or in connection with the transferring employee’s contract with his employer, in the sense of being a right or liability owed by one party to that contract against the other, albeit sometimes in tort rather than contract”. The EAT noted that there was no individual liability in relation to unfair dismissal or other aspects of the Equalities Act such as indirect discrimination and a failure to make reasonable adjustments, where there was no question that the liabilities would not transfer.
Following its analysis of these prior decisions, the Court concluded that that they showed (a) the connection between the liability of the transferor and the transferring contract must be “direct”, in the sense of a liability the transferor has to the employee, or (b) a transferor’s vested (or contingent) right against a third party will transfer if it arises purely out of such a direct liability. All the cases described liabilities that were sufficiently connected to the transferring employment contract that they were “fundamental” to that employment relationship, whereas vicarious liability is a doctrine without any “coherent or agreed jurisprudential underpinning”.
Vicarious liability for tortious wrongs therefore did not transfer, and Doane should no longer be followed.
Had the Court concluded that the vicarious liability transferred, it held the transferor’s rights to claim on a public liability insurance policy would also transfer.
This decision may well seem sensible to employment lawyers steeped in TUPE, with its focus on the purpose of the Directive of protecting the rights of employees in the event of a change in their employer at transfer. However, with the transferor replaced by the transferee in relation to its “rights, powers, duties and liabilities” concerning the wrongdoing employee’s employment contract, the transferor may lose a valuable claim against them. There may be further instalments in this series of authorities concerning where exactly the collection of potentially fractured rights and liabilities lie after a TUPE transfer.
