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TUPE and third-party liability
A transferor’s vicarious liability for alleged torts committed by two of its employees prior to a TUPE transfer does pass to the transferee.
Background
The claimant, ABC, issued High Court proceedings seeking damages for injuries suffered while she was an inpatient at a hospital owned and operated by Huntercombe (the transferor). ABC argued that Huntercombe was vicariously liable for the acts of two of its employees who, following a subsequent TUPE transfer, had become employed by Active Young People Ltd (the transferee).
At a preliminary hearing the High Court had to determine whether any vicarious liability that Huntercombe owed to ABC for the alleged wrongdoings of the employees it employed before the transfer transferred to Active Young People under TUPE.
High Court decision
The High Court held that the automatic transfer principle under TUPE, reg. 4 did not extend to a transferor’s vicarious liability for torts committed by its employees towards a third party prior to a TUPE transfer. These did not transfer to the transferee.
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 reg. 4 so that it transferred from the transferor to the transferee. For liability to transfer, the connection with the transferring employment contract must be ‘direct’.
This decision follows Sean Pong Tyres Ltd v Moore 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 also concluded that the county court decision in Doane v Wimbledon FC [2007] 12 WLUK 2, which held that vicarious liability for tort (a negligent tackle on another player prior to transfer) did transfer with the wrongdoing employee, should not be followed, as the court had applied the wrong test, namely the ‘but for’ test and the primary obligations were not owed by the employer to the employee but by the employee wrongdoer to the third party.
Comment
This case confirms that vicarious liability to third parties, e.g. because of the negligence of an employee or employees, will not transfer under TUPE even if the employees responsible transfer. In contrast, where an employer owes a liability to an employee for personal injury or discrimination or harassment, (except for vicarious liability for direct discrimination as above) that liability would transfer under TUPE along with the employee. Where liability transfers, previous case law suggests that the benefit of any insurance cover would also transfer.