In the recent case of ABC v Huntercombe (No. 12) Ltd and Ors, the High Court (HC) held that a transferor’s vicarious liability for the alleged torts committed by two of its employees did not transfer to the transferee under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
The Law under TUPE
The purpose of TUPE is to safeguard the rights of employees following a transfer of their employment, for example, to another employer following an acquisition.
It has been established that tortious liability for personal injury could transfer automatically under TUPE from a transferor employer to a transferee. This means that an injured employee could claim against their subsequent new employer transferee. The current case has, however, added a limitation to this general principle.
Regulation 4(2)(a) of TUPE provides that where there is a relevant transfer of an undertaking, ‘all the transferor’s rights, powers, duties and liabilities under or in connection with any such contract shall be transferred to the transferee’ (our emphasis added).
The transferee will also acquire ‘liability for all pre-transfer acts and omissions of or in relation to the transferor in respect of transferring employees or their contracts of employment’.
Case law on the transfer of tortious liabilities to date has almost exclusively dealt with the transfer of employers’ liabilities directly owed to their employees (such as relating to the employer’s duty to keep employees safe at work), where the rights and obligations are so fundamental to the relationship of employer and employee (and to the protection of the employee), as opposed to liabilities that may be owed to third parties.
Facts of the Case in ABC v Huntercombe Ltd and Ors
ABC brought a personal injury claim seeking damages for ‘wrongs’ allegedly suffered while she was an in-patient at a hospital owned and operated by the transferor, H Ltd, which was then sold to Active Young People Ltd (AYP Ltd) by way of a TUPE transfer. It was claimed that the injuries were caused by the alleged tortious acts of two employees of H Ltd. The employees’ employment subsequently transferred from H Ltd to AYP Ltd and ABC claimed H Ltd was vicariously liable for the injuries.
The HC had to consider what ‘liabilities…in connection with’ the employees’ contracts transferred to AYP Ltd and, if liabilities for the acts complained about did transfer, did the benefit of H Ltd’s insurance also transfer.
The HC stated that, in order for liability to transfer, it was necessary for there to be a ‘direct’ connection between the transferor and ABC. However, in the current case, the relevant direct liability was that of the employees to ABC. The connection between H Ltd and ABC was, therefore, too remote from the employment contract. Accordingly, the liability for the alleged negligent act did not transfer.
Takeaway for Employers
Transferees can take comfort in knowing that they will not be liable for harm caused by transferring employees to third parties that occurs immediately before they transfer. For such liability to transfer, there must be a sufficient connection (i.e. ‘direct’) between such liability and the employees’ contracts of employment being transferred, rather than a mere ‘but for’ connection.