Background
ABC sought damages arising from her four-month placement in 2018–2019 at Huntercombe Hospital, a privately operated psychiatric facility. She alleged that staff mentally and verbally abused her and restrained her more than 200 times. The alleged events all occurred while the hospital was operated by Huntercombe (no.12) Limited.
In March 2021, the undertaking transferred from Huntercombe to Active Young People Limited under the Transfer of Undertakings (Protection of Employment) Regulations 2006. Two doctors who had treated ABC transferred with it. After learning that Huntercombe was in liquidation and that its public-liability insurance carried a £250,000-per-claim deductible, ABC argued that Regulation 4(2)(a) transferred Huntercombe’s alleged vicarious liability for the doctors’ pre-transfer conduct to Active Young People.
HHJ Bird, sitting as a High Court judge, rejected that argument on preliminary issues. ABC appealed. The parties agreed that alleged torts and alleged human-rights breaches should receive the same answer.
The Court’s Holding
The Court of Appeal unanimously dismissed the appeal. It held that Regulation 4(2)(a) does not transfer an employer’s vicarious liability to third parties for employees’ acts or omissions occurring before a TUPE transfer. Any such liability remained with Huntercombe and did not pass to Active Young People.
The Court interpreted the regulation in light of the Acquired Rights Directive’s primary purpose: safeguarding employees’ enforceable rights when their employer changes. An employer’s vicarious liability to an injured third party gives the employee no corresponding right against the employer and is secondary to the employee’s own alleged liability. It therefore does not qualify as a liability “under or in connection with” the employment contract for TUPE-transfer purposes.
The wider statutory scheme reinforced that conclusion. TUPE requires disclosure to a transferee of claims by employees, but contains no equivalent mechanism for third-party claims. The Court considered it inconsistent with the scheme to impose potentially substantial undisclosed liabilities for events in which the transferee had no involvement. It declined to follow the contrary county-court decision in Doane v Wimbledon FC.
Key Takeaways
- A TUPE transfer does not move the transferor’s vicarious liability to third parties for employees’ pre-transfer conduct.
- Regulation 4(2)(a) principally protects rights that employees can enforce against their employer, including relevant liabilities owed to employees.
- Vicarious liability for injury to an employee may transfer, but vicarious liability to an outside third party does not.
Why It Matters
The decision clarifies an important boundary on the broad wording of Regulation 4(2)(a). A business acquiring an undertaking under TUPE does not, merely because employees transfer, inherit the former employer’s vicarious liability to third parties for those employees’ earlier acts.
The ruling may affect more than 50 similar claims arising from the same facility. It also distinguishes employee claims protected by TUPE from claims brought by patients, customers, or other outsiders, even where the alleged wrongdoing was closely connected with an employee’s work.