Key takeaways
TUPE does not transfer third-party liability
Pre-transfer vicarious liability to third parties remains with transferor.
Employee protections remain unchanged
TUPE still transfers employee-related liabilities, including personal injury claims.
Reassurance for transferee employers
New employers avoid historic third-party negligence liabilities post-transfer.
The Court of Appeal has recently considered the legal position when a claim for negligence is brought against an employer by a third party, in relation to the pre-transfer negligent actions of an employee whose employment has since been transferred to a new employer, holding that vicarious liability does not transfer to the new employer under the Transfer of Undertakings (Protection of Employment) 2006 (TUPE).
TUPE protection
Employees benefit from various special protections when their employment transfers to a new employer because of a TUPE transfer. In particular, under the ‘automatic transfer principle’, most of the employee’s employment terms are preserved on transfer and ‘all the transferor's rights, powers, duties and liabilities under or in connection with’ the employee’s employment contract transfer to the new employer (our emphasis added).
The Court of Appeal has previously held that the ‘automatic transfer principle’ does extend to an employer's liability to an employee for personal injury, and that the new employer has the right to be indemnified by the original employer’s insurance policy (Bernadone v Pall Mall Services Group [2000] IRLR 487).
Key issue before the Court of Appeal
The Court of Appeal was asked to consider the legal position where a claim for negligence is brought against an employer by a third party, in relation to the pre-transfer negligent actions of an employee whose employment has since been TUPE transferred to it.
The key question for the Court was: could the ‘automatic transfer principle’ operate to transfer vicarious liability to the new employer?
Factual background
The claimant, ABC, claims that she had suffered personal injuries whilst she was an in-patient at a privately run psychiatric hospital. There are more than 50 similar claims brought by other claimants against the same parties.
In short, ABC claims that she was mentally and verbally abused, and was restrained on over 200 occasions, during her during her four-month stay at the hospital in 2018/2019. She asserts that her injuries were caused by the acts/omissions of two doctors employed by the hospital and brought a claim seeking damages.
At the relevant time, the hospital in question was owned/operated by H (No 12) Ltd. However, in March 2021, the hospital had been sold to AYP Ltd. As a result of this sale, the two doctors’ employment had transferred across to AYP Ltd.
Therefore, a preliminary issue arose about whether the TUPE transfer meant that ABC could bring her claim against AYP Ltd, which would establish which insurer was liable if ABC’s personal claim was successful. ABC sought a finding that she could bring her claim against AYP Ltd because H (No 12) Ltd has since fallen into liquidation and there are uncertainties about whether its public liability insurance is sufficient to cover the full value of her claim.
High Court decision
The High Court held that any vicarious liability of H (No 12) Ltd for the alleged act/omissions of the doctors who had treated ABC did not transfer to AYP Ltd under TUPE. For liability to transfer under TUPE, there must be a direct connection between the liability and the transferred employment contract. The primary purpose of the TUPE legislation is to safeguard the rights of employees after their employment transfers and it is not generally concerned with preserving the rights of third parties. ABC appealed.
Court of Appeal decision
The Court of Appeal dismissed ABC’s appeal and upheld the High Court decision. The ‘liabilities’ that are contemplated by the ‘automatic transfer principle’ under TUPE do not extend to the old employer’s vicarious liability to third parties for the acts and omissions of its employees that occurred prior to the transfer. ABC cannot use provisions that were designed to safeguard the rights of employees to make a claim which would not otherwise be open to her.
What does this mean in practical terms for employers?
Employers who are involved in TUPE transfers will no doubt be greatly relieved by the court’s decision that any vicarious liability the original employer may have towards a third party will not transfer to the new employer under the ‘automatic transfer principle’, even if the liability arose from a pre-transfer act or omission of a transferred employee. Subject to any indemnity it is entitled to from its insurer, the original employer will continue to be responsible for paying any damages if the third party’s personal injury claim is upheld.
However, it is important to note that the principle established in Bernadone (see ‘TUPE protection’ above) remains undisturbed, meaning the ‘automatic transfer principle’ does extend to cover an employer's liability to a transferred employee for personal injury occurring pre-transfer (subject to any indemnities outlined within the transfer agreement).
ABC v Huntercombe (No.12) Ltd & Ors [2026] EWCA Civ 1161
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