TUPE – Employer’s liability for employee’s negligence

What is TUPE?

TUPE stands for Transfer of Undertakings (Protection of Employment) Regulations 2006. In its earlier form it has been around since 1981, when our head of department was studying A levels at college. TUPE applies to employees of businesses and other organisations in the UK and is designed to protect employees when there is a business transfer or change in service provision. TUPE protects staff during business acquisitions, outsourcing, insourcing or when services are taken over by a different provider (2^nd generation contracting). TUPE is there to prevent job losses and unfair treatment solely because of a change in business or organisation ownership, where a TUPE transfer is going to or has taken place.

Employees automatically transfer to the different organisation with their existing terms and conditions of employment intact, together with their accrued service so continuity of employment is therefore preserved. Employees cannot be dismissed solely due to the transfer itself.

TUPE applies during a business transfer where a business or part of it is sold and during a service provision change where services such as cleaning or catering are outsourced, insourced, or transferred to a new contractor. TUPE does not apply when a company is acquired through a share sale or where assets are sold (on a company break up) or where a new provider is called into finish a particular project.

There are other certain exceptions where TUPE protections against dismissal may not apply such as when the sole or principal reason for the variation is an economic, technical or organisational reason (ETO reason) entailing changes in the workforce (reduction of staff), or where the terms of the employment contract expressly allow the employer to make changes.

Vicarious liability

At common law, an employer is liable for acts such as negligence conducted by an employee in the course of their employment or by someone with whom the employer has a relationship that is “akin to employment”.

TUPE and vicarious liability

Where there is a transfer of an undertaking for the purposes of TUPE, all the employer’s rights, powers, duties, and liabilities under or in connection with the transferring employees’ contracts pass to the new employer or service provider. There is a limited carve out for pensions, which is a complex area, outside of the scope of this update.

Breach of duty of care to service users resulting in injuries. How is this dealt with in TUPE law?

In the case of ABC v Huntercombe (No 12) Ltd and others from May 2025, ABC issued High Court proceedings seeking damages for injuries suffered while she was an in-patient at a hospital owned and operated by Huntercombe Ltd. ABC argued that Huntercombe Ltd was vicariously liable for the acts of two of its employees who, following a subsequent TUPE transfer of Huntercombe Ltd’s business, had become employed by Active Young People Ltd.

The High Court addressed the scope of liabilities that transfer under TUPE. The claimant, referred to as ABC, sought damages for wrongs suffered during her time as an inpatient at a hospital operated by Huntercombe Ltd. The hospital’s business was subsequently sold to Active Young People Ltd, with its employees transferring under TUPE.

The Court considered two preliminary issues:

• Transfer of vicarious liability: Whether Huntercombe Ltd’s liability for the alleged torts (negligence in a breach of duty of care) committed by its employees transferred to Active Young People Ltd under TUPE
• Transfer of indemnity rights: Whether Huntercombe Ltd’s right to an indemnity from its public liability insurers in respect of that vicarious liability also transferred.

The Court concluded that vicarious liability for torts committed by employees does not automatically transfer to the new employer under TUPE. It found that for a liability to transfer, there must be a direct connection between the liability and the transferring employment contract. In this case, the Court found that the alleged negligent acts were not sufficiently connected to the employment contracts of the transferring employees to warrant the liability transferring to Active Young People Ltd.

Consequently, the Court determined that Huntercombe’s vicarious liability did not transfer to Active Young People Ltd. As a result, Huntercombe’s right to an indemnity from its insurers in respect of that liability also did not transfer.

This decision follows previous cases such as Sean Pong Tyres Ltd v Moore [2024] EAT 1, which decided that vicarious liability for direct discrimination committed by an employee under the Equality Act 2010 does not transfer under TUPE.

What should businesses do?

The ruling underlines the importance of assessing the direct connection between potential liabilities and employment contracts when determining whether such liabilities transfer under TUPE. This is important if a business transfer or change in service provision is being considered.

The decision also underlines the importance of undertaking thorough due diligence during a business transfer and of ensuring that contractual indemnities are considered and put in place where necessary.

If you require further advice about TUPE or employment issues in business transfers, please contact Ben Stepney, Partner in Employment at Thomson Snell & Passmore.