When the Troublemaker Transfers: Who Pays for Pre-TUPE Wrongs?

When the Troublemaker Transfers: Who Pays for Pre-TUPE Wrongs?

What happens when an employee who has discriminated against, harassed, or injured a colleague then transfers to a new employer under TUPE? Does the original employer's vicarious liability travel with them? Two recent decisions, Sean Pong Tyres Ltd v Moore [2024] EAT 1 and ABC v Huntercombe (No. 12) Ltd [2025] ICR 1336, have now provided crucial clarity on this question, with significant practical implications for advisers on both sides of a TUPE transfer.

The Problem

The issue is deceptively simple. TUPE, reg 4(2)(a) provides that on a relevant transfer, "all the transferor's rights, powers, duties and liabilities under or in connection with" the transferring employee's contract "shall transfer to the transferee."

An employer's vicarious liability for the torts of its employees is, at first blush, a liability "in connection with" the tortfeasor's contract of employment. So when the tortfeasor transfers to a new employer, does that vicarious liability follow?

The Foundational Authority: Martin v Lancashire County Council

The starting point is the Court of Appeal's decision in Martin v Lancashire County Council [2001] ICR 197 (joined with Bernadone v Pall Mall Services Group Ltd). Peter Gibson LJ held that not only primary tortious liability but also secondary vicarious liability would transfer to the transferee in respect of an employee whose employment has been transferred under TUPE.

Crucially, the Court observed that the "rights and obligations" referred to in the Directive should not be limited to contractual claims but could extend to claims in tort. A liability under the Occupiers' Liability Act 1957 arising from the transfer or employment relationship would transfer where there was "sufficient connection" with the contract of employment.

The Prior Authority: Doane v MK Dons

In Doane v Wimbledon FC [2007] Sheffield CC, HHJ Robinson extended this logic significantly. A footballer injured by a tackle from an opposition player (Mr Holloway) sought damages. Mr Holloway's employment subsequently transferred from Wimbledon FC to MK Dons under TUPE. The court held that Wimbledon's vicarious liability likewise transferred to MK Dons, on the basis that it arose "in connection with" Mr Holloway's contract.

The logic was superficially attractive: if the tortfeasor's contractual obligations transfer, why not the employer's secondary liability for breaches of those obligations? But this county court decision now represents the high-water mark of the expansive interpretation.

Pong and Huntercombe: A Purposive Brake

The EAT in Pong (Judge Stout) and the High Court in Huntercombe (HHJ Bird) have now applied a salutary brake to this expansive interpretation.

In Pong, the claimant brought discrimination and harassment claims against his employer arising from the conduct of a colleague. That colleague's employment then transferred to a third party. The employer sought to argue that its vicarious liability had transferred away with the tortfeasor.

Judge Stout rejected this submission. She drew a critical distinction: TUPE, reg 4(2)(a) transfers liabilities owed to a transferring employee (or arising from their contract), not liabilities created by a transferring employee but owed to someone whose employment does not transfer.

The decision hinged on the analysis that under EqA 2010, ss.39 and 40, an employer's liability for discrimination or harassment is a primary liability owed directly to the victim employee. It arises from the victim's contract with the employer, irrespective of the vicarious liability provisions in s.109. To hold otherwise would require a victim to pursue claims against a transferee with whom they have no relationship at all.

The 'In Connection With' Test

Both Pong and Huntercombe emphasise that "in connection with" is a term that can have a narrower or wider meaning depending on context. In TUPE, the connection between the liability and the contract must be direct. HHJ Bird in Huntercombe held that the liabilities sufficiently closely connected to the contract are those that are "fundamental" parts of the employer/employee relationship.

Vicarious liability, by contrast, is a secondary, no-fault liability for wrongs committed by employees. It is not part of the fundamental employment relationship and therefore does not transfer with the tortfeasor's contract.

The Exception: Continuing Acts

One important exception exists. In Vernon v Azure Support Services Ltd EAT 0192/13, the transferee was held liable under s.109 EqA for acts of sexual harassment carried out pre-transfer by an employee of the transferor who did not transfer. The key finding was that the sexual harassment was a "continuing act" which carried on after the transfer, with the last act occurring less than three months before the claim was lodged. Where discrimination continues post-transfer, the transferee may still incur liability.

Interactive Decision Tree

Use the interactive tool below to navigate specific TUPE vicarious liability scenarios:

Practical Implications for Practitioners

• Transferors cannot shed vicarious liability by engineering the transfer of a problem employee. Claims based on pre-transfer conduct remain the transferor's responsibility.
• Transferees should not inherit unexpected liabilities for the pre-transfer wrongs of newly-acquired employees against non-transferring employees or third parties.
• Claimants should continue to sue the original employer for pre-transfer discrimination, harassment, or injury, regardless of whether the alleged tortfeasor has since moved on.
• Due Diligence: During TUPE transfers, transferees should request disclosure of all pending or threatened claims. The risk of acquiring problem employees is now limited to post-transfer conduct.
• Watch for Continuing Acts: If discriminatory conduct straddles the transfer date, the transferee may still be caught.

Summary: The Current Position