By Sara Meyer & Hilary Larter
|Published 08 October 2026
In this case, the Court of Appeal confirmed that an employer’s vicarious liability to a third party for the negligent acts of its employees does not transfer under regulation 4(2)(a) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) because those regulations are concerned with safeguarding employees’ rights, not enhancing the rights of third-party claimants.
The claimant, ABC, suffered injuries while receiving treatment at a psychiatric hospital owned and operated by Huntercombe (No 12) Ltd (Huntercombe), the transferor and first defendant, which she alleged were caused by the negligence of two doctors employed by Huntercombe (the third and fourth defendants). All relevant events occurred before a TUPE transfer from Huntercombe to Active Young People Ltd (AYPL), the transferee and second defendant.
ABC brought a claim for damages, arguing that the transfer meant that AYPL became vicariously liable for the conduct of the doctors who had transferred from Huntercombe. The High Court rejected this argument, holding that vicarious liability did not transfer (see our earlier alert here). ABC appealed.
The Court dismissed ABC's appeal, concluding that regulation 4(2)(a) does not extend to a transferor employer’s vicarious liability to third parties for acts or omissions committed by employees before the transfer. Those liabilities remain with the transferor employer.
Although regulation 4(2)(a) uses broad language, referring to liabilities arising “in connection with” a contract of employment, this phrase had to be read in context. The Court held that TUPE was intended to implement the EU Acquired Rights Directive and must therefore be construed consistently with the Directive’s objective of safeguarding employees’ rights following a change of employer. An employer’s vicarious liability to a third party does not create any corresponding right that an employee can enforce against the employer.
The Court described vicarious liability as a secondary liability, parasitic upon the employee’s primary liability to the injured third party. Since employees have no right to require their employer to be vicariously liable for their conduct, the liability falls outside the category of rights and liabilities which TUPE was designed to preserve on transfer.
The Court rejected ABC's argument that the transfer of vicarious liability protected employees in practice. Case law has established that an employer may seek an indemnity from a negligent employee, and the Civil Liability (Contribution) Act 1978 would allow an employer to seek a contribution from the employee for damage caused by the employee's negligence. An employee therefore gains no legal protection merely because a claimant chooses to sue the employer instead.
The broader TUPE framework was also significant. Regulation 11 requires a transferor to provide extensive information to the transferee before a transfer takes place, including details of any existing or potential employment claims (with Regulation 12 setting out remedies for a failure to comply) but there is no equivalent requirement for disclosure of third-party claims. The Court considered that if Parliament had intended third-party vicarious liability claims to transfer, the legislation would have included corresponding information and protection provisions so that transferees would be aware of any potential liabilities they may acquire as part of the transfer.
This decision provides welcome reassurance to transferees that they will not automatically inherit a transferor's historic vicarious liabilities to third-parties simply because the employees who were primarily liable for the relevant conduct transfer. This is consistent with the principal purpose of TUPE being to safeguard employees' rights on a change of employer.
While the employee liability information that a transferor is required to provide under Regulation 11 is a useful source of information on liabilities that may transfer under TUPE, transferees may wish to request more detailed information from the transferor as part of any pre-transfer due diligence exercise.
