A recent UK Court of Appeal decision has clarified an important limit to the liabilities that pass to a new employer when employees transfer as part of a business acquisition.

Under the UK’s Transfer of Undertakings (Protection of Employment) rules, commonly known as TUPE, employees may transfer automatically to a new employer when a business changes hands, together with certain employment-related rights and liabilities.

But what happens when an employee is alleged to have caused harm to a third party before that transfer? Does the new employer also inherit liability for those historic actions?

Ed McFarlane Chattertons Partner Employment examines the decision and its practical implications below.

TUPE and vicarious liability - important new Court of Appeal decision

A significant new Court of Appeal judgment has clarified the relationship between TUPE and vicarious liability. In ABC v Huntercombe (No. 12) & others, the Court considered whether a business acquiring employees under TUPE also acquires liability for historic acts or omissions committed by those employees while working for their previous employer.

Key point

The Court of Appeal has confirmed that liability for third‑party claims arising from an employee’s pre‑transfer conduct does not transfer under TUPE.

This means that if an employee previously caused harm to a third party, for example through negligence, an accident or other alleged wrongdoing, the new employer is not responsible for those historic acts once the employee transfers.

The case

The claim involved alleged mistreatment of a hospital patient by doctors. The hospital operator sold the business, and its staff transferred to a new operator under TUPE. The original employer later went into liquidation. The claimant pursued claims against:

• the former hospital operator
• the new operator
• the doctors alleged to have been involved

The Court held that vicarious liability for the doctors’ alleged historic actions remained with the original employer, despite its insolvency. The new employer could not be held liable for acts occurring before the transfer.

Implications for employers and advisers

This judgment provides welcome certainty for organisations involved in TUPE transfers:

• No inherited third‑party liabilities Businesses acquiring staff under TUPE do not need to make provision for tortious claims arising from pre‑transfer conduct.
• Clearer due diligence scope Buyers can focus on employment‑related liabilities that do transfer, without needing to investigate historic third‑party claims.
• Litigation clarity For legal practitioners, the decision confirms who the correct defendant is in vicarious liability claims linked to pre‑transfer acts.

Subject to any appeal to the Supreme Court, this decision sets a clear boundary on the extent of TUPE liability.

Read the judgment

The full judgment is available here: https://caselaw.nationalarchives.gov.uk/ewca/civ/2026/1161