TUPE and vicarious liability: what schools and academy trusts need to know

High Court: vicarious liability for acts of employees does not transfer under TUPE to the new employer.

What is vicarious liability? 

Vicarious liability is a legal principle which means an employer can be held responsible for the wrongful acts of an employee where there is a sufficiently close connection between the employee’s role and the wrongdoing. This area of law is highly fact-sensitive and often turns on whether it is fair, just and reasonable to impose liability on the employer.

The Courts have consistently emphasised that the application of vicarious liability depends on the specific context and nature of the act in question. For schools and academy trusts, this can raise difficult questions, particularly when staff behaviour outside the workplace or beyond core duties causes harm to others. 

For more detail on this area of law see our previous articles: 

Could your organisation be liable for the wrongful acts of work experience students? 

Could schools and charities be liable for the wrongdoing of unpaid volunteers, including trustees and governors? 

Does an academy trust take on vicarious liability for third party claims connected to transferring staff under TUPE? 

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) are designed to protect employees when a business or service they work for changes hands. TUPE applies on the conversion of a school when it becomes or joins an academy trust. It also applies on the transfer of an academy to another academy trust and on a change of service provider, either on outsourcing or taking a service back in-house. 

Under TUPE, employees’ contracts and the associated rights transfer to the new employer as they were at the time of transfer. TUPE also transfers the liabilities ‘under or in connection with’ the employment contract that is being transferred.

Case law has established over time that certain liabilities linked to the employment contract do not transfer, but there has been debate about whether or not this included vicarious liability for acts committed by staff.

Case details: In ABC v Huntercombe (No.12) Ltd & Ors, the High Court confirmed that vicarious liability for torts committed by employees against third parties did not transfer to the new employer under TUPE.

Background

The case involved a claimant who alleged she had suffered harm by the negligence of two doctors while she was an inpatient at a hospital operated by Huntercombe (No.12) Ltd. The hospital was later transferred to another provider, Active Young People Ltd (AYPL), with staff transferring via TUPE. The claimant argued that the new provider should be vicariously liable and brought a claim against AYPL alongside claims against Huntercombe and the two doctors.

The Court was asked to decide whether the vicarious liability transferred from Huntercombe to AYPL.

Findings

The Court held that TUPE does not transfer vicarious liability for torts committed by employees against third parties because any such liability is not owed to the transferring employee and is not sufficiently ‘connected to the employment contract’ to fall within the scope of TUPE.

The Court distinguished between direct obligations to an employee under the employment contract, such as an employer’s duty to provide a safe working environment and secondary liabilities like vicarious liability, which relate to third parties and arise externally to the direct employment relationship.

This reasoning supports the principle that TUPE is primarily concerned with protecting the rights of employees, not transferring liabilities to third parties to the transferee.

Key takeaways for schools and academy trusts 

This decision is important for schools and academy trusts whether they are the transferor or transferee in a TUPE transfer. The judgment makes clear that liability for the acts and omissions of staff does not transfer to the new employer under TUPE. 

It should be noted however that third parties may seek to involve a transferee employer in a claim in order to increase their chances of recovering damages. This can be a particular risk where the transferor employer ceases to exist following the transfer, such as where an employer governing body is dissolved or an exiting academy trust is wound up.   

The practical implications for schools and academy trusts involved in a TUPE transfer are therefore that they should continue to carry out rigorous due diligence, particularly in relation to ongoing or potential claims involving transferring staff, and ensure that suitable indemnity clauses are included in transfer agreements to manage this risk. 

Do rights under an insurance policy transfer under TUPE? 

The High Court commented that, if it had found that vicarious liability did transfer, it would have found that Huntercombe’s right to claim on an insurance policy in respect of the claims would also have transferred to APYL. 

Academy trusts should seek assurances concerning the transferor’s relevant insurance policies during the due diligence process, and should review their insurance arrangements carefully to seek to ensure that they are covered for potential claims following a TUPE transfer.

This case is a helpful reminder that TUPE is not a catch-all for liability and that its primary purpose is to protect employees.

If you would like to discuss any aspect of this article further, please contact our employment team on 0113 244 6100. 

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The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website.

Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.