UK Court of Appeal Limits Acquired Liability Under TUPE
A UK appellate court held that an employer’s vicarious liability for employee torts against a third party does not transfer to the buyer of a business under the country's employee-protection regulations.
The UK Court of Appeal has ruled that a business acquirer does not inherit the seller's vicarious liability for employee torts committed against third parties. The decision clarifies the scope of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), which are designed to protect employee rights during a business transfer. In ABC v Huntercombe, the court rejected a claimant's "opportunistic" attempt to hold the new owner of a hospital liable for alleged abuse by the former owner's staff, especially after the former owner entered liquidation. The court held that TUPE's provision transferring liabilities "under or in connection with" a contract of employment applies only to liabilities owed to employees, not to third parties. This ruling provides significant certainty for buyers in UK asset deals, confirming that they do not step into the shoes of the seller for pre-transfer torts against non-employees. The immediate impact is on over fifty similar claims awaiting case management, but the precedent will shape risk allocation in UK M&A going forward.