Employer’s liability for harassment did not transfer under TUPE, rules EAT

In a novel case, the Employment Appeal Tribunal has ruled that where the alleged perpetrator of harassment transfers under TUPE but the employee victim does not, the liability for the harassment does not transfer to the new employer. The case is Sean Pong Tyres v Moore. We’ll speak to a TUPE expert on what it means for employers involved in TUPE transfers. 

A reminder. Under the TUPE Regulations 2006, following a relevant transfer, all of the former employer’s “rights, powers, duties and liabilities under or in connection with” the transferring employees’ contracts pass to the new employer by virtue of regulation 4(2)(a). In this case the claims were for unfair constructive dismissal under the Employment Rights Act 1996 and harassment under the Equality Act 2010.

The facts briefly. Barry Moore was employed by Sean Pong Tyres; a tyre import and export business based in Rotherham. In 2021 he was subjected to a barrage of abuse by a work colleague who allegedly called him “old white man” and “gay white man” and was told he was lazy and too old to do his job which involved lifting and moving tyres. Subsequently, he resigned and brought a claim against his former employer for discrimination and harassment perpetrated by the colleague. The perpetrator subsequently transferred to a new employer under TUPE and the previous employer sought to argue that its liability had transferred under TUPE to the new employer. The employment tribunal ruled that liability did not transfer and awarded around £22,000 in compensation. On appeal, the EAT agreed with the Leeds employment tribunal’s reasoning - the claimant’s employer remained liable. The EAT made clear that liability which arose under the Equality Act 2010 does not transfer unless the claimant also transfers.

So, let’s get reaction to that ruling. Gill Ross is a TUPE expert and earlier she joined me by phone from Glasgow to discuss the case. I put it to Gill that it’s a novel point:

Gill Ross: “Yes, that's right. It's the first time, really, that this point has been considered and there's been any commentary on it. There was one previous case that came to a similar finding but there was no published decision on it so this is the first time we've really had a written decision from the EAT that covers this point around whether liability for discrimination would pass to a new employer in a TUPE transfer situation where the claimant didn't transfer as part of the TUPE transfer.”

Joe Glavina: “In this case the victim of the harassment, the claimant, didn’t transfer to the new employer and that seems to be the key point which explains why liability stayed with the transferor. Is that right?”

Gill Ross: “Yes, absolutely, because one of the basic protections under the TUPE regulations is that all rights and liabilities transfer with transferring employees to the transferee and that would include things like unfair dismissal, constructive dismissal, if it was connected with the transfer, any discrimination claims, whistleblowing claims. It’s a transfer ‘warts and all’ with, of course, all the protected rights under the employment contract as well, but the critical point in this claim was that even though the perpetrator was a transmitting employee, the victim wasn't a transmitting employee, and there was a three-month gap between his resignation and the TUPE transfer taking place, and his resignation had nothing to do with the TUPE transfer so there was no connection there with the TUPE transfer and his claim. So, the liability for the unfair dismissal claim rested with the transferor, his employer, and the discrimination and harassment claims didn't pass over in terms of liability to the transferee.”

Joe Glavina: “There is quite a lot of commentary out there on this case and I see one article carries the message that this case should come as a relief to transferees who might otherwise have found themselves liable for Equality Act 2010 claims by individuals who they had never employed, although, they say, it is likely that such liability could have been dealt with by suitable warranties and indemnities in a transfer agreement. Do you agree with that?”

Gill Ross: “Yes but another point, just before talking about the indemnity and the warranty point, is if you do have the ability in an outsourcing situation, or a business transfer to do the due diligence and investigate where there have been any claims in the 12 months, or the two years, prior to transfer, not just the transferring employees, but actually other employees as well. Have there been any cases, just so that that you've got the full picture of what potential liability would be and, absolutely, this is a comfort to transferees that discrimination liability wouldn't pass but I think it's still good to have that knowledge and consider whether you do need to add in an additional warranty and indemnity to cover this point specifically. Most of the time it’s probably going to be fine but you may just want even a warranty to just make sure that you're aware that there aren't any claims that they are disclosed against, and that you have that that sort of additional protection there. I was thinking about our standard warranties and indemnities and certainly the indemnities wouldn’t specifically cover this situation of former employees unless there was a connection with the transfer. But absolutely worth thinking about every circumstance and not just putting in standard ones and really thinking through are these appropriate for the particular circumstances?”

That case is called Sean Pong Tyres v Moore and is a decision of the EAT. We’ve included a link to the judgment in the transcript of this programme for you.

LINKS
- Link to judgment: Sean Pong Tyres v Moore