In more detail 

Background

Employee M was employed by SPT Ltd. He suffered discrimination and harassment by colleague O, leading to his unfair, constructive dismissal. SPTs business, including O, subsequently transferred to X, which was said to be a TUPE transfer. This led to the question: had the liability for the discrimination remained with SPT, or had it had transferred to X despite the fact that M had not TUPE transferred? The answer required analysis of the mechanics of the Equality Act 2010 (EqA), as well as the TUPE Regulations.

Relevantly, the EqA provides that:

• An employer must not discriminate against an employee or harass them (sections 39 and 40). 
• An employee who perpetrates discrimination or harassment against a colleague will be individually liable (section 110).
• The employer is vicariously liable for its employees' acts of discrimination / harassment perpetrated in the course of employment, subject to a potential defense that the employer took all reasonable steps to prevent the discrimination / harassment (section 109). 

Where both the employer and the individual discriminator / harasser are successfully sued for the same acts, they are jointly and severally liable.

Under TUPE, all of the transferor employer's rights, powers, duties and liabilities under or in connection with a transferring employee's contract of employment transfer to the transferee. 

The issue in this case boiled down to whether SPTs liability for discrimination / harassment was connected to M's contract of employment (as the victim) or O's (as the culprit).

Decision

At tribunal, SPT argued that the legal basis for its alleged liability to M for the discrimination and harassment was entirely dependent on O's personal liability (under section 110 EqA), for which SPT was vicariously liable (under section 109 EqA). This, it said, meant the liability arose in connection with O's employment within the meaning of TUPE and so had automatically transferred to X. 

The EAT disagreed, for several reasons. It identified that, in addition to the individual and vicarious liability provisions in sections 109 and 110, the EqA  creates a distinct, primary liability on the employer under sections 39 and 40. This primary liability is not strictly dependent on an individual discriminator's personal liability. As such, the EAT concluded that the liability arose in connection with M's employment, not O's. Since M had not transferred, neither had the liability for the discrimination and harassment he had suffered. 

The EAT contrasted a non-binding County Court decision dealing with a negligence claim (Doane v Wimbledon Football Club and others, 2007). In that case, a footballer had suffered a personal injury allegedly caused by the negligent tackle of a Wimbledon FC player. Wimbledon FC, including the allegedly negligent player, TUPE transferred to MK Dons and the court found that the liability for negligence transferred with him. The EAT considered the court's analysis to be "highly persuasive", but concluded it engaged different legal principles. In Doane, the negligence claim was brought on the basis of Wimbledon FC's vicarious liability. As this was a secondary liability it could properly be described as arising in connection with the wrongdoer's employment, and therefore capable of transferring under TUPE. In contrast, the EAT was dealing with an employer's primary liability under the EqA.

The EAT was in part persuaded by issues to do with how liability is shared between wrongdoers. In the negligence scenario, if an individual wrongdoer is ordered to pay compensation, they can claim a contribution from their employer, and vice versa. It is different under the EqA under current case law: there is currently no right to claim a contribution. The EAT concluded that this points to there being a package of rights and liabilities in the negligence scenario, which means they should all transfer under TUPE to protect the position of the employee who is transferring, whereas the rights and liabilities under the EqA are separate. 

Comment

As it stands, a transferee won't inherit liability for the discriminatory acts of a transferring employee unless the victim of the discrimination also transfers. (If the victim doesn't transfer, the liability remains with the transferor.) However, the decision suggests that a transferee will inherit the vicarious liability for the negligent acts of a transferring employee, regardless of whether the victim of the negligence has transferred. 

There is very little case law on the issues in this case and it seems apt for further judicial consideration, balancing multiple legal nuances and policy considerations. It reinforces the longstanding best practice for a TUPE scenario, namely, a transferee should carry out appropriate due diligence in relation to the liabilities which might transfer and seek appropriate protection through warranties and indemnities.

Sean Pong Tyres Ltd v Moore, EAT.