The Employment Appeal Tribunal (EAT) recently provided important clarification on the transfer of liability under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). The EAT ruled in Sean Pong Tyres Ltd v Moore that liability under the Equality Act 2010 (EA 2010) does not transfer unless the claimant also transfers to the new employer.
Factual background
Mr Moore (the Claimant) was employed by Sean Pong Tyres Limited (the Respondent) until he resigned on 19 April 2021. On 1 June 2021, the Claimant lodged claims in the Employment Tribunal (ET) against the Respondent for unfair constructive dismissal, age- and race-related discrimination and harassment allegedly perpetrated by Mr Owusu, a fellow employee. The Claimant did not bring any claims against Mr Owusu directly.
In July 2021, Mr Owusu transferred to another company, Credential, and the Respondent later argued on the first day of the three-day final hearing that this amounted to a TUPE transfer with the result that they were no longer liable for his actions. Under Regulation 4(2)(a) of TUPE, where there is a transfer of an undertaking or business, the transferor’s liabilities in connection with the transferring employees will pass to the transferee. This meant that the Respondent was seeking to transfer any liability in connection with the claim to Credential on the basis that Mr Owusu and liability for his conduct had passed under TUPE.
The ET refused to amend the Respondent’s application to add Credential as a party to the proceedings on the basis that the Respondent had offered no credible explanation for not raising the issue at an earlier point. The ET held that the balance of prejudice was in favour of the Claimant, refused the Respondent’s application and upheld the Claimant’s claim.
The Respondent appealed to the Employment Appeal Tribunal (EAT).
The EAT decision
The EAT dismissed the appeal, upholding the ET’s decision. It was determined that, given the Claimant’s employment had not transferred to Credential, the liability for his claims could not have transferred under TUPE either. The EAT clarified that the employer’s primary liability under the EA 2010 does not transfer in such circumstances. Any errors in handling the amendment application were deemed immaterial as they would not have changed the outcome.
While being described as a new point, this issue was previously considered by the EAT in WGS Ground Handling Services v Sohail, ASIG Manchester and Swissport in December 2018. In that case, the same argument was successfully put forward – that discrimination liability does not transfer under TUPE where only the alleged discriminator transfers.
Lessons for employers
There are a number of key takeaways for employers that arise from this EAT judgment:
- Understand the implications of TUPE: Employers must be aware of TUPE and how it affects liability for claims made by employees. In this case, the employer’s attempt to transfer liability under TUPE was unsuccessful because the claimant employee’s employment had not transferred to the new company.
- Timely identification of defences: Employers should identify and raise potential defences early in the legal process. The employer’s late attempt to amend its response to include a TUPE-based defence was not accepted, highlighting the importance of early and thorough case preparation.
- Prejudice and timing in amendments: When seeking to amend a response or add a party to a claim, employers should consider the timing and potential prejudice to both parties. The ET in this case considered the late amendment application as causing significant delay and prejudice to the proceedings, which led to the refusal of the application.
