TUPE Transfer Liability: Who Is Responsible for Pre-Transfer Claims?

One of the most significant implications of TUPE is the transfer of liability. The new employer inherits not just employees and contracts, but all employment-related claims, debts, and obligations - including those arising before the transfer.

Core Principle: Liabilities Transfer

Automatic Transfer of Liability

Under Regulation 4 TUPE:

• All rights, powers, duties and liabilities transfer
• Whether arising before or after transfer
• From employment relationship
• To the new employer
• Old employer ceases to be liable

What This Means

The new employer becomes responsible for:

• Employment tribunal claims
• Breach of contract claims
• Unpaid wages and benefits
• Holiday pay owed
• Personal injury claims
• Discrimination claims
• Whistleblowing detriments
• Collective consultation failures

Even if the cause occurred entirely under the old employer's watch.

Employment Tribunal Claims

Claims That Transfer

New employer liable for all employment-related claims:

Claim Type	Transfers?	Notes
Unfair dismissal	Yes	Even if dismissed before transfer
Discrimination	Yes	For acts before transfer date
Unpaid wages	Yes	All arrears transfer
Breach of contract	Yes	Contractual claims transfer
Redundancy pay	Yes	If owed before transfer
Holiday pay	Yes	Accrued entitlement
Whistleblowing	Yes	For pre-transfer detriments
Unlawful deductions	Yes	All employment debts

Pre-Transfer Dismissals

If employee dismissed before transfer:

• Claim transfers to new employer
• New employer defends claim
• Must justify dismissal
• May not know the circumstances
• Old employer's actions judged
• New employer pays compensation

Example: Employee dismissed 2 weeks before transfer for alleged misconduct. Brings unfair dismissal claim after transfer. New employer must defend the claim, even though they had no involvement in the decision or process.

Claims in Progress

If claim already lodged:

• Continues against new employer
• Old employer name substituted
• New employer takes over defence
• Must obtain old employer's documents
• May not know full background
• Risk of adverse findings

Unknown Claims

Particular risk:

• New employer may not know claim exists
• Or that grounds for claim exist
• Employee can claim up to time limits
• May only discover issues after transfer
• Limited ability to investigate

Breach of Contract Claims

All Contractual Breaches Transfer

New employer liable for:

• Unpaid bonuses - even if discretionary
• Commission owed - from old employer's sales
• Benefits not provided - company car, medical, etc.
• Notice pay - if terminated by old employer
• Enhanced terms - if old employer broke them
• Restrictive covenants - breaches by old employer

Historical Breaches

Even long-standing breaches:

• May only come to light after transfer
• Employee can claim going back years
• New employer inherits liability
• Cannot argue "we didn't cause it"
• May not have records to defend

Unpaid Debts and Arrears

What Transfers

All employment debts owed at transfer:

• Wages - any arrears
• Overtime - unpaid hours
• Holiday pay - accrued but unpaid
• Expenses - outstanding claims
• SSP - if underpaid
• SMP/SPP - statutory payments
• Pension contributions - if in arrears
• Bonuses - due but unpaid

New Employer Must Pay

Cannot refuse on basis:

• Old employer should have paid
• Not in new employer's budget
• Didn't know about debts
• Not part of purchase agreement

These are employment liabilities that automatically transfer.

Personal Injury Claims

Transfer to New Employer

Claims for workplace injuries transfer:

• Accidents before transfer
• Occupational illness (gradual onset)
• Work-related stress
• Repetitive strain injuries
• Exposure to harmful substances

Even if injury occurred years before transfer.

Employer's Liability Insurance

Protection for new employer:

• Old employer's insurance may cover pre-transfer claims
• But new employer named as defendant
• Must coordinate with old employer's insurer
• Check indemnities in purchase agreement
• May need to notify both insurers

Long-Tail Liabilities

Some injuries manifest years later:

• Asbestos exposure
• Industrial diseases
• Cumulative stress
• Repetitive strain
• Hearing loss

New employer inherits liability even if condition develops after transfer but caused by pre-transfer exposure.

Discrimination Claims

Historical Discrimination

Claims for discrimination before transfer:

• Race, sex, age, disability discrimination
• Harassment and victimisation
• Pay inequality
• Failure to make reasonable adjustments
• Discrimination in dismissal

All transfer to new employer.

Continuing Acts

Particularly risky:

• Discrimination may be continuing act
• Starts before transfer, continues after
• Or series of acts spanning transfer
• New employer liable for whole course of conduct
• Not just post-transfer elements

Example: Female employee paid less than male colleagues for 3 years before transfer. Transfer occurs but pay not corrected. Brings equal pay claim. New employer liable for entire period, including 3 years under old employer.

Collective Claims

TUPE Consultation Failures

If old employer failed to inform and consult:

• Liability transfers to new employer
• Each employee can claim up to 13 weeks' pay
• For old employer's failure
• New employer may not have known
• Limited defences available

Trade Union Recognition

Obligations transfer:

• Recognition agreements
• Collective agreements
• Bargaining obligations
• Ongoing negotiations
• Historical failures

What Doesn't Transfer

Criminal Liabilities

Certain liabilities don't transfer:

• Criminal offences - by old employer
• Corporate manslaughter - stays with old employer
• Health and safety prosecutions - against old company
• Fines - imposed on old employer entity

But civil claims from same facts do transfer (e.g., personal injury from same incident).

Tortious Claims Unconnected to Employment

Some tort claims may not transfer:

• If unconnected to employment relationship
• Pure commercial disputes
• Third party claims
• Non-employment personal injury

But this is fact-specific and disputed.

Risk Management for New Employers

Due Diligence Critical

Before transfer, investigate:

• Any ongoing tribunal claims
• Grievances that may lead to claims
• Disciplinary matters
• Recent dismissals
• Pay disparities
• Historical accidents
• Potential discrimination issues
• Consultation failures

See TUPE due diligence guidance.

Obtain Information

Request from old employer:

• Details of all claims (actual and potential)
• Disciplinary and grievance records (2 years)
• Accident book
• Sickness absence records
• Pay data
• Terms and conditions
• Policies applied
• Recent management actions

Seek Indemnities

In purchase agreement:

• Indemnity for unknown pre-transfer claims
• Cap on liability
• Insurance backed if possible
• Mechanism for notification
• Cooperation in defence

But remember: indemnity is between buyers and sellers. Employee can still sue new employer, who must then seek reimbursement.

Price Adjustment

Factor into purchase price:

• Known liabilities
• Provision for potential claims
• Insurance costs
• Legal defence costs
• Risk premium

Defending Inherited Claims

Challenges

New employer faces:

• Limited knowledge of facts
• No involvement in decision-making
• Reliance on old employer for information
• Old employer may be unhelpful
• Documents may be incomplete
• Witnesses may have left

Steps to Take

1. Obtain full file from old employer
2. Interview witnesses - if still employed
3. Coordinate with old employer - secure cooperation
4. Check insurance - old employer's liability policy
5. Enforce indemnities - if available
6. Assess prospects - early settlement may be cheaper

Cooperation Obligations

Old employer must:

• Provide information
• Make witnesses available
• Disclose documents
• Assist in defence
• But may be reluctant if in dispute over indemnity

Time Limits Still Apply

Not Extended by Transfer

Claims must still be brought:

• Within normal time limits
• Usually 3 months less 1 day
• From date of act complained of
• Not extended because of transfer
• ACAS early conciliation required

Named Respondent

Employee must name:

• New employer (after transfer)
• Not old employer
• Or tribunal may not have jurisdiction
• Can amend if wrong employer named

Multiple Transfer Scenario

Liability Passes Through

If business transfers multiple times:

• Liability follows the business
• Current employer inherits all liabilities
• From all previous employers
• No limit on how far back
• Each transfer passes liability on

Example: Business transfers in 2020, 2023, and 2026. Employee brings claim in 2026 for underpayment spanning all three ownerships. 2026 employer liable for entire claim, including periods under 2020 and 2023 employers.

Insolvency Situations

Special Rules

If old employer insolvent:

• TUPE may not apply (if no ongoing business)
• Or applies with modifications
• Liability may transfer differently
• Redundancy payments may come from National Insurance Fund
• Some debts may not transfer
• Complex and fact-specific

Contract Indemnities

As Between Buyers and Sellers

Purchase agreement may include:

• Indemnity for pre-transfer claims
• But this is commercial arrangement
• Doesn't affect employees' rights
• Employee still sues new employer
• New employer claims from old employer
• Depends on indemnity being enforceable

Limitations

Indemnities limited by:

• Financial caps
• Time limits
• Exclusions
• Old employer's ability to pay
• May be worth less than expected

Practical Steps for New Employers

Before Transfer

• Thorough due diligence
• Employee liability information
• Historical claims data
• Assess potential claims
• Obtain insurance
• Negotiate indemnities
• Price accordingly

At Transfer

• Review inherited terms
• Check for breaches
• Remedy any obvious issues
• Don't worsen terms
• Proper TUPE process
• Clear communication

After Transfer

• Review policies and practices
• Address discrimination risks
• Ensure equal treatment
• Pay all arrears
• Resolve outstanding issues
• Maintain good records

Summary

Liabilities That Transfer

• All employment tribunal claims
• Breach of contract claims
• Unpaid wages and benefits
• Holiday pay arrears
• Personal injury claims
• Discrimination claims
• Collective consultation failures
• Historical breaches and debts

Key Points

• New employer inherits all employment liabilities
• Even for acts before transfer
• Even if unknown at transfer
• Cannot refuse responsibility
• Old employer ceases to be liable
• Criminal liabilities exception
• Indemnities don't affect employee rights
• Due diligence critical

Risk Management

• Comprehensive due diligence
• Obtain employee liability information
• Seek warranties and indemnities
• Insurance consideration
• Price adjustment for risk
• Act quickly on inherited issues
• Take legal advice on significant claims

The transfer of liabilities is one of TUPE's most significant effects. New employers must understand they inherit not just staff, but all employment-related claims and obligations - requiring thorough due diligence and careful risk assessment before any TUPE transfer.