Employment Law Coffee Break: Consultation following Supreme Court decision, vicarious liability and TUPE, and employment law update

EHRC publishes consultation following Supreme Court decision 

The Equality and Human Rights Commission (EHRC) has published a consultation on proposed updates to its Code of Practice for services, public functions and associations, following the Supreme Court's decision in For Women Scotland v Scottish Ministers. 

The EHRC is asking for views on whether updates it has made to the code to reflect the Supreme Court decision on the definition of "sex" in the Equality Act 2010 "clearly articulate the practical implications of the judgment and enable those who will use the Code to understand and comply with the Equality Act 2010." The consultation will last for six weeks, closing on Monday 30 June. 

The EHRC states that it will "consider every response carefully and amend the draft Code where necessary". It will then be submitted to the Minster for Women and Equalities for approval and laying it before Parliament, before it acquires statutory status. 

What does this mean for employers? 

The EHRC has acknowledged in announcing the current consultation that "this is a complex area of law, which bears on the rights of people with the protected characteristics of sex, sexual orientation and gender reassignment. We know that there are strongly held views across our society, both about how the law should be interpreted and whether it reflects the right balance between those rights. So if everybody’s rights are to be protected – as the Supreme Court confirmed the law intends – service providers and their legal advisors need help to navigate these challenges" and that its role "is to ensure everybody's rights are protected in line with the law, so that no one experiences discrimination or harassment as a result of their protected characteristic when using services. We are committed to developing guidance that provides legal clarity and practical support for organisations following the Supreme Court judgment". 

While no express mention is made of the Employment Code of Practice, the EHRC press release states that the services Code of Practice is one of a range of statutory and non-statutory guidance the EHRC will be working to update, following the Supreme Court's judgment . The EHRC recently published interim non-statutory guidance which covered employers, as well as service providers, and it may be that this is revisited in light of the revisions to this code. The guidance and examples relating to the Supreme Court decision, which are the subject of the current consultation, may also be helpful in the employment context. 

Please see our earlier Coffee Breaks (on the judgment and on the interim guidance). For further guidance on the implications for your workforce, please speak to your usual Osborne Clarke contact. 

Vicarious liability and TUPE transfers 

A recent High Court decision has considered whether or not an employer's vicarious liability for alleged tortious acts by an employee towards a third party transfers under the Transfer of Undertakings (Protection of Employment) Regulations 2006. Here, a former in-patient at a hospital alleged harm caused by two employees and claimed damages. However, in the interim the business had transferred to a new owner. It was accepted that TUPE applied to this transfer. 

The High Court noted that the purpose of TUPE is the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded. Applying previous case law, the High Court held that "the connection between the liability [of the transferor] and the [employment] contract must be direct, in the sense of being a liability the transferor has to an employee if the liability is to transfer". Here, the relevant direct liability was the liability of the employee to the third party. The only liability that attached to the transferor was the secondary (or indirect) no-fault liability "for a wrong committed by his employee". The connection between the liability of the transferor and the employment contract was therefore too remote to fall within the scope of TUPE. 

The High Court declined to follow a previous County Court decision which had held that vicarious liability for a tort did transfer with a wrongdoing employee, on the basis that the court in that case had approached, among other matters, the construction of the statutory provisions incorrectly. 

While it did not need to do so in light of its finding that vicarious liability did not transfer, the High Court ruled that had this not been so, the right of the former employer to an indemnity by its public liability insurers in respect of the claim for damages and costs arising from the alleged vicarious liability would also have transferred to the new employer under TUPE. 

What does this mean for employers? 

This decision reinforces the principle that TUPE transfers are primarily concerned with safeguarding employee rights rather than extending liability for third-party claims. It reflects an earlier decision of the Employment Appeal Tribunal which held that an employer's alleged vicarious liability for direct discrimination against an employee under the Equality Act 2010 did not transfer with the accused employee under TUPE. 

Employers involved in a business sale or outsourcing agreement will need to carefully assess which liabilities will transfer under TUPE and which will remain with the company. While liabilities directly connected to the employment relationship (for example, those for personal injury or discrimination by an employer against a transferring employee will transfer), this decision confirms that more remote liabilities, such as those relating to customers and clients, will remain with the original employer. 

Where liabilities remain with a former employer, it will be important to ensure that adequate insurance remains and/or that account is taken of them in the sale or outsourcing agreement, for example, through warranties and indemnities or price adjustments, as well as considering the need for any contractual obligations around the conduct of any legal claims. 

Catch up on our latest employment law update 

We recently hosted two webinars as part of our Eating Compliance for Breakfast series on managing your people. If you were unable to join us, you can listen to the recordings using the links below:

• Impact of new regimes for using staffing companies, zero hours agency workers and umbrella workers: How to minimise cost and risk
• Employment law 2025: Essential insights and immediate action

If you wish to discuss any of the issues covered, please do contact your usual Osborne Clarke contact or our speakers, who will be happy to assist you. We are closely tracking the Employment Rights Bill as it progresses through Parliament; you can catch up on the latest status of the reforms via our dedicated microsite.