Understanding "Vicarious Liability" - A Key Element of Harassment Liability Under Fair Housing Law
In October 2015, HUD issued a proposed rule to create a new fair housing regulation that will apply to both private and federally assisted communities. The new regulation - if made final - will encompass two major issues:
It will establish formal standards for harassment under fair housing law, and will make it clear that all harassment, whether due to sex, race, national origin, disability, familial status, or any other protected characteristic, will be illegal; and
It will clarify when housing providers and other entities or individuals may be held liable for harassment.
Liability for Fair Housing Violations
Anyone may be held ‘directly’ liable for his or her own fair housing violations. For example, an individual manager or maintenance employee may be sued for making discriminatory statements or treating prospects or residents differently based on race, color, religion, national origin, sex, familial status or disability. Likewise, owners may face liability if they have rules that discriminate against applicants or residents based on a protected characteristic. Owners may also fact liability for the actions of others, including employees and other agents. This higher level of liability is known as "vicarious liability," and is a little understood element of common law. The purpose of this article is to assist housing operators and others associated with the provision of housing in their understanding of vicarious liability.
Traditional legal standards recognize two levels of liability - direct liability for one’s own misconduct and vicarious liability for the misconduct of others. The standards for both types of liability follow well-established legal principles and do not add any new forms of liability under fair housing law.
Direct Liability
There are three ways, under fair housing law, in which an individual or entity may be directly liable for a fair housing violation.
A person is directly liable for his own conduct that results in a discriminatory housing practice. Individual employees, managers, owners and others all are directly liable for their own discriminatory conduct.
A person may also be directly liable for the misconduct of others. Such misconduct could be the behavior of an employee or agent, or a third party, such as another resident.
When a claim is based on the actions of an employee or agent, a person may be considered directly liable for failing to take prompt action to correct and end a discriminatory housing practice by that person’s employee or agent, if the person knew or should have known of the discriminatory conduct. In other words, community owners are directly liable for the actions of employees and other agents when they knew or should have known about the discriminatory conduct, but did not take action to stop it.
A person also may be directly liable for failing to take prompt action to end a discriminatory housing practice by a third party, such as another resident, if the person knew or should have known about the conduct.
A key element of ‘direct liability’ is knowledge; it must be clear that the person knew or should have known about the discriminatory behavior in order to demonstrate direct liability. This is not the case for ‘vicarious liability.’
Vicarious Liability
Vicarious liability is a form of strict, secondary liability that arises under the common law doctrine of 'agency.' The Latin term used in the law is respondeat superior - the responsibility of the superior for the acts of their subordinate, or, in a broader sense, the responsibility of any third party that had the "right, ability or duty to control" the activities of a violator.
The HUD proposed regulation provides that a person may be vicariously liable for a discriminatory housing practice by the person’s agent or employee, regardless of whether the person knew or should have known of the conduct that resulted in a discriminatory housing practice, consistent with agency law.
HUD is making it clear that the general principles of agency law apply to fair housing cases. Under well-established agency law, the vicarious liability occurs when the discriminatory actions of the agent are taken within the scope of the agency relationship, or are committed outside the scope of the agency relationship but the agent was aided in the commission of such acts by the existence of the agency relationship.
Certain elements must generally be present to demonstrate vicarious liability, including (1) the act or action occurred while the employee [or agent] was at the workplace and within the hours of the employee's schedule; (2) the employer must have employed the employee at the time of the incident. In other words, the employee had a reason to be at work at the time; and (3) the injury was a result of the act or actions of the employee [or agent] in the capacity that the employee or agent was hired. However, HUD has indicated that with regard to fair housing, vicarious liability will be expanded to include actions by employees or agents when not working during their normal work schedule. For example, a maintenance staffer using keys held as part of his job to enter a resident's apartment after hours.
There is hope, in the form of a Supreme Court ruling from 2003. In the case of Meyer v. Holley, Mr. and Mrs. Holley was an interracial couple that tried to purchase a house in California but were discriminated against during the process. A real estate corporation listed the house for sale. The couple sued the corporation, the employee who allegedly committed the discrimination, and the President of the real estate corporation, for unlawful discrimination. The President was the sole owner of the Corporation and neither participated in nor authorized the alleged conduct.
The case ultimately went to the Unites States Supreme Court, which was asked to decide whether the owners or officers of entities were automatically liable for the wrongful acts of their employees or agents, even if the owners or officers were not involved in and did not direct or authorize the unlawful discriminatory conduct.
The Court ruled that the owners or officers of a corporation may only be held liable for Fair Housing violations if they directed or controlled the person with respect to the unlawful act. The Court concluded that the owner/broker of the real estate company was not liable for the unlawful acts of the real estate agent. Keep in mind that one of the key components, in this case, was that the operating entity was a corporation. The corporate structure itself provides some protection to its officers relative to personal liability.
Protection Against Vicarious Liability
Unfortunately, the possibility of vicarious liability cannot be fully eliminated no matter how diligent an owner is relative to hiring, screening, and training. However, the potential can be minimized by properly training and supervising all employees - not only managers and leasing staff. Anyone who interacts with the public or with residents, including maintenance workers and contractors, should be well supervised. Special care must be taken when hiring outside contractors, who may well be considered agents.
Any complaints regarding discrimination or harassment should be addressed immediately. An investigation should be conducted and, if warranted, adequate steps should be taken to eliminate the offensive conduct.
Ultimately, the key to prevention of liability is screening of employees (including criminal screening), training of employees, and supervision of employees. As for contractors and agents, supervision becomes even more critical, since there is often little opportunity for management companies to screen and train contractors.