Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices Under the Fair Housing Act, 63054-63075 [2016-21868]

Download as PDF 63054 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations The Agency has determined under 21 CFR 25.33(a) that this action is categorically excluded from the requirement to submit an environmental assessment or an environmental impact statement because it is of a type that does not individually or cumulatively have a significant effect on the human environment. Elsewhere in this issue of the Federal Register, FDA gave notice that the approval of those parts of NADA 138– 934 pertaining to the procaine penicillin component indications for growth promotion and increased feed efficiency in swine is withdrawn, effective September 14, 2016. As provided for in the regulatory text of this document, the animal drug regulations are amended to reflect this partial withdrawal of approval and subsequent product reformulation. NADA 138–934 was identified as being affected by guidance for industry (GFI) #213 ‘‘New Animal Drugs and New Animal Drug Combination Products Administered in or on Medicated Feed or Drinking Water of Food-Producing Animals: Recommendations for Drug Sponsors for Voluntarily Aligning Product Use Conditions with GFI #209,’’ December 2013. This rule does not meet the definition of ‘‘rule’’ in 5 U.S.C. 804(3)(A) because it is a rule of ‘‘particular applicability.’’ Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801–808. List of Subjects in 21 CFR Part 558 Animal drugs, Animal feeds. Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs and redelegated to the Director of the Center for Veterinary Medicine, 21 CFR part 558 is amended as follows: PART 558—NEW ANIMAL DRUGS FOR USE IN ANIMAL FEEDS 1. The authority citation for part 558 continues to read as follows: ■ asabaliauskas on DSK3SPTVN1PROD with RULES Authority: 21 U.S.C. 354, 360b, 360ccc, 360ccc–1, 371. § 558.140 [Amended] 2. In § 558.140, in paragraph (b)(2), remove ‘‘No. 054771’’ and in its place add ‘‘Nos. 054771 and 069254’’. ■ § 558.145 [Amended] 3. In § 558.145, remove and reserve paragraph (a)(2). ■ VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 Dated: September 6, 2016. William T. Flynn, Acting Director, Center for Veterinary Medicine. [FR Doc. 2016–21985 Filed 9–13–16; 8:45 am] BILLING CODE 4164–01–P DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Part 100 [Docket No. FR–5248–F–02] RIN 2529–AA94 Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices Under the Fair Housing Act Office of the Assistant Secretary for Fair Housing and Equal Opportunity, HUD. ACTION: Final rule. AGENCY: This final rule amends HUD’s fair housing regulations to formalize standards for use in investigations and adjudications involving allegations of harassment on the basis of race, color, religion, national origin, sex, familial status, or disability. The rule specifies how HUD will evaluate complaints of quid pro quo (‘‘this for that’’) harassment and hostile environment harassment under the Fair Housing Act. It will also provide for uniform treatment of Fair Housing Act claims raising allegations of quid pro quo and hostile environment harassment in judicial and administrative forums. This rule defines ‘‘quid pro quo’’ and ‘‘hostile environment harassment,’’ as prohibited under the Fair Housing Act, and provides illustrations of discriminatory housing practices that constitute such harassment. In addition, this rule clarifies the operation of traditional principles of direct and vicarious liability in the Fair Housing Act context. DATES: Effective date: October 14, 2016. FOR FURTHER INFORMATION CONTACT: Lynn Grosso, Acting Deputy Assistant Secretary for Enforcement and Programs, Office of Fair Housing and Equal Opportunity, Department of Housing and Urban Development, 451 7th Street SW., Room 5204, Washington DC 20410–2000; telephone number 202– 402–5361 (this is not a toll-free number). Persons with hearing or speech impairments may contact this number via TTY by calling the toll-free Federal Relay Service at 800–877–8339. SUPPLEMENTARY INFORMATION: SUMMARY: PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 I. Executive Summary A. Purpose of the Regulatory Action Both HUD and the courts have long recognized that Title VIII of the Civil Rights Act of 1968, as amended, (42 U.S.C. 3601 et seq.) (Fair Housing Act or Act) prohibits harassment in housing and housing-related transactions because of race, color, religion, sex, national origin, disability,1 and familial status, just as Title VII of the Civil Rights Act of 1964 (42 U.S.C. 2000e et seq.) (Title VII) prohibits such harassment in employment. But no standards had been formalized for assessing claims of harassment under the Fair Housing Act. Courts have often applied standards first adopted under Title VII to evaluate claims of harassment under the Fair Housing Act, but there are differences between the Fair Housing Act and Title VII, and between harassment in the workplace and harassment in or around one’s home, that warrant this rulemaking. This rule formalizes standards for evaluating claims of quid pro quo and hostile environment harassment in the housing context. The rule does so by defining ‘‘quid pro quo harassment’’ and ‘‘hostile environment harassment’’ as conduct prohibited under the Fair Housing Act, and by specifying the standards to be used to evaluate whether particular conduct creates a quid pro quo or hostile environment in violation of the Act. Such standards will apply both in administrative adjudications and in cases brought in federal and state courts under the Fair Housing Act. This rule also adds to HUD’s existing Fair Housing Act regulations illustrations of discriminatory housing practices that may constitute illegal quid pro quo and hostile environment harassment. By establishing consistent standards for evaluating claims of quid pro quo and hostile environment harassment, this rule provides guidance to providers of housing or housing-related services seeking to ensure that their properties or businesses are free of unlawful harassment. The rule also provides clarity to victims of harassment and their representatives regarding how to assess potential claims of illegal harassment under the Fair Housing Act. In addition, this final rule clarifies when housing providers and other entities or individuals covered by the Fair Housing Act may be held directly or vicariously liable under the Act for 1 This rule uses the term ‘‘disability’’ to refer to what the Fair Housing Act and its implementing regulations refer to as ‘‘handicap.’’ Both terms have the same legal meaning. See Bragdon v. Abbott, 524 U.S. 624, 631 (1998). E:\FR\FM\14SER1.SGM 14SER1 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations illegal harassment, as well as for other discriminatory housing practices that violate the Act. This rule sets forth how these traditional liability standards apply in the housing context because, in HUD’s experience, there has been significant misunderstanding among public and private housing providers as to the circumstances under which they will be subject to liability under the Fair Housing Act for discriminatory housing practices undertaken by others. B. Legal Authority for the Regulation The legal authority for this regulation is found in the Fair Housing Act, which gives the Secretary of HUD the ‘‘authority and responsibility for administering this Act.’’ 42 U.S.C. 3608(a). In addition, the Act provides that ‘‘[t]he Secretary may make rules (including rules for the collection, maintenance, and analysis of appropriate data) to carry out this title. The Secretary shall give public notice and opportunity for comment with respect to all rules made under this section.’’ 42 U.S.C. 3614a. HUD also has general rulemaking authority under the Department of Housing and Urban Development Act to make such rules and regulations as may be necessary to carry out its functions, powers and duties. See 42 U.S.C. 3535(d). C. Summary of Major Provisions asabaliauskas on DSK3SPTVN1PROD with RULES The major provisions of this rule: • Formalize definitions of ‘‘quid pro quo harassment’’ and ‘‘hostile environment harassment’’ under the Fair Housing Act. • Formalize standards for evaluating claims of quid pro quo and hostile environment harassment under the Fair Housing Act. • Add illustrations of prohibited quid pro quo and hostile environment harassment to HUD’s existing Fair Housing Act regulations. • Identify traditional principles of direct and vicarious liability applicable to all discriminatory housing practices under the Fair Housing Act, including quid pro quo and hostile environment harassment. Please refer to section III of this preamble, entitled ‘‘This Final Rule,’’ for a discussion of the changes made to HUD’s regulations by this final rule. D. Costs and Benefits This rule formalizes clear, consistent, nationwide standards for evaluating harassment claims under the Fair Housing Act. The rule does not create any new forms of liability under the Fair Housing Act and thus adds no additional costs for housing providers VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 and others engaged in housing transactions. The benefits of the rule are that it will assist in ensuring compliance with the Fair Housing Act by defining quid pro quo and hostile environment harassment that violates the Act and by specifying traditional principles of direct and vicarious liability, consistent with Supreme Court precedent. Articulating clear standards enables entities subject to the Fair Housing Act’s prohibitions and persons protected by its terms to understand the types of conduct that constitute actionable quid pro quo and hostile environment harassment. As a result, HUD expects this rule to facilitate more effective training to avoid discriminatory harassment in housing and decrease the need for protracted litigation to resolve disputed claims. II. Background Title VIII of the Civil Rights Act of 1968, as amended (the Fair Housing Act or Act), prohibits discrimination in the availability and enjoyment of housing and housing-related services, facilities, and transactions because of race, color, national origin, religion, sex, disability, and familial status. 42 U.S.C. 3601–19. The Act prohibits a wide range of discriminatory housing and housingrelated practices, including, among other things, making discriminatory statements, refusing to rent or sell, denying access to services, setting different terms or conditions, refusing to make reasonable modifications or accommodations, discriminating in residential real estate-related transactions, and retaliating. See 42 U.S.C. 3604, 3605, 3606 and 3617. In 1989, HUD promulgated fair housing regulations at 24 CFR part 100 that address discriminatory conduct in housing generally. The 1989 regulations include examples of discriminatory housing practices that cover quid pro quo sexual harassment and hostile environment harassment generally. Section 100.65(b)(5) identifies, as an example of unlawful conduct, denying or limiting housing-related services or facilities because a person refused to provide sexual favors. Section 100.400(c)(2) offers as an example of illegal conduct ‘‘. . . interfering with persons in their enjoyment of a dwelling because of race, color, religion, sex, handicap, familial status, or national origin of such persons, or of visitors or associates of such persons.’’ The 1989 regulations do not, however, expressly define quid pro quo or hostile environment harassment, specify standards for examining such claims, or provide illustrations of other types of PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 63055 quid pro quo or hostile environment harassment prohibited by the Act. The 1989 regulations also do not discuss liability standards for prohibited harassment or other discriminatory housing practices. Over time, forms of harassment that violate civil rights laws have coalesced into two legal doctrines—quid pro quo and hostile environment. Although HUD and the courts have recognized that the Fair Housing Act prohibits harassment because of race or color,2 disability,3 religion,4 national origin,5 familial status,6 and sex,7 the doctrines of quid pro quo and hostile environment harassment are not well developed under the Fair Housing Act. As a result, when deciding harassment cases under the Fair Housing Act, courts have often looked to case law decided under Title VII, which prohibits employment discrimination because of race, color, religion, sex, and national origin.8 But the home and the workplace are significantly different environments such that strict reliance on Title VII case law is not always appropriate. One’s home is a place of privacy, security, and refuge (or should be), and harassment that occurs in or around one’s home can be far more intrusive, violative and threatening than harassment in the more public environment of one’s work place.9 Consistent with this reality, the 2 See, e.g., Smith v. Mission Assoc. Ltd. P’ship, 225 F. Supp. 2d 1293, 1298–99 (D. Kan. 2002) (42 U.S.C. 3604(b)); HUD v. Tucker, 2002 ALJ LEXIS 33, *3–4 (HUD ALJ 2002) (42 U.S.C. 3604(a) and (b)). 3 See, e.g., Neudecker v. Boisclair Corp., 351 F. 3d 361, 364 (8th Cir. 2003) (42 U.S.C. 3604(f)(2)). 4 See, e.g., Bloch v. Frischholz, 587 F. 3d 771, 787 (7th Cir. 2009) (42 U.S.C. 3604(b), 3617). 5 See, e.g., Effendi v. Amber Fields Homeowners Assoc., 2011 U.S. Dist. Lexis 35265, *1 (N.D. Ill. 2011) (42 U.S.C. 3604(b) and 3617); Texas v. Crest Asset Mgmt., 85 F. Supp. 722, 736 (S.D. TX 2000) (42 U.S.C. 3604(a) and (b), 3617). 6 See, e.g., Bischoff v. Brittain, 2014 U.S. Dist. LEXIS 145945, *13–14, *17 (E.D. Cal. 2014) (3604(b)); United States v. M. Westland Co., 1995 U.S. Dist. LEXIS 22466, *4 (C.D. Cal. 1995) (Fair Housing Act provision not specified). 7 See, e.g., Quigley v. Winter, 598 F. 3d 938, 946 (8th Cir. 2010) (42 U.S.C. 804(b), 3617); Krueger v. Cuomo, 115 F. 3d 487, 491 (7th Cir. 1997) (42 U.S.C. 3604(b), 3617); Honce v. Vigil, 1 F. 3d 1085, 1088 (10th Cir. 1993) (42 U.S.C. 3604(b)); Shellhammer v. Lewallen, 770 F. 2d 167 (6th Cir. 1985) (sexual harassment under the Fair Housing Act in general). 8 See, e.g., Honce v. Vigil, 1 F. 3d at 1088; Shellhammer v. Lewallen, 770 F. 2d 167; Glover v. Jones, 522 F. Supp. 2d 496, 503 (W.D.N.Y. 2007); Beliveau v. Caras, 873 F. Supp. 1393, 1396 (C.D. Cal. 1995); see also Neudecker v. Boisclair Corp., 351 F. 3d at 364 (applying Title VII concepts to find hostile environment based on disability violated Act). Unlike Title VII, the Act also includes disability and familial status among its protected characteristics. 9 See, e.g., Quigley v. Winter, 598 F. 3d at 947 (emphasizing that defendant’s harassing conduct E:\FR\FM\14SER1.SGM Continued 14SER1 63056 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations asabaliauskas on DSK3SPTVN1PROD with RULES Supreme Court has recognized that individuals have heightened expectations of privacy within the home.10 This rule therefore formalizes standards to address harassment in and around one’s home and identifies some of the differences between harassment in the home and harassment in the workplace. While Title VII and Fair Housing Act case law contain many similar concepts, this regulation describes the appropriate analytical framework for harassment claims under the Fair Housing Act. The rule addresses only quid pro quo and hostile environment harassment, and not conduct generically referred to as harassment that, for different reasons, may violate section 818 or other provisions of the Fair Housing Act. For example, a racially hostile statement by a housing provider could indicate a discriminatory preference in violation of section 804(c) of the Act, or it could evidence intent to deny housing or discriminate in the terms or conditions of housing in violation of sections 804(a) or 804(b), even if the statement does not create a hostile environment or establish a quid pro quo. Section 818, which makes it unlawful to ‘‘coerce, intimidate, threaten, or interfere with any person in the exercise or enjoyment of’’ rights protected by the Act, or on account of a person having aided others in exercising or enjoying rights protected by the Act, could be violated by conduct that creates a quid pro quo was made ‘‘even more egregious’’ by the fact that it occurred in plaintiff’s home, ‘‘a place where [she] was entitled to feel safe and secure and need not flee.’’); Salisbury v. Hickman, 974 F. Supp. 2d 1282, 1292 (E.D. Cal. 2013) (‘‘[c]ourts have recognized that harassment in one’s own home is particularly egregious and is a factor that must be considered in determining the seriousness of the alleged harassment’’); Williams v. Poretsky Management, 955 F. Supp. 490, 498 (D. Md. 1996) (noting sexual harassment in the home more severe than in workplace); Beliveau v. Caras, 873 F. Supp. at 1398 (describing home as place where one should be safe and not vulnerable to sexual harassment); D. Benjamin Barros, Home As a Legal Concept, 46 Santa Clara L. Rev. 255, 277–82 (2006) (discussing legal concept of home as source of security, liberty and privacy which justifies favored legal status in many circumstances); Nicole A. Forkenbrock Lindemyer, Article, Sexual Harassment on the Second Shift: The Misfit Application of Title VII Employment Standards to Title VIII Housing Cases, 18 Law & Ineq. 351, 368–80 (2000) (noting that transporting of Title VII workplace standards for sexual harassment into Fair Housing Act cases of residential sexual harassment ignores important distinctions between the two settings); Michelle Adams, Knowing Your Place: Theorizing Sexual Harassment at Home, 40 Ariz. L. Rev. 17, 21–28 (1998) (describing destabilizing effect of sexual harassment in the home). 10 See, e.g. Frisby v. Schultz, 487 U.S. 474, 484 (1988) (‘‘[w]e have repeatedly held that individuals are not required to welcome unwanted speech into their own homes and that the government may protect this freedom’’). VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 or hostile environment. It is not, however, limited to quid pro quo or hostile environment claims and could be violated by other conduct that constitutes retaliation or another form of coercion, intimidation, threats, or interference because of a protected characteristic. In sum, this rule provides standards that are uniformly applicable to claims of quid pro quo and hostile environment harassment under the Fair Housing Act, regardless of the section of the Act that is alleged to have been violated, and the same discriminatory conduct could violate more than one provision of the Act whether or not it also constitutes quid pro quo or hostile environment harassment. III. Changes Made at the Final Rule Stage A. Overview of Changes Made at the Final Rule Stage In response to public comment and upon further consideration by HUD of the issues presented in this rulemaking, HUD makes the following changes at this final rule stage: • Re-words proposed § 100.7(a)(1)(iii) to avoid confusing the substantive obligation to comply with the Fair Housing Act with the standard of liability for discriminatory third-party conduct. Proposed § 100.7(a)(1)(iii) stated that a person is directly liable for ‘‘failing to fulfill a duty to take prompt action to correct and end a discriminatory housing practice by a third-party, where the person knew or should have known of the discriminatory conduct. The duty to take prompt action to correct and end a discriminatory housing practice by a third-party derives from an obligation to the aggrieved person created by contract or lease (including bylaws or other rules of a homeowner’s association, condominium or cooperative), or by federal, state or local law.’’ Section 100.7(a)(1)(iii) of this final rule provides that a person is directly liable for ‘‘failing to take prompt action to correct and end a discriminatory housing practice by a third-party, where the person knew or should have known of the discriminatory conduct and had the power to correct it. The power to take prompt action to correct a discriminatory housing practice by a third-party depends upon the extent of control or any other legal responsibility the person may have with respect to the conduct of such third-party.’’ • Adds to § 100.400 a new paragraph (c)(6) specifying as an example of a discriminatory housing practice retaliation because a person reported a discriminatory housing practice, PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 including quid pro quo or hostile environment harassment. • Adds to § 100.600(a)(2)(i), ‘‘Totality of the circumstances,’’ a new paragraph (C) that explains the reasonable person standard under which hostile environment harassment is assessed ‘‘Whether unwelcome conduct is sufficiently severe or pervasive as to create a hostile environment is evaluated from the perspective of a reasonable person in the aggrieved person’s position.’’ • Re-words proposed § 100.600(a)(2)(i)(B) to clarify that proof of hostile environment would not require demonstrating psychological or physical harm to avoid any confusion on that point. Proposed § 100.600(a)(2)(i)(B) stated ‘‘Evidence of psychological or physical harm is relevant in determining whether a hostile environment was created, as well as the amount of damages to which an aggrieved person may be entitled. Neither psychological nor physical harm, however, must be demonstrated to prove that a hostile environment exists.’’ Section 100.600(a)(2)(i)(B) in this final rule provides: ‘‘Neither psychological nor physical harm must be demonstrated to prove that a hostile environment exists. Evidence of psychological or physical harm may, however, be relevant in determining whether a hostile environment existed and, if so, the amount of damages to which an aggrieved person may be entitled.’’ • Re-words proposed § 100.600(c) to clarify that a single incident may constitute either quid pro quo or hostile environment harassment if the incident meets the standard for either type of harassment under § 100.600(a)(1) or (a)(2). Proposed § 100.600(c) provided ‘‘A single incident of harassment because of race, color, religion, sex, familial status, national origin, or handicap may constitute a discriminatory housing practice, where the incident is severe, or evidences a quid pro quo.’’ Section 100.600(c) in this final rule provides ‘‘A single incident of harassment because of race, color, religion, sex, familial status, national origin, or handicap may constitute a discriminatory housing practice, where the incident is sufficiently severe to create a hostile environment, or evidences a quid pro quo.’’ • Corrects the illustration in proposed § 100.65(b)(7) to fix a typographical error in the proposed rule. In the final rule, the word ‘‘service’’ is corrected and made plural. E:\FR\FM\14SER1.SGM 14SER1 asabaliauskas on DSK3SPTVN1PROD with RULES Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations IV. The Public Comments On October 21, 2015, at 80 FR 63720, HUD published for public comment a proposed rule on Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices Under the Fair Housing Act. The public comment period closed on December 21, 2015. HUD received 63 comments. The comments were submitted by public housing agencies (PHAs) and other government agencies; private housing providers and their representatives; nonprofit organizations, including fair housing, civil rights, housing advocacy, and legal groups; tenants and other individuals. This section of the preamble addresses significant issues raised in the public comments and provides HUD’s responses. All public comments can be viewed at: http://www.regulations.gov/ #!docketDetail;D=HUD-2015-0095. The majority of the commenters were generally supportive of the rule, with some urging HUD to publish the rule quickly. This summary does not provide responses to comments that expressed support for the proposed rule without suggesting any modifications to the rule. General supportive comments included statements of the importance of the rule in addressing and preventing sexual assault of tenants by landlords and descriptions of how the rule would empower housing providers, renters, and other consumers to understand and avoid illegal housing practices by defining and illustrating quid pro quo and hostile environment harassment. Some commenters stated that this rule may help providers focus on the importance of eliminating harassment on their properties, and some commenters identified provisions of the rule that would provide useful guidance to housing providers, tenants, residents, and others involved in housing transactions. More specifically, commenters expressed appreciation that the rule would apply not solely to sexual harassment but to harassment because of all protected characteristics, with some commenters sharing anecdotes of harassment based on a variety of protected characteristics that they believe the rule may help remedy. Other commenters supported the proposed rule’s distinction between the Fair Housing Act and Title VII, with commenters endorsing the Department’s proposal not to adopt the Title VII affirmative defense to an employer’s vicarious liability. A number of commenters assessed the rule to be in accord with case law, and approved of the balance the rule strikes VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 between the rights and obligations of the parties in a fair housing matter. Some commenters noted that the proposed standard for determining whether conduct constitutes a hostile environment is appropriately individualized to the facts of each case. Some commenters specifically identified the benefits provided by the rule in establishing a uniform framework for fairly evaluating and appropriately responding to alleged harassment, which minimizes the subjective nature of adjudicating such claims. Other commenters expressed appreciation for the proposed rule’s recognition that a single incident may establish hostile environment harassment. Some commenters expressed support for the rule’s acknowledgement of the fear of retaliation many individuals with disabilities experience when trying to address issues of harassment in their housing. Many commenters stated that the rule’s description of traditional principles of agency liability is accurate and not an expansion of existing liability. Some commenters expressed appreciation that the rule would incorporate traditional liability principles for any type of discriminatory housing practice, not just harassment, and would rely on negligence principles and distinguish between direct and vicarious liability. Other commenters stated that the rule would not burden housing providers because the direct liability standard is aligned with established housing provider business practice. Some commenters expressed appreciation that the rule would place landlords on notice that they should take corrective action early on, once they know or should have known of the discrimination. Several commenters stated that housing providers are already in possession of the tools they need to create living environments free from harassment. In particular, the commenters stated that housing providers are familiar with the corrective actions they may take in order to enforce their own rules. Another commenter stated that housing providers are in the best position to select, train, oversee, and assure the correct behavior of their agents, noting that effective enforcement of the rule depends on the potential for liability on the part of housing providers. Some commenters expressed support for the proposed rule while seeking modifications at the final rule stage. For example, a commenter encouraged broad application of the rule so that intervention and corrective action PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 63057 would occur before victims of housing discrimination are forced out of their homes. Another commenter sought an expansive reading of the rule in order to prevent all forms of bullying. Some commenters sought to add factors to the totality of circumstances consideration, while other commenters sought to add to the classes protected by the rule. Following are HUD’s responses to commenters’ suggested modifications to the rule and the other significant issues raised in the public comments. A. Quid Pro Quo and Hostile Environment Harassment: § 100.600 a. General: § 100.600(a) Issue: A commenter requested that HUD add seniors as a protected class under the rule. Other commenters stated that elderly persons often have disabilities, which make them particularly vulnerable to harassment. These commenters requested that the final rule make clear that the rule protects elderly persons from harassment because of disability. HUD Response: HUD shares the commenters’ concern for elderly persons but does not have the authority to add a new protected class to the Fair Housing Act and therefore is unable to adopt the commenters’ recommendation to expand the scope of the rule in this way. Neither age nor senior status is a protected characteristic under the Act, although persons who are discriminated against because of their disabilities are protected under the Act without regard to their age. Therefore, elderly individuals who are subjected to quid pro quo or hostile environment harassment on the basis of disability or another protected characteristic are protected under the Act and this final rule. Issue: A commenter suggested that HUD include a clause in the final rule to protect whistleblowers who experience harassment for reporting quid pro quo or hostile environment harassment. The commenter reported having witnessed such harassment and explained that whistleblowers are particularly vulnerable to quid pro quo and hostile environment harassment, but because they are not harassed on the basis of their race, color, religion, national origin, sex, familial status, or disability, they are not directly protected by the proposed regulation. HUD Response: Anyone who is harassed for reporting discriminatory harassment in housing is protected by the Fair Housing Act. Section 818 of the Act makes it unlawful to coerce, intimidate, threaten, or interfere with a person on account of his or her having E:\FR\FM\14SER1.SGM 14SER1 asabaliauskas on DSK3SPTVN1PROD with RULES 63058 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations aided or encouraged another person in the exercise or enjoyment of any right granted or protected by sections 803– 806 of the Act. To highlight the essential role whistleblower protection plays in ensuring fair housing, HUD is adding to § 100.400 a new paragraph (c)(6), which provides the following example of a discriminatory housing practice ‘‘Retaliating against any person because that person reported a discriminatory housing practice to a housing provider or other authority.’’ Issue: Several commenters urged HUD to state in the final rule that harassment against persons who are lesbian, gay, bisexual, or transgender (LGBT), or because of pregnancy, violates the Fair Housing Act. They asked HUD to define harassment because of sex to include harassment based on sexual orientation, gender identity, sex stereotyping, or pregnancy. The commenters referenced studies about the pervasive harassment and discrimination such persons face in housing. They also noted that a number of federal courts and federal agencies have interpreted Title VII and other laws prohibiting discrimination because of sex to include discrimination on the basis of gender identity, gender transition, or transgender status. The commenters also pointed to HUD’s ‘‘Equal Access to Housing in HUD Programs Regardless of Sexual Orientation or Gender Identity’’ rule, which provides that persons may not be denied access to HUD programs because of sexual orientation or gender identity. HUD Response: The Fair Housing Act already expressly prohibits discrimination based on pregnancy as part of its prohibition of discrimination because of familial status (42 U.S.C. 3602(k)), and HUD’s Equal Access Rule applies only to HUD programs. HUD agrees with the commenters’ view that the Fair Housing Act’s prohibition on sex discrimination prohibits discrimination because of gender identity. In Price Waterhouse v. Hopkins, the Supreme Court interpreted Title VII’s prohibition of sex discrimination to encompass discrimination based on nonconformance with sex stereotypes, stating that ‘‘[i]n forbidding employers to discriminate against individuals because of their sex, Congress intended to strike at the entire spectrum of disparate treatment of men and women resulting from sex stereotypes.’’ 11 Taking note of Price Waterhouse and its progeny, in 2010, HUD issued a memorandum recognizing that sex discrimination prohibited by the Fair Housing Act includes discrimination 11 490 U.S. 228, 251 (1989). VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 because of gender identity. In 2012, the Equal Employment Opportunity Commission (EEOC) reached the same conclusion, ‘‘clarifying that claims of discrimination based on transgender status, also referred to as claims of discrimination based on gender identity, are cognizable under Title VII’s sex discrimination prohibition.’’ 12 Following the EEOC’s decision, the Attorney General also concluded that: the best reading of Title VII’s prohibition of sex discrimination is that it encompasses discrimination based on gender identity, including transgender status. The most straightforward reading of Title VII is that discrimination ‘‘because of . . . sex’’ includes discrimination because an employee’s gender identification is as a member of a particular sex, or because the employee is transitioning, or has transitioned, to another sex.13 HUD reaffirms its view that under the Fair Housing Act, discrimination based on gender identity is sex discrimination. Accordingly, quid pro quo or hostile environment harassment in housing because of a person’s gender identity is indistinguishable from harassment because of sex.14 HUD, in its 2010 memorandum, also advised that claims of housing discrimination because of sexual orientation can be investigated under the Price Waterhouse sex-stereotyping 12 Macy v. Dept. of Justice, No. 0120120821, 2012 EEOPUB LEXIS 1181, *13 (EEOC Apr. 20, 2012); see also Lusardi v. Dept. of the Army, No. 0120133395, 2015 EEOPUB LEXIS 896, *17 (EEOC Apr. 1, 2015). 13 Attorney General Memorandum, Treatment of Transgender Employment Discrimination Claims Under Title VII of the Civil Rights Act of 1964 (Dec. 15, 2014), posted at http://www.justice.gov/file/ 188671/download. Similarly, the Office of Personnel Management revised its nondiscrimination regulations to make clear that sex discrimination under Title VII includes discrimination based on gender identity. See 5 CFR 300.102–300.103; see also OFCCP Directive 2014– 02, Gender Identity and Sex Discrimination (Aug. 19, 2014) (stating that discrimination based on gender identity or transgender status is discrimination based on sex), posted at http:// www.dol.gov/ofccp/regs/compliance/directives/ Directive_2014–02_508c.pdf. 14 See Glenn v. Brumby, 663 F.3d at 1317 (‘‘discrimination against a transgender individual because of her gender nonconformity is sex discrimination, whether it is described as being on the basis of sex or gender.’’); see also Finkle v. Howard Cnty, 12 F. Supp. 3d 780, 788 (D. Md. 2014) (holding that ‘‘Plaintiff’s claim that she was discriminated against ‘because of her obvious transgender[] status is a cognizable claim of sex discrimination under Title VII’’); Rumble v. Fairview Health Services, No. 14–cv–2037, 2015 U.S. Dist. LEXIS 31591, *4–5 (D. Minn. Mar. 16, 2015) (in Affordable Care Act case, holding that ‘‘[b]ecause the term ‘transgender’ describes people whose gender expression differs from their assigned sex at birth, discrimination based on an individual’s transgender status constitutes discrimination based on gender stereotyping. Therefore, Plaintiff’s transgender status is necessarily part of his ‘sex’ or ‘gender’ identity’’). PO 00000 Frm 00008 Fmt 4700 Sfmt 4700 theory. Over the past two decades, an increasing number of Federal courts, building on the Price Waterhouse rationale, have found protections under Title VII for those asserting discrimination claims related to their sexual orientation.15 Many Federalsector EEOC decisions have found the same.16 Although some Federal 15 See, e.g., Prowel v. Wise Bus. Forms, Inc., 579 F.3d 285, 291–92 (3rd Cir. 2009) (harassment of a plaintiff because of his ‘‘effeminate traits’’ and behaviors could constitute sufficient evidence that he ‘‘was harassed because he did not conform to [the employer’s] vision of how a man should look, speak, and act—rather than harassment based solely on his sexual orientation’’); Nichols v. Azteca Rest. Enter., Inc., 256 F.3d 864, 874–75 (9th Cir. 2001) (coworkers’ and supervisors’ harassment of a gay male because he did not conform to gender norms created a hostile work environment in violation of Title VII); Hall v. BNSF Ry. Co., No. C13–2160 RSM, 2014 U.S. Dist. LEXIS 132878 *8–9 (W.D. Wash. September 22, 2014) (plaintiff’s allegation that ‘‘he (as a male who married a male) was treated differently in comparison to his female coworkers who also married males’’ stated a sex discrimination claim under Title VII); Terveer v. Billington, 34 F. Supp. 3d 100, 116 (D.D.C. 2014) (Title VII claim based on sex stated when plaintiff’s ‘‘orientation as homosexual’’ removed him from the employer’s preconceived definition of male); Heller v. Columbia Edgewater Country Club, 195 F. Supp. 2d 1212, 1224 (D. Or. 2002) (‘‘[A] jury could find that Cagle repeatedly harassed (and ultimately discharged) Heller because Heller did not conform to Cagle’s stereotype of how a woman ought to behave. Heller is attracted to and dates other women, whereas Cagle believes that a woman should be attracted to and date only men.’’); Centola v. Potter, 183 F. Supp. 2d 403, 410 (D. Mass. 2002) (‘‘Sexual orientation harassment is often, if not always, motivated by a desire to enforce heterosexually defined gender norms. In fact, stereotypes about homosexuality are directly related to our stereotype about the proper roles of men and women.’’). Cf. Videckis v. Pepperdine Univ., 2015 U.S. Dist. LEXIS 167672, *16 (C.D. Cal. 2015) (‘‘It is impossible to categorically separate ‘sexual orientation discrimination’ from discrimination on the basis of sex or from gender stereotypes; to do so would result in a false choice. Simply put, to allege discrimination on the basis of sexuality is to state a Title IX claim on the basis of sex or gender.’’). 16 Baldwin v. Dep’t of Transp., EEOC Appeal No. 0120133080, slip op. at 9–11 (July 16, 2015); Complainant v. Dep’t of Homeland Sec., EEOC Appeal No. 0120110576, slip op. at 1 (Aug. 20, 2014) (‘‘While Title VII’s prohibition of discrimination does not explicitly include sexual orientation as a basis, Title VII prohibits sex discrimination, including sex-stereotyping discrimination and gender discrimination’’ and ‘‘sex discrimination claims may intersect with claims of sexual orientation discrimination.’’); Couch v. Dep’t of Energy, EEOC Appeal No. 0120131136, slip op. at 1 (Aug. 13, 2013) (finding harassment claim based on perceived sexual orientation is a discrimination claim based on failure to conform to gender stereotypes); Culp v. Dep’t of Homeland Sec., EEOC Appeal 0720130012, slip op. at 1 (May 7, 2013) (Title VII covers discrimination based on associating with lesbian colleague); Castello v. U.S. Postal Serv., EEOC Appeal No. 0520110649, slip op. at 1 (Dec. 20, 2011) (vacating prior decision and holding that complainant stated claim of discrimination based on sex-stereotyping through evidence of offensive comments by manager about female subordinate’s relationships with women); Veretto v. U.S. Postal Serv., EEOC Appeal No. 0120110873, slip op. at 1 E:\FR\FM\14SER1.SGM 14SER1 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations asabaliauskas on DSK3SPTVN1PROD with RULES appellate courts have declined to find sex discrimination under Title VII based on the sole fact of the person’s sexual orientation, those courts nonetheless recognized the Price Waterhouse sexstereotyping theory may be used to find discrimination based on sex.17 These Title VII legal authorities are consistent with HUD’s 2010 memorandum, in which HUD interprets the Fair Housing Act’s prohibition on sex discrimination to include, at a minimum, discrimination related to an individual’s sexual orientation where the evidence establishes that the discrimination is based on sex stereotypes. HUD’s interpretation of sex discrimination under the Fair Housing Act is also consistent with the Department of Health and Human Services’ rule interpreting sex discrimination under Section 1557 the Affordable Care Act 18 and the Department of Labor’s rule interpreting sex discrimination under Title VII of the Civil Rights Act of 1964.19 Issue: Some commenters asked HUD to provide a definition of harassment. A commenter noted that the proposed rule defines two types of harassment—quid pro quo and hostile environment, but does not define the general term ‘‘harassment.’’ Another commenter stated that if HUD believes that other (July 1, 2011) (court found that ‘‘Complainant has alleged a plausible sex-stereotyping’’ claim of harassment because he married a man). 17 See, e.g., Gilbert v. Country Music Ass’n, 432 F. App’x 516, 520 (6th Cir. 2011) (acknowledging the validity of a sex-stereotyping claim ‘‘based on gender non-conforming ‘behavior observed at work or affecting . . . job performance,’ such as . . . ‘appearance or mannerisms on the job,’ ’’ but rejecting the plaintiff’s sex discrimination claim because his ‘‘allegations involve discrimination based on sexual orientation, nothing more. He does not make a single allegation that anyone discriminated against him based on his ‘appearance or mannerisms’ or for his ‘gender nonconformity.’ ’’) (quoting Vickers v. Fairfield Med. Ctr., 453 F.3d 757, 763 (6th Cir. 2006); Pagan v. Gonzalez, 430 F. App’x 170, 171–72 (3d Cir. 2011) (recognizing that ‘‘discrimination based on a failure to conform to gender stereotypes is cognizable’’ but affirming dismissal of the plaintiff’s sex discrimination claim based on ‘‘the absence of any evidence to show that the discrimination was based on Pagan’s acting in a masculine manner’’); Dawson v. Bumble & Bumble, 398 F.3d 211, 221, 222–23 (2d Cir. 2005) (observing that ‘‘one can fail to conform to gender stereotypes in two ways: (1) Through behavior or (2) through appearance, but dismissing the plaintiff’s sex discrimination claim because she ‘‘has produced no substantial evidence from which we may plausibly infer that her alleged failure to conform her appearance to feminine stereotypes resulted in her suffering any adverse employment action’’). See also Hively v. Ivy Tech Community College, 2016 U.S. App. LEXIS 13746, *16–25 (7th Cir. 2016) (reviewing this line of cases). 18 Nondiscrimination in Health Programs and Activities, 81 FR 31376, 31388–90 (May 18, 2016) (to be codified at 45 CFR part 92). 19 Discrimination Because of Sex, 81 FR 39108, 39137–40 (June 15, 2016) (to be codified at 41 CFR part 60–20). VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 types of harassment may also violate the Fair Housing Act, HUD should provide a definition of harassment. Other commenters strongly supported the rule’s definitions of quid pro quo and hostile environment harassment, describing them as clear and inclusive, and stated that the definitions and related examples provided in the rule clarify what conduct the Fair Housing Act prohibits and will aid all stakeholders’ understanding of the rule’s provisions. HUD Response: The term harassment has broad colloquial usage with no defined parameters. For this reason, the final rule defines the specific terms ‘‘quid pro quo’’ and ‘‘hostile environment harassment.’’ Other conduct that might generically be referred to as harassment might fall in the categories of quid pro quo or hostile environment, or the conduct may constitute a different type of discriminatory housing practice in violation of section 818 of the Act or other provisions of the Act, or the conduct may not violate the Act at all. As the preamble to the proposed rule explained, a violation of section 818 may be established using the standards for quid pro quo or hostile environment harassment or by the specific elements of a section 818 violation, i.e., (1) the plaintiff or complainant exercised or enjoyed—or aided or encouraged another person in the exercise or enjoyment of—a right guaranteed by sections 803–06; (2) the defendant’s or respondent’s conduct constituted coercion, intimidation, a threat, or interference; and (3) a causal connection existed between the exercise, enjoyment, aid or encouragement of the right and the defendant’s or respondent’s conduct. Issue: Some commenters expressed concern that the proposed rule did not expressly state that sections 804(b) and 818 of the Fair Housing Act apply to discrimination that occurs after the complainant or plaintiff acquires the dwelling. The commenters stated that some courts have held that these provisions apply only to discrimination that affects access to housing and urged HUD to add language to the rule making clear that these particular provisions apply to post-acquisition discrimination claims. HUD Response: HUD believes that the definitions of ‘‘quid pro quo’’ and ‘‘hostile environment harassment’’ make clear HUD’s view that the Act covers post-acquisition conduct and therefore no additional language is required. These definitions mirror the coverage of sections 804(b), 804(f)(2), and 818 of the Fair Housing Act, which plainly apply PO 00000 Frm 00009 Fmt 4700 Sfmt 4700 63059 to both pre-acquisition and postacquisition discrimination claims. Moreover, HUD has long interpreted and enforced these provisions of the Act and others to protect against discrimination that occurs before one acquires a dwelling as well as while one is living in the dwelling. HUD’s 1989 regulations interpreting sections 804(b), 804(f)(2), and 818 of the Act, for example, provide that discrimination prohibited under these provisions includes the ‘‘maintenance or repairs of sale or rental dwellings,’’ ‘‘[d]enying or limiting the use of privileges, services, or facilities associated with a dwelling,’’ and threatening, intimidating or interfering with persons ‘‘in their enjoyment of a dwelling.’’ The inclusion of language covering the maintenance of housing, the continued use of privileges, services, or facilities associated with housing, and the ‘‘exercise or enjoyment’’ of housing indicates circumstances in which residents—as opposed to just applicants—benefit from the Act’s protections throughout their residency. Sections 100.65(b)(6)–(7) of the proposed and of the final rule further illustrate some ways in which a person may violate sections 804(b), 804(f)(2), and 818 of the Fair Housing Act: ‘‘conditioning the terms, conditions, or privileges relating to the sale or rental of a dwelling, or denying or limiting the services or facilities in connection therewith, on a person’s response to harassment because of [a protected characteristic]; ‘‘subjecting a person to harassment because of [a protected characteristic] that has the effect of imposing different terms, conditions, or privileges relating to the sale or rental of a dwelling or denying or limiting services or facilities in connection with the sale or rental of a dwelling.’’ In sum, the Act and HUD’s regulations, including this final rule, make clear that the Act prohibits discrimination that occurs while a person resides in a dwelling, and courts have repeatedly interpreted the Act similarly.20 20 See, e.g., Bloch v. Frischholz, 587 F.3d at779– 81 (ruling that post-sale conduct by a homeowner’s association could violate section 804(b) of the Act and allowing section 3604(b) claims to address post-acquisition conduct was consistent with HUD’s regulations (citing 24 CFR 100.65(b)(4))); Comm. Concerning Cmty. Improvement v. City of Modesto, 583 F.3d 690, 713 (9th Cir. 2009) (concluding that the Act covers post-acquisition discrimination); Neudecker v. Boisclair Corp., 351 F.3d at 364 (finding plaintiff’s post-acquisition harassment claim valid under the Act); DiCenso v. Cisneros, 96 F.3d 1004, 1008 (7th Cir. 1996) (recognizing claim for sexual harassment hostile housing environment under the Act); Honce v. Vigil, 1 F.3d at 1089–90 (recognizing that the Act prohibits both quid pro quo and hostile housing E:\FR\FM\14SER1.SGM Continued 14SER1 63060 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations asabaliauskas on DSK3SPTVN1PROD with RULES Issue: Some commenters asked HUD to clarify how to distinguish potentially actionable harassment under the Fair Housing Act from protected speech under the First Amendment. A commenter said that it is not clear how conduct that allegedly constitutes harassment under the rule may be distinguished from other speech or conduct that is constitutionally protected or so trivial so as not to qualify as harassment in the first place. Another commenter said that courts have consistently held that the First Amendment protects a tenant who publicly speaks about a neighbor, even if that conduct is motivated by discriminatory intent. Another commenter asked whether the proposed rule would implicate constitutional protections of free speech or free exercise of religion if the housing provider evicts a tenant where, for example, two tenants are having heated religious arguments about the other’s choice of religious attire. Another commenter stated that the proposed rule properly balanced the competing rights at issue and did not interfere with constitutionally protected speech because the rule would not encompass speech that is merely offensive or that causes nothing more than hurt feelings. HUD Response: As discussed elsewhere in this preamble, not every dispute between neighbors is a violation of the Fair Housing Act. Moreover, speech that is protected by the First Amendment is not within the Act’s prohibitions. First Amendment protections do not extend to certain acts of coercion, intimidation, or threats of bodily harm proscribed by section 818 environment sexual harassment); Woods-Drake v. Lundy, 667 F.2d 1198, 1201 (5th Cir. 1982) (finding that a landlord’s discriminatory conduct against current tenants violated section 3604(b) of the Act); Richards v. Bono, No. 5:04CV484–OC–10GRJ, 2005 WL 1065141, at *3 (M.D. Fla. May 2, 2005) (‘‘[b]ecause the plain meaning of ‘rental’ contemplates an ongoing relationship, the use of that term in § 3604(b) means that the statute prohibits discrimination at any time during the landlord/tenant relationship, including after the tenant takes possession of the property’’); United States v. Koch, 352 F. Supp. 2d 970, 976 (D. Neb. 2004) (‘‘[I]t is difficult to imagine a privilege that flows more naturally from the purchase or rental of a dwelling than the privilege of residing therein.’’); U.S. Department of Housing and Urban Development, Office of Fair Housing and Equal Opportunity, Questions and Answers on Sexual Harassment under the Fair Housing Act (2008), available at http://portal.hud.gov/hudportal/ documents/huddoc?id=QAndASexualHarassment .pdf (recognizing that current tenants may file fair housing complaints under the Act); Robert G. Schwemm, Fair Housing Litigation After Inclusive Communities: What’s New and What’s Not, 115 Colum. L. Rev. Sidebar 106, 122–23 (2015) (explaining that many post-acquisition actions, such as evictions and harassment, may give rise to violations under sections 804(a) and 804(b) of the Act). VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 of the Act. As the Supreme Court has stated, ‘‘true threats’’ have no First Amendment protection.21 In Notice FHEO–2015–01, HUD has set out substantive and procedural guidelines regarding the filing and investigation of Fair Housing Act complaints that may implicate the First Amendment.22 The Notice discusses how HUD handles complaints against persons who are not otherwise covered by the Act, but who are alleged to have violated Section 818 of the Act. Issue: A commenter suggested that the rule is unnecessary because other administrative and legal remedies already exist for victims of harassment under state and local law. Another commenter suggested that the rule is unnecessary because HUD has already charged cases involving harassment under the Act. HUD Response: This final rule formalizes and provides uniform standards for evaluating complaints of quid pro quo and hostile environment harassment under the Fair Housing Act. While other administrative and legal causes of action may exist for victims of quid pro quo and hostile environment harassment under landlord-tenant law, tort law, or other state law, they do not substitute for the protections against discrimination and the remedies provided under the Act. Moreover, the fact that HUD has previously issued charges of discrimination involving quid pro quo or hostile environment harassment does not negate the need for this rule. Issue: A commenter asked HUD to abandon the rulemaking process and instead provide specific, clear guidance to the regulated community so that housing providers can ascertain the types of behavior that do and do not constitute harassment under the Fair Housing Act. Other commenters requested that HUD provide technical assistance on various aspects of the rule to residents, housing providers, and practitioners to ensure all parties know their rights under the law. HUD Response: HUD declines to abandon this rulemaking. This regulation is needed to formalize standards for assessing claims of harassment under the Fair Housing Act and to clarify when housing providers and others covered by the Act may be liable for illegal harassment or other discriminatory housing practices. It has been HUD’s experience that there is 21 See, e.g., R.A.V. v. City of St. Paul, 505 U.S. 377, 388 (1992). 22 Notice FHEO 2015–01 found at: http:// portal.hud.gov/hudportal/documents/huddoc?id=526-2015notice.pdf. PO 00000 Frm 00010 Fmt 4700 Sfmt 4700 significant misunderstanding among public and private housing providers about the circumstances under which they may be liable. This regulation provides greater clarity in making that assessment. HUD will continue to offer guidance and training on the Fair Housing Act generally and on this final rule, as needed. Issue: A commenter recommended that the rule expand the limits for damages in cases that establish sexual harassment in housing. HUD Response: HUD declines to make this change because it is unnecessary. The Act contains no limit on damages that may be awarded, specifically authorizing an award of ‘‘actual damages.’’ 42 U.S.C. 3612(g)(3); 3613(c)(1); 3614(d)(1)(B). Issue: A commenter asked HUD to consider expanding the time for filing sexual harassment complaints where a hostile environment case includes subsequent harassment that occurs many months after the initial act of sexual harassment. HUD Response: HUD declines to adopt this recommendation because the Fair Housing Act specifically defines the statute of limitations for filing complaints. It is one year after an alleged discriminatory housing practice occurred or terminated for a complaint with HUD and two years after an alleged discriminatory housing practice occurred or terminated for a civil action in federal district court or state court. See 42 U.S.C. 3610; 3613. If a violation is continuing, the limitations period runs from the date of the last occurrence or termination of the discriminatory act.23 1. Quid Pro Quo Harassment: § 100.600(a)(1) Issue: A commenter asked how the rule would ‘‘differentiate between a situation of involuntary quid pro quo that genuinely must be governed by the Act and a situation where one party is manipulating the rule following a mutually beneficial and agreed upon transaction.’’ HUD Response: The rule’s definition of quid pro quo harassment requires a request or demand that is ‘‘unwelcome.’’ A mutually beneficial and agreed upon transaction is not unwelcome and would not constitute quid pro quo harassment under the rule or the Act. It is important to note, however, that, as the rule states, if an individual 23 See, e.g., Havens Realty Corp. v. Coleman, 455 U.S. 363, 380–81 (1982); Neudecker v. Boisclair Corp., 351 F.3d at 363 ; Spann v. Colonial Vill., Inc., 899 F.2d 24, 34–35 (D.C. Cir. 1990); Heights Cmty Congress v. Hilltop Realty, Inc., 774 F.2d 135, 139– 41 (6th Cir. 1985). E:\FR\FM\14SER1.SGM 14SER1 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations acquiesces to an unwelcome request or demand, unlawful quid pro quo harassment may have occurred. Moreover, if a housing provider regularly or routinely confers housing benefits based upon the granting of sexual favors, such conduct may constitute quid pro quo harassment or hostile environment harassment against others who do not welcome such conduct, regardless of whether any objectionable conduct is directed at them and regardless of whether the individuals who received favorable treatment willingly granted the sexual favors.24 Liability in all situations involving allegations of harassment must be determined on a case-by-case basis. Issue: A commenter stated that the preamble to the proposed rule was vague in stating that ‘‘a person is aggrieved if that person is denied or delayed in receiving a housing-related opportunity or benefit because another received the benefit.’’ The commenter was concerned that this statement would require a PHA to identify, investigate, and document a defense to any tenant-perceived delay in receiving benefits. HUD Response: The quoted phrase is not vague when read in context, which explains the meaning of quid pro quo harassment under the Fair Housing Act. The phrase refers to a person who is aggrieved because he or she is denied a benefit that went to another in exchange for sexual favors, for example. Aggrieved persons under the Act and HUD’s regulation are limited to those who were injured (or are about to be injured) by a discriminatory housing practice as defined in the Act. Neither the Fair Housing Act nor this final rule prohibits delays in receiving housingrelated opportunities or benefits for nondiscriminatory reasons. If, however, an applicant or tenant alleges that he or she has been denied or delayed in receiving a benefit because others submitted to requests for sexual favors, the PHA should investigate to determine if quid pro quo or hostile environment harassment has occurred. 2. Hostile Environment Harassment: § 100.600(a)(2) asabaliauskas on DSK3SPTVN1PROD with RULES Issue: Several commenters recommended that HUD ensure 24 Cf. EEOC Policy Guidance No. N–915.048, Employer Liability under Title VII for Sexual Favoritism (Jan. 12, 1990) (providing that widespread sexual favoritism based upon solicitations for and/or the granting of sexual favors or other sexual conduct ‘‘can form the basis of an implicit ‘quid pro quo’ harassment claim for female employees, as well as a hostile environment claim for both women and men who find this offensive’’). VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 consistency of the discussion of hostile environment harassment throughout the preamble in order to prevent any unintentional barriers for harassment victims seeking to bring claims under the Fair Housing Act. The commenters specifically stated that in one section of the preamble to the proposed rule, HUD defines ‘‘hostile environment harassment’’ to require unwelcome conduct because of a protected characteristic that ‘‘unreasonably interferes’’ with the use and enjoyment of a dwelling, or with the exercise of other rights protected by the Act. By contrast, the commenters stated, other sections of the preamble rightly omit the ‘‘unreasonably’’ qualifier when discussing hostile environment harassment. The commenters requested that the word ‘‘unreasonably’’ be removed from the discussion in the preamble because it is unnecessary and will create confusion. They stated that unwelcome conduct that is ‘‘sufficiently severe or pervasive’’ as to interfere with one’s enjoyment of rights protected under the Act is in itself unreasonable. HUD Response: The term ‘‘unreasonably’’ does not appear in the definition of ‘‘hostile environment harassment’’ in the regulatory text of the proposed rule. The term ‘‘unreasonably’’ was used in the preamble to the proposed rule to convey how a claim of hostile environment would be evaluated; that is, from the perspective of a reasonable person in the aggrieved person’s position. HUD agrees that the use of the term ‘‘unreasonably’’ in the preamble may have caused confusion by conflating the substantive standard with the method of proof. In this final rule, as was the case in the proposed rule, the definition of ‘‘hostile environment harassment’’ in § 100.600(a)(2) is not phrased as requiring proof that unwelcome conduct ‘‘unreasonably’’ interfere with a right protected by the Fair Housing Act. But it remains that whether unwelcome conduct is sufficiently severe or pervasive as to interfere with rights protected by the Act, and therefore constitute hostile environment harassment, is evaluated from the perspective of a reasonable person in the aggrieved person’s position. Issue: A commenter suggested that HUD include definitions and descriptions of ‘‘bullying’’ in this final rule because bullying is very similar to hostile environment harassment. HUD Response: HUD does not agree that it is necessary to add the word ‘‘bullying’’ to the final rule in order to cover conduct that could be considered bullying. Section 100.600(a)(2) of the proposed rule and of this final rule, PO 00000 Frm 00011 Fmt 4700 Sfmt 4700 63061 which defines hostile environment harassment and specifies the factors to be considered when evaluating whether particular conduct creates a hostile environment in violation of the Act, is broadly worded and fully captures the concept of bullying because of a protected characteristic that the commenter seeks to include. Issue: A commenter said HUD should include social isolation and neglect as forms of harassment under the rule, especially when they occur with the intent to drive a person from his or her home or interfere with his or her enjoyment of a dwelling. According to the commenter, these actions have major implications for the psychological well-being of an individual. HUD Response: HUD appreciates that social isolation and neglect are serious concerns. This rule is limited to conduct engaged in because of a protected characteristic. If a tenant is subjected to unwanted severe or pervasive conduct because of a disability, for example, which leads to social isolation with the intent or effect of driving the tenant from his or her home or interfering with his or her enjoyment of a dwelling, such conduct could constitute hostile environment harassment under the standards set forth in the rule. Issue: A commenter said the rule could more clearly distinguish harassment from inappropriate behavior or disputes that do not rise to the level of harassment. Other commenters stated that they appreciated the rule’s emphasis on the totality of the circumstances, which will ensure that mere disagreements, mistaken remarks, or isolated words spoken in the heat of the moment will not result in liability unless the totality of the circumstances establishes hostile environment harassment. HUD Response: HUD agrees that not every disagreement between persons involved in a housing transaction constitutes unlawful harassment because of a protected characteristic in violation of the Act and believes the rule appropriately captures the distinction. Section 100.600(a)(2) of the proposed rule and of this final rule defining hostile environment harassment requires that the unwelcome conduct be ‘‘sufficiently severe or pervasive’’ as to interfere with defined features of the housing transaction: The availability, sale, rental, or use or enjoyment of a dwelling; the terms, conditions, or privileges of the sale or rental, or the provision or enjoyment of services or facilities in connection therewith; or the availability, terms or conditions of a residential real estaterelated transaction. E:\FR\FM\14SER1.SGM 14SER1 asabaliauskas on DSK3SPTVN1PROD with RULES 63062 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations Issue: A commenter recommended that the final rule recognize the role of preferential treatment for services and living arrangements, except when provided because of disability, as a type of discrimination. The commenter said that preferential treatment is a means through which to encourage and reward secondary actors for their role in creating a hostile environment, and the rule should recognize it as such. The commenter also recommended that HUD request and make available data regarding repairs or upgrades so any non-monetary favor in exchange for harassment, by an agent not directly employed by the management or owner, may be determined. HUD Response: HUD declines to adopt the commenter’s suggestions because the rule as currently proposed already accommodates the commenter’s concerns. Providing preferential treatment that creates a hostile environment because of race, color, religion, sex, familial status, or national origin already violates the Fair Housing Act under the standards proposed in the rule. Moreover, HUD’s regulations already contain illustrations as to this type of violation. Therefore, additional language regarding preferential treatment is not needed. In addition, processes for requesting and making available data regarding repairs or upgrades are outside the scope of this rule. HUD notes that in investigations, it requests data regarding repairs or upgrades as appropriate to determine whether a violation of the Fair Housing Act has occurred. Issue: Two commenters asked whether the rule would apply to situations in which residential property managers or other employees of a housing provider are harassed by the housing provider’s tenants. One of the commenters explained that she was a resident of the building she managed, that she had a disability, and that she had suffered harassment and threats by other residents. HUD Response: The proposed standards generally would not apply to situations in which a property manager or other housing provider employee is harassed by the housing provider’s tenants because such situations ordinarily do not involve a housingrelated transaction covered by the Act. Where, however, a property manager is also a resident of the building that the property manager manages (e.g., a resident-manager), the property manager is entitled to the same protection from discriminatory harassment under the Act and under this final rule as any other resident. Additionally, Section 818 of the Act makes it unlawful to VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 coerce, intimidate, threaten, or interfere with any person on account of the person having assisted others in enjoying or exercising their fair housing rights. Therefore, to the extent that a property manager or other housing provider employee (whether a resident or not) is subjected to coercion, intimidation, threats, or interference because he or she aided or encouraged other people in exercising or enjoying a right protected by the Act—e.g., by receiving and responding to one tenant’s complaint of discriminatory harassment by another tenant—the manager or employee may be entitled to protection under the Act.25 i. Totality of the Circumstances: § 100.600(a)(2)(i) Issue: Some commenters requested that HUD clarify the definition of ‘‘totality of the circumstances’’ in § 100.600(a)(2)(i) because, in the commenters’ view, the proposed rule does not sufficiently explain the showing required to prove hostile environment harassment in violation of the Fair Housing Act. Other commenters supported HUD’s standard for determining whether conduct constitutes a hostile environment, stating that the standard and its factors are clear and permit an appropriately individualized assessment of the facts of each case. These commenters stated that the rule’s explanation of hostile environment harassment provides meaningful guidance to both housing providers and potential claimants. HUD Response: HUD believes the ‘‘totality of the circumstances’’ standard in this final rule provides an appropriate standard for assessing claims of hostile environment harassment, while also providing courts with the flexibility to consider the numerous and varied factual circumstances that may be relevant when assessing a specific claim. HUD therefore chooses not to alter the definition of the term ‘‘totality of the circumstances,’’ although it will add to the final rule the standard by which the evidence is to be evaluated, which is from the perspective of a reasonable person in the aggrieved person’s position. Section 100.600(a)(2) defines what constitutes hostile environment harassment under the Act. In accordance with this provision, establishing a hostile environment harassment violation requires proving that: A person was subjected to unwelcome spoken, written, or physical 25 A property manager may also be protected by Title VII, whether or not he or she resides at the housing. PO 00000 Frm 00012 Fmt 4700 Sfmt 4700 conduct; the conduct was because of a protected characteristic; and the conduct was, considering the totality of the circumstances, sufficiently severe or pervasive as to interfere with or deprive the victim of his or her right to use and enjoy the housing or to exercise other rights protected by the Act. Whether a hostile environment harassment violation has occurred is a fact-specific inquiry, and the rule supplies a nonexhaustive list of factors that must be considered in making that determination. It would be impossible to quantify in the rule the amount of evidence necessary to make such a showing in every case involving a claim of hostile environment harassment. The additional instruction in the rule text, and not just the preamble, that the ‘‘totality of the circumstances’’ is to be evaluated from the perspective of a reasonable person in the aggrieved person’s position will aid all parties in assessing whether a ‘‘hostile environment’’ has been created. Issue: HUD received several comments regarding the explanation in the preamble to the proposed rule that hostile environment harassment should be assessed from the perspective of a reasonable person in the aggrieved person’s position. A commenter expressed concern that this standard is too subjective, stating that one reasonable person’s measure may be different from another reasonable person’s measure. Another commenter asked HUD to provide a definition of the term ‘‘reasonable person.’’ Other commenters approved of the standard articulated in the preamble to the proposed rule and commended HUD for recognizing that the reasonable person standard must take into account the circumstances of the aggrieved person. A commenter recommended that the rule text itself explicitly state this objective standard. Another commenter, however, recommended that HUD not add the standard to the rule text itself because such addition may invite courts to second-guess the rationality and behavior of the actual victim, rather than focusing on the conduct and its surrounding circumstances. HUD Response: As HUD explained in the preamble to the proposed rule, whether unwelcome conduct is sufficiently severe or pervasive to create a hostile housing environment is evaluated from the perspective of a reasonable person in the aggrieved person’s position. This standard is an objective one, but ensures that an assessment of the totality of the circumstances includes consideration of whether persons of the same protected class and of like personal experience as E:\FR\FM\14SER1.SGM 14SER1 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations asabaliauskas on DSK3SPTVN1PROD with RULES the plaintiff or complainant would find the challenged conduct to create a hostile environment. At the proposed rule stage, HUD chose not to add the ‘‘reasonable person in the aggrieved person’s position’’ standard to the text of the rule itself. But in light of the confusion expressed by some of the commenters, HUD has added this standard to the text of the final rule discussing the totality of the circumstances standard. In adding this reasonable person standard for assessing the evidence to the rule text, HUD does not intend to create an additional requirement for proving a hostile environment harassment claim beyond the showing required under § 100.600(a)(2) of the rule. The definition of hostile environment harassment in this final rule remains unchanged and focuses on defining the types of conduct that may establish a claim of hostile environment harassment under the Fair Housing Act. (A) Factors To Be Considered: § 100.600(a)(2)(i)(A) Issue: Several commenters commended HUD’s explanation in the preamble to the proposed rule that individuals have heightened rights within their home for privacy and freedom from unwelcome speech and conduct. Many commenters agreed with HUD that harassment in or around one’s home can be far more intrusive, violative, and threatening than harassment in the more public environment of one’s workplace. Some commenters said these considerations should be explicitly incorporated into the text of the rule itself. Commenters specifically requested that HUD revise proposed § 100.600(a)(2)(i)(A) by adding as a factor to be considered in determining whether hostile environment harassment exists ‘‘the heightened rights in or around one’s home for privacy and freedom from harassment’’ or ‘‘the heightened reasonable expectation of privacy and freedom from harassment in one’s home.’’ Another commenter said that § 100.600(a)(2)(i)(A) should expressly state that conduct occurring in one’s home may result in a violation of the Fair Housing Act even though the same conduct in one’s place of employment may not violate Title VII. HUD Response: HUD declines to add language regarding individuals’ heightened rights within the home for privacy and freedom from unwelcome speech and conduct to the rule text in § 100.600(a)(2)(i)(A). The nonexhaustive list of factors included in § 100.600(a)(2)(i)(A) identifies circumstances that can be demonstrated VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 with evidence during the adjudication of a claim of hostile environment harassment under the Act. Evidence regarding the ‘‘location of the conduct,’’ as explicitly identified in § 100.600(a)(2)(i)(A), is a critical factor for consideration and will allow courts to take into account the heightened privacy and other rights that exist within the home when determining whether hostile environment harassment occurred. For similar reasons, HUD also declines to add language stating that harassing conduct may result in a violation of the Fair Housing Act even though such conduct might not violate Title VII. HUD believes that by establishing a hostile environment harassment standard tailored to the specific rights protected by the Fair Housing Act and by directing that hostile environment claims under the Act are to be evaluated by assessing the totality of the circumstances—including the location of the unwelcome conduct and the context in which it occurred—the final rule ensures that courts consider factors unique to the housing context when making the fact-specific determination of whether the particular conduct at issue violates the Act. Therefore, while HUD agrees that unwelcome conduct in or around the home can be particularly intrusive and threatening and may violate the Fair Housing Act even though the same or similar conduct in an employment setting may not violate Title VII, HUD does not believe the proposed additions to § 100.600(a)(2)(i)(A) are necessary. Issue: A commenter supported HUD’s identification of the relationship of the persons involved as a factor to be considered when determining whether hostile environment harassment has occurred, but recommended that the final rule further refine the concept. Specifically, in the homeowner’s association context, the commenter drew distinctions between the relationships among the different resident-owners and between a board member and a resident-owner. The commenter also distinguished these relationships from landlord-tenant relationships. HUD Response: HUD appreciates these distinctions and believes the rule already accommodates them by requiring the relationship of the parties involved be taken into account in determining whether a hostile environment has been created. This is one of several factors that HUD identified for evaluating allegations of hostile environment harassment. In a community governed by a homeowner’s association, for example, the influence PO 00000 Frm 00013 Fmt 4700 Sfmt 4700 63063 an owner-board member has over another resident by virtue of his or her authority to make association policy, to approve homeowner requests, and to bring or adjudicate charges of association rule violations may be greater than a non-board member, and thus each person’s relationship to the victim should be considered when assessing whether a hostile environment exists. No further refinement to the rule is necessary to address the commenter’s concerns; nor is any further refinement desirable, as it would risk inadvertently inserting limiting factors into the otherwise broad and flexible totality of the circumstances test. (B) Physiological or Physical Harm: § 100.600(a)(2)(i)(B) Issue: A commenter stated that § 100.600(a)(2)(i)(B) of the proposed rule, which concerns psychological or physical harm, is confusing. The commenter requested that HUD clarify the meaning of this provision. HUD Response: HUD agrees that § 100.600(a)(2)(i)(B) may be confusing and has revised this provision at the final rule stage; the revision is intended to clarify without altering the meaning of the provision. Proposed § 100.600(a)(2)(i)(B) provided that ‘‘Evidence of psychological or physical harm is relevant in determining whether a hostile environment was created, as well as the amount of damages to which an aggrieved person may be entitled. Neither psychological nor physical harm, however, must be demonstrated to prove that a hostile environment exists.’’ Final § 100.600(a)(2)(i)(B) provides that ‘‘Neither psychological nor physical harm must be demonstrated to prove that a hostile environment exists. Evidence of psychological or physical harm may, however, be relevant in determining whether a hostile environment was created and, if so, the amount of damages to which an aggrieved person may be entitled.’’ As explained at the proposed rule stage, evidence of such harm is but one of many factors that may be considered in assessing the totality of the circumstances. So long as the unwelcome conduct is sufficiently severe or pervasive as to interfere with or deprive the victim of a right protected by the Act, there is no need to also demonstrate psychological or physical injury in order to prove a hostile environment violation. ii. Title VII Affirmative Defense: § 100.600(a)(2)(ii) Issue: HUD received several comments on § 100.600(a)(2)(ii) of the proposed rule, which provides that the E:\FR\FM\14SER1.SGM 14SER1 asabaliauskas on DSK3SPTVN1PROD with RULES 63064 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations Title VII affirmative defense to an employer’s vicarious liability for hostile environment harassment by a supervisor does not apply to claims brought pursuant to the Fair Housing Act. Several commenters commended HUD’s decision not to extend the Title VII affirmative defense to the Fair Housing Act and agreed with HUD that such a defense would be inappropriate in the housing context, in part because of the lack of an exhaustion requirement under the Fair Housing Act, as well as the differences between an agent in the employment context versus an agent in the housing context. Other commenters recommended that HUD apply the judicially-created Title VII affirmative defense to Fair Housing Act claims. One such commenter stated that HUD, by rule, cannot import a Title VII cause of action onto the Fair Housing Act without the judiciallycreated limitations on a Title VII employer’s liability under that cause of action. Another commenter believed that HUD eliminated an existing affirmative defense for housing providers that is available in the employment context. Given the scope of potential harassment claims, this commenter found unwarranted HUD’s position that the Title VII affirmative defense is not relevant to harassment in the housing context because, in HUD’s view, a housing agent who harasses residents is inevitably aided by his or her agency relationship with the housing provider. In the commenter’s view, a responsible housing provider who exercises reasonable care to prevent harassment, and who provides a complaint mechanism that a resident unreasonably fails to invoke, should be afforded the same affirmative defense available to employers in analogous situations. Another commenter asked HUD to reconsider its decision to reject the affirmative defense as it appears unfair and based on an assertion that agents of housing providers are equivalent to a supervisory employer in terms of their power over applicants and/or tenants. HUD Response: After carefully considering the analysis provided by the commenters on both sides of the issue, HUD has retained its view that the Title VII affirmative defense is not appropriate to include as a defense under the Fair Housing Act. HUD has never found occasion to employ such a defense and remains unaware of any court having extended the Title VII affirmative defense to fair housing claims, and commenters did not identify any such case law. Moreover, unlike Title VII, which requires employees to exhaust their administrative remedies VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 before filing an action in court, the Fair Housing Act has no exhaustion requirement, and nothing in the text of the Fair Housing Act otherwise indicates that Congress intended to permit a housing provider to avoid vicarious liability for discriminatory harassment perpetrated by its agents by establishing its own complaint process or procedure. To the contrary, the Act authorizes any aggrieved person to directly commence a civil action in federal or state court, whether or not the individual has previously chosen to file an administrative complaint with HUD.26 Therefore, as explained in the preamble to the proposed rule, the Title VII affirmative defense is not appropriately applied to harassment in the housing context because its adoption would impose burdens on victims of discriminatory harassment that are incompatible with the broad protections and streamlined enforcement mechanisms afforded by the Fair Housing Act. HUD notes that some comments on this issue demonstrated a misunderstanding of the potential scope of the Title VII affirmative defense. The Title VII affirmative defense does not apply to harassment claims based on direct liability. Thus, contrary to the perceptions of some commenters, the affirmative defense does not apply to cases in which an employer—or housing provider—knew or should have known of an agent or third-party’s harassment and failed to stop it, because such cases involve direct rather than vicarious liability. Therefore, in exercising its power to promulgate rules to interpret and carry out the Act, HUD believes it would be inappropriate to add, for the first time, an affirmative defense that would require victims of hostile environment harassment—who are often housing insecure or otherwise especially vulnerable—to choose between the risk of retaliation by the perpetrator and the risk of losing their right to hold a housing provider liable for the acts of its agents. Instead, the traditional principles of vicarious liability— including those standards that hold a principal liable for an agent’s conduct that is taken within the scope of employment, with the apparent authority of the principal, or that is otherwise aided by the agency relationship—will continue to govern a housing provider’s liability for harassment. While HUD declines to extend the Title VII affirmative defense to the Fair Housing Act, the development and dissemination of anti26 See PO 00000 42 U.S.C. 3614(a). Frm 00014 Fmt 4700 Sfmt 4700 harassment policies will still assist housing providers to avoid litigation by identifying and quickly addressing improper conduct by employees or other agents. Issue: A commenter requested that HUD create safe harbors from liability for housing providers for harassment by their agents and third-parties. Specifically, the commenter stated that liability for unknown and unintended harassment by an agent or third-party should not be imposed on a housing provider where the housing provider: (1) Provides periodic mandatory fair housing training for its employees and agents (including training related to harassment claims); (2) requires unaffiliated management companies to conduct similar training of their employees, report to the property owner on a regular basis about the steps it is taking to avoid fair housing claims generally, and promptly report any potential fair housing claim to a designated official of the housing provider; and (3) implements and publicizes a hotline or other secure communication mechanism whereby a tenant can confidentially notify the housing provider about possible harassment by employees or other tenants. Another commenter expressed concern that the rule as proposed would expand a PHA’s exposure to liability by making the PHA liable for perceived hostile environment harassment that occurs beyond its knowledge or control and fails to create or incentivize any new remedies to protect tenants against hostile environment harassment. As a result, according to the commenter, the proposed rule raises the possibility that future litigation over alleged harassment might be driven by plaintiff attorneys’ fees rather than the merit of the allegations or effective remedies. In light of these concerns, the commenter suggested that HUD revise the proposed rule to adopt defenses similar to those applicable to public agencies under California state law for injuries caused by dangerous conditions on the public agency’s property. As described by the commenter, the State law defense provides that liability attaches to the public agency if the plaintiff establishes that: (1) The public employee’s negligence or wrongful act or omission created the dangerous condition; or (2) the public entity had actual or constructive notice of the dangerous condition before the injury occurred. The commenter believes this standard incentivizes the public agency to maintain its property and train its staff in order to limit its exposure to liability and reduce the risk of injuries. E:\FR\FM\14SER1.SGM 14SER1 asabaliauskas on DSK3SPTVN1PROD with RULES Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations HUD Response: As explained in the preamble to the proposed rule, traditional principles of tort liability and agency law apply in fair housing cases. The standards for direct and vicarious liability established in this final rule continue to reflect such principles and do not impose any new legal obligations or create or define new agency relationships or duties of care. For the same reasons that HUD does not interpret the Fair Housing Act to import the Title VII affirmative defense for a claim of hostile environment harassment by the provider’s agent, HUD does not believe the requested safe harbor or state law-derived defense from liability is appropriate. The California State law identified by the commenter essentially imposes a negligence standard for public agency liability, which is akin to the standard of direct liability that governs Fair Housing Act claims under § 100.7(a)(1)(ii). In addition, under traditional principles of agency law, a housing provider may be held vicariously liable for the discriminatory acts of an employee or agent regardless of whether the housing provider knew of or intended the discriminatory conduct where the employee was acting within scope of his or her agency, or where the harassment was aided by the agency relationship. HUD believes that traditional tort and agency law standards for assessing liability under the Act will encourage housing providers to provide appropriate training for their staff and to ensure compliance with the Act. Issue: A commenter asserted that the proposed rule, including HUD’s decision not to adopt the Title VII affirmative defense, raises Federalism implications. The commenter stated that the proposed rule creates a cause of action based on Title VII law that could, ostensibly, be brought against a State, even when the actions are performed by a city or other sub-recipient of funds, and obviate the State’s sovereign immunity despite its ongoing assertion that it has not waived such sovereign immunity. The commenter said that the rule would do so while removing the judicially-created Title VII affirmative defense. The commenter recommended that HUD withdraw the rule or create a specific carve-out for actions against a State that limits and defines the extent of vicarious liability, including a safehaven for conduct or policy akin to an affirmative defense. HUD Response: Executive Order 13132 (entitled ‘‘Federalism’’) prohibits an agency from publishing any rule that has federalism implications if the rule either (1) imposes substantial, direct VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 compliance costs on state and local governments and is not required by statute, or (2) preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. Under the Executive Order, Federalism implications are those having substantial direct effects on states or local governments (individually or collectively), on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. This final rule does not have such implications. As discussed elsewhere, the rule creates no new cause of action, liability or obligation on the part of any housing provider, including a State. The rule interprets the Fair Housing Act’s prohibition on discriminatory harassment, and in doing so, neither alters the substantive prohibitions against discrimination in the Act nor creates enhanced liability or compliance costs for States or any other entities or individuals. Similarly, the rule does not alter any sovereign immunity protections that a State may have under the Eleventh Amendment. In addition, the rule does not remove a pre-existing affirmative defense, because no court of which HUD is aware has ever applied the Title VII affirmative defense or any other affirmative defense or safe harbor to Fair Housing Act claims; nor has HUD ever applied such a standard. HUD notes further that creating an affirmative defense or safe harbor for States would not be consistent with Congressional intent, for the reasons discussed above. b. Type of Conduct: § 100.600(b) Issue: A commenter inquired whether a verbal or written account from an aggrieved tenant would be enough to comprise a showing of hostile environment harassment under the Act. HUD Response: A verbal or written account from an aggrieved tenant may be enough to provide notice to a housing provider that a hostile environment may be occurring, but whether it would be sufficient to establish that the conduct is sufficiently severe or pervasive to create a hostile environment depends on the totality of the circumstances. c. Number of Incidents: § 100.600(c) Issue: A commenter expressed concern that the proposed rule includes both a ‘‘totality of the circumstances standard’’ and a ‘‘single incident standard’’ and asked HUD to provide more descriptive language to determine the existence of a hostile environment based on such standards. The PO 00000 Frm 00015 Fmt 4700 Sfmt 4700 63065 commenter asked HUD to clarify or provide examples of when a single incident of harassment would be sufficient to create a hostile environment. Several other commenters expressed approval of § 100.600(c) of the proposed rule, which provides that a single incident of harassment because of race, color, religion, sex, familial status, national origin, or disability may constitute a discriminatory housing practice, where the incident is severe, or evidences a quid pro quo. Other commenters stated that in some cases a single act can be so severe as to deprive individuals of their right to use and enjoy their housing. HUD Response: HUD did not intend to propose two different standards for determining whether hostile environment harassment has occurred. To avoid confusion and better clarify the relationship between § 100.600(c) and § 100.600(a)(2), HUD is revising § 100.600(c) at this final rule stage. Section 100.600(a)(2) of the rule provides the only standard that must be met to prove a claim of hostile environment harassment under the Act—namely, that: A person was subjected to unwelcome spoken, written, or physical conduct; the conduct was because of a protected characteristic; and the conduct was sufficiently severe or pervasive as to interfere with or deprive the victim of his or her right to use and enjoy the housing or to exercise other rights protected by the Act. As provided in § 100.600(a)(2)(i), a determination of whether this standard has been met is to be based on the totality of the circumstances. Section 100.600(c) is included in the rule to make clear that a single incident of harassment because of a protected characteristic, if sufficiently severe, can constitute a hostile environment harassment violation (as defined in § 100.600(a)(2)). Whether a claim of hostile environment harassment is based on a single incident or repeated incidents of unwelcome conduct, an assessment of the totality of the circumstances is still required. For example, the nature of the unwelcome conduct (e.g., whether it was spoken, written and/or physical) and the location of the conduct (e.g., whether it occurred inside the victim’s apartment or in a common space), among other potential considerations, would factor into an assessment of whether a single incident of harassment was sufficiently severe to interfere with or deprive the victim of his or her right to use and enjoy the housing or to exercise other rights protected by the Act. HUD is revising proposed § 100.600(c) at this final rule stage as follows. E:\FR\FM\14SER1.SGM 14SER1 63066 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations asabaliauskas on DSK3SPTVN1PROD with RULES Proposed § 100.600(c) provided that: ‘‘A single incident of harassment because of race, color, religion, sex, familial status, national origin, or handicap may constitute a discriminatory housing practice, where the incident is severe, or evidences a quid pro quo.’’ Final § 100.600(c) now provides: ‘‘A single incident of harassment because of race, color, religion, sex, familial status, national origin, or handicap may constitute a discriminatory housing practice, where the incident is sufficiently severe to create a hostile environment, or evidences a quid pro quo.’’ B. Illustrations: §§ 100.60, 100.65, 100.80, 100.90, 100.120, 100.130, and 100.135 Issue: Several commenters supported the illustrations included throughout the proposed rule and asked HUD to provide additional examples of prohibited practices in the final rule. They requested more examples of: Unwelcome conduct; how quid pro quo harassment occurs with respect to protected classes other than sex; single incidents that constitute a hostile environment; and when direct liability exists. Commenters also recommended that HUD add to the final rule examples clarifying the relationship between age and disability and add examples of harassment of pregnant women, Muslims, persons with limited English proficiency, persons with mental healthrelated disabilities or HIV/AIDS, and persons who assert their rights to organize. Another commenter stated that HUD has provided useful illustrations of what does not violate the Act in other fair housing contexts, and requested that HUD do the same here, citing 24 CFR 100.205(b) (concerning the impracticality of meeting the Act’s design and construction standards). HUD Response: HUD retains the illustrations contained in the proposed rule, but otherwise declines to add more illustrations to the final rule. The rule contains numerous illustrations of possible quid pro quo and hostile environment harassment referencing all protected classes. But whether illegal harassment has or has not occurred in a particular situation is fact-specific and must be determined on a case-by-case basis. For this reason, the illustrations provided are simply more specific descriptions of the legal standard, e.g., conditioning the availability of housing on a person’s response to sexual harassment illustrates an unlawful refusal to sell or rent. Providing illustrations as to what does not violate the Act would not be appropriate because of the necessarily fact-specific VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 nature of such an inquiry. HUD notes that § 100.205(b), which the commenter cited, does not describe conduct that does not violate the Act, but rather provides examples of when the impracticality exception to the Act’s design and construction requirements is applicable. Lastly, some of the suggested examples are outside the scope of the Act, e.g., the right to organize, but HUD notes that persons would be protected by the Act to the extent the harassment is because of their race, color, religion, sex, familial status, national origin, or disability. C. Liability for Discriminatory Housing Practices: § 100.7 a. Direct Liability for One’s Own Discriminatory Conduct: § 100.7(a)(1)(i) Issue: A commenter stated that the language in § 100.7(a)(1)(i), which states that a person is directly liable for the person’s own conduct that results in a discriminatory housing practice, may lead to the liability of innocent actors and third-parties who somehow contributed to an illegal discriminatory action. The commenter gave as an example a situation in which a person supplied the pen that a housing provider used to make notes on an application that the housing provider later rejected because of a protected characteristic of the applicant. HUD Response: The rule creates no new or enhanced forms of liability. As discussed in the preamble of the proposed rule, § 100.7(a)(1)(i) does nothing more than restate the most basic form of direct liability, i.e., that a person is directly liable for his or her own discriminatory housing practices, as defined by the Act. Whether a person’s conduct constitutes a discriminatory housing practice under sections 804– 806 or 818 of the Act depends upon the specific facts. b. Direct Liability for Negligent Failure To Correct and End Discrimination: § 100.7(a)(1)(ii) and (iii) Issue: Several commenters expressed concern about the ‘‘should have known’’ standard in proposed § 100.7(a)(1)(ii) and (iii), which states that a person is directly liable for ‘‘(ii) [f]ailing to take prompt action to correct and end a discriminatory housing practice by that person’s employee or agent, where the person knew or should have known of the discriminatory conduct,’’ and ‘‘(iii) [f]ailing to fulfill a duty to take prompt action to correct and end a discriminatory housing practice by a third-party, where the person knew or should have known of the PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 discriminatory conduct . . . ’’ (emphasis added). Some commenters stated that this standard creates almost certain liability for landlords and that requiring actual knowledge would be more fair to property owners because liability would only attach for failing to act on known discrimination. A commenter stated that the final rule should limit liability where a housing provider has limited knowledge of misconduct. In contrast, other commenters stated that the ‘‘knew or should have known’’ standard is reasonable and consistent with the Fair Housing Act, legal negligence principles, and business practices of housing providers. One commenter complained that the proposed rule appears to require actual knowledge, even though the standard only requires that a defendant ‘‘should have known’’ of the harassment. Commenters asked HUD to clarify how a housing provider ‘‘should have known’’ about harassment, especially in the context of tenant-on-tenant harassment. A commenter questioned what the housing provider needs to know before liability attaches and whether the housing provider needs to know that the harasser’s actions violate the Fair Housing Act or only that the harasser took some action toward the victim. Several commenters expressed concern that a PHA might be liable when a housing voucher holder is harassed but neither the apartment owner nor voucher holder informs the housing agency about the harassment. One commenter expressed a similar concern that owners living in another city or state may not learn that harassment is taking place on their property unless the tenant tells the owner, and another commenter asked about a PHA’s potential liability when harassment occurs over the internet but is unknown to the housing agency. HUD Response: The ‘‘knew or should have known’’ standard is well established in civil rights and tort law.27 A housing provider ‘‘should have known’’ of the harassment of one resident by another when the housing provider had knowledge from which a reasonable person would conclude that the harassment was occurring. Such knowledge can come from, for example, the harassed resident, another resident, 27 As the Supreme Court has recognized, fair housing actions are essentially tort actions. See Meyer v. Holley, 537 U.S. 280, 285 (2003) (citing Curtis v. Loether, 415 U.S. 189, 195–96 (1974)); see also Burlington Indus. v. Ellerth, 524 U.S. 742, 759 (‘‘An employer is negligent with respect to sexual harassment if it knew or should have known about the conduct and failed to stop it. Negligence sets a minimum standard for employer liability under Title VII. . . .’’) (emphasis added). E:\FR\FM\14SER1.SGM 14SER1 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations asabaliauskas on DSK3SPTVN1PROD with RULES or a friend of the harassed resident.28 There is no requirement that the resident contact the housing provider about the harassment, only that the housing provider have knowledge from which a reasonable person would conclude that harassment was occurring. If the housing provider has no information from which a reasonable person would conclude that one resident or a third-party was harassing another resident, the housing provider is not liable for failing to take action to correct and end the harassment. If the knowledge component is not met, a housing provider cannot be held liable for a resident’s or third-party’s discriminatory conduct. HUD disagrees that this standard will subject landlords to certain liability. Application of this standard to the liability provisions of the rule helps clarify the Act’s coverage for residents and housing providers. It is intended to help guide housing providers in their assessment of when to intervene to prevent or end discriminatory conduct. HUD encourages housing providers to create safe, welcoming, and responsive housing environments by regularly training staff, developing and publicizing anti-discrimination policies, and acting quickly to resolve complaints once sufficient information exists that would lead a reasonable person to conclude that harassment was occurring. Issue: A commenter was concerned that § 100.7(a)(1)(ii) is seeking to hold the agent liable for the actions of its principal, contrary to Supreme Court precedent, and asked why this provision is necessary in light of proposed § 100.7(b) (vicarious liability), which states that the housing provider is already liable for the unlawful actions of the agent, whether known or not. HUD Response: Section 100.7(a)(1)(ii) addresses a principal’s direct liability for the principal’s own negligent conduct in overseeing (or failing to oversee) its agent or employee. Under the negligence theory of direct liability, the principal is liable only if the principal knew or should have known of the agent’s discriminatory conduct and failed to take corrective action to end it. Section 100.7(b), by contrast, holds the principal vicariously liable for the discriminatory conduct of its agent, 28 See, e.g., Neudecker v. Boisclair Corp., 351 F.3d at 364 (owner may be liable for acts of tenants and management’s children after failing to respond to plaintiff’s complaints of harassment); Bradley v. Carydale Enterprises, 707 F. Supp. 217 (E.D. Va. 1989) (finding that owners and managers’ failure to address one tenant’s complaints of racial harassment by another tenant stated a claim under 42 U.S.C. 1981 and 1982). VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 regardless of whether the principal knew or should have known of the agent’s conduct. As the commenter noted, an agent is not vicariously liable for the principal’s conduct, but is directly liable for his or her own actions. Section 100.7 does not create liability that does not already exist; it does not hold the agent liable for the conduct of the principal, and it is entirely consistent with traditional agency principles and Supreme Court precedent. Issue: A commenter asked for clarification of the term ‘‘third-party’’ in § 100.7(a)(1)(iii). The commenter was concerned that if left undefined, the term would include everyone. The commenter asked HUD to limit the term to what the commenter perceived to be HUD’s primary concern—‘‘liability resulting from a landlord’s failure to assist a tenant subject to another tenant’s harassment.’’ HUD Response: HUD does not agree that its use of the term ‘‘third-party’’ requires further clarification in the text of the rule. In the context of the rule, liability for discriminatory conduct by a ‘‘third-party’’ is appropriately limited to a non-employee or non-agent who engaged in quid pro quo or hostile environment harassment of which the housing provider knew or should have known and had the power to correct. Issue: A commenter stated that it is unclear from the proposed rule whether the obligation in proposed § 100.7(a)(1)(iii) to take action to end a discriminatory housing practice by a third-party must be derived from a contract, lease, or law, or whether it could be derived from these sources. The commenter also requested that HUD clarify in the rule whether generic lease provisions related to the use and enjoyment of one’s home that are found in almost every lease would be enough to create the obligation and related liability contemplated in § 100.7(a)(1)(iii). Another commenter expressed a concern that housing providers would take steps to minimize their liability for failing to take corrective action by revising their leases and other documents so that they do not create a duty to protect tenants. A commenter expressed concern that the term ‘‘duty,’’ incorporated from other laws and contracts, is difficult to fully assess and therefore bound to create unanticipated consequences. HUD Response: HUD recognizes that proposed § 100.7(a)(1)(iii) may have caused some confusion, so HUD has reworded the provision in the final rule. Proposed § 100.7(a)(1)(iii) stated that a person is directly liable for ‘‘failing to fulfill a duty to take prompt action to PO 00000 Frm 00017 Fmt 4700 Sfmt 4700 63067 correct and end a discriminatory housing practice by a third-party, where the person knew or should have known of the discriminatory conduct. The duty to take prompt action to correct and end a discriminatory housing practice by a third-party derives from an obligation to the aggrieved person created by contract or lease (including bylaws or other rules of a homeowner’s association, condominium or cooperative), or by federal, state or local law.’’ Revised section 100.7(a)(1)(iii) of this final rule provides that a person is directly liable for ‘‘failing to take prompt action to correct and end a discriminatory housing practice by a third-party, where the person knew or should have known of the discriminatory conduct and had the power to correct it. The power to take prompt action to correct a discriminatory housing practice by a third-party depends upon the extent of control or any other legal responsibility the person may have with respect to the conduct of such third-party.’’ The final rule does not use the term ‘‘duty,’’ and no longer identifies specific categories of potential sources for such a duty. A housing provider’s obligation to take prompt action to correct and end a discriminatory housing practice by a third-party derives from the Fair Housing Act itself, and its liability for not correcting the discriminatory conduct of which it knew or should have known depends upon the extent of the housing provider’s control or any other legal responsibility the provider may have with respect to the conduct of such third-party.29 For example, when a housing provider enters into a lease agreement with a tenant, the lease typically obligates the housing provider to exercise reasonable care to protect the residents’ safety and curtail unlawful conduct in areas under the housing provider’s control, whether or not the lease contains specific language creating that responsibility. Even if the lease does not expressly create such obligations, the power to act may derive from other legal responsibilities or the operation of law.30 29 See, e.g., Neudecker v. Boisclair Corp., 351 F. 3d at 364 (owner may be liable for acts of tenants and management’s children after failing to respond to plaintiff’s complaints of harassment); Fahnbulleh v. GFZ Realty, LLC, 795 F. Supp. 2d 360, 364–65 (D. Md. 2011) (denying landlord’s motion to dismiss because the Act imposes no categorical rule against landlord liability for tenant-on-tenant harassment); Reeves v. Carrollsburg Condo. Unit Owners Ass’n, 1997 U.S. Dist. LEXIS 21762, *26 (D.D.C. 1997) (condo association that knew of harassment by resident but failed to take corrective actions may violate Act). 30 See, e.g., Wilstein v. San Tropai Condo. Master Ass’n, 1999 U.S. Dist. LEXIS 7031, *28–33 (N.D. Ill. Apr. 21, 1999) (rejecting condo association’s E:\FR\FM\14SER1.SGM Continued 14SER1 63068 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations asabaliauskas on DSK3SPTVN1PROD with RULES Issue: A commenter expressed concern that proposed § 100.7(a)(1)(iii) creates liability on the part of a community association (homeowner association, condominium or cooperative) for the illegal acts of residents over whom they have no control. The commenter urged HUD to remove or revise the proposed rule’s extension of direct liability to community associations for the discriminatory actions of non-agents. The commenter stated that community associations generally lack legal authority to mandate that residents take actions described in the preamble of the proposed rule because the associations cannot evict homeowners or otherwise impose conditions not specifically authorized by the association’s covenants, conditions, and restrictions (CC&Rs) or state law. The commenter suggested that if the language in § 100.7(a)(1)(iii) remains, it should be modified to clearly state which terms and conditions in association bylaws and regulations constitute a duty on the part of an association or its agents to investigate and punish residents for illegal discriminatory housing practices. HUD Response: As noted above, HUD has slightly revised § 100.7(a)(1)(iii) to clarify that a housing provider is liable under the Fair Housing Act for thirdparty conduct if the provider knew or should have known of the discriminatory conduct, has the power to correct it, and failed to do so. HUD also notes that the rule does not add any new forms of liability under the Act or create obligations that do not otherwise exist. The rule does not impose vicarious liability (see § 100.7(b)) on a community association for the actions of persons who are not its agents. Section 100.7(a)(1)(ii) describes a community association’s liability for its own negligent supervision of its agents, and § 100.7(a)(1)(iii) describes a community association’s liability for its own negligence for failing to take prompt action to correct and end a discriminatory housing practice by a third-party. With respect to § 100.7(a)(1)(iii), the rule requires that when a community association has the power to act to correct a discriminatory housing practice by a third party of argument that it had no duty to stop harassment of plaintiff by other residents and holding that association could be liable where evidence indicated that association knew of the harassment and bylaws authorized the association to regulate such conduct); see also Bradley v. Carydale Enterprises, 707 F. Supp. 217 (E.D. Va. 1989) (finding that owners and managers’ failure to address one tenant’s racial harassment of a neighboring tenant states a claim under 42 U.S.C. 1981, 1982). VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 which it knows or should have known, the community association must do so. As the commenter recognizes, a community association generally has the power to respond to third-party harassment by imposing conditions authorized by the association’s CC&Rs or by other legal authority.31 Community associations regularly require residents to comply with CC&Rs and community rules through such mechanisms as notices of violations, threats of fines, and fines. HUD understands that community associations may not always have the ability to deny a unit owner access to his or her dwelling; the rule merely requires the community association to take whatever actions it legally can take to end the harassing conduct. Issue: A few commenters suggested that HUD should reconsider imposing liability on a landlord for tenant-ontenant harassment because the law in this area is not well-settled. The commenters expressed concern that proposed § 100.7(a)(1)(iii) exceeds the scope of the Act by expanding liability for housing providers to include liability for third-party harassment of a resident when the housing provider did not act with discriminatory intent. One commenter, relying on Title VII case law and an interpretation of the phrase ‘‘because of,’’ stated that a landlord must have acted with discriminatory intent in order to be liable under the Fair Housing Act. Another commenter stated that although section 804(a) of the Fair Housing Act does not require a showing of intentional discrimination, claims brought under sections 804(b) and 817 of the Act do, citing Francis v. King Park Manor, Inc., 91 F. Supp. 3d 420 (E.D.N.Y. 2015). Another comment stated that to establish a housing provider’s liability for failing to take action to correct third-party harassment, the plaintiff must show not just that the housing provider failed to correct the harassment but also that the housing provider did so because of animus against the victim due to a protected characteristic. A commenter pointed to Lawrence v. Courtyards of Deerwood 31 See, e.g., Wilstein v. San Tropai Condo. Master Ass’n, supra*28–33; Reeves v. Carrollsburg Condo. Unit Owners Ass’n, 1997 U.S. Dist. LEXIS 21762, *26. See also Freeman v. Dal-Tile Corp., 750 F. 3d 413, 422–23 (4th Cir. 2014) (holding that ‘‘an employer is liable under Title VII for third parties creating a hostile work environment if the employer knew or should have known of the harassment and failed to take prompt remedial action reasonably calculated to end [it].’’) (internal quotation marks and citations omitted); Galdamez v. Potter, 415 F. 3d 1015, 1022 (9th Cir. 2005) (‘‘An employer may be held liable for the actionable third-party harassment of its employees where it ratifies or condones the conduct by failing to investigate and remedy it after learning of it.’’). PO 00000 Frm 00018 Fmt 4700 Sfmt 4700 Ass’n, Inc., 318 F. Supp. 2d 1133 (S.D. Fla. 2004), as an example of a case in which the court dismissed the fair housing claim against the housing provider because the plaintiffs failed to establish that the housing provider’s ineffective response to the harassment was due to racial animus. Commenters also pointed to Ohio Civil Rights Comm’n v. Akron Metro. Hous. Auth., 892 NE.2d 415, 420 (Ohio 2008), in which the court declined to impose liability on landlords for failing to take corrective action in response to discriminatory harassment committed by the landlord’s tenants. A commenter also suggested that not requiring discriminatory animus on the part of the housing provider would amount to strict liability. The commenters proposed that in light of these contrary federal and state court decisions, HUD should require proof of some degree of animus by the housing provider before subjecting the provider to direct liability for the acts of third parties. HUD Response: HUD does not agree that a housing provider’s failure to act to correct third-party harassment must be motivated by a discriminatory intent or animus before the provider can be held liable for a Fair Housing Act violation. In reaching this conclusion, HUD considered its own experience in administering and enforcing the Fair Housing Act, the broad remedial purposes of the Act,32 relevant case law including the Supreme Court’s recent ruling in Texas Department of Community Affairs v. Inclusive Communities Project, Inc. holding that the Fair Housing Act is not limited to claims of intentional discrimination, and the views of the EEOC regarding Title VII. The case law cited by the commenters fails to support the proposition that the Fair Housing Act requires discriminatory intent in order to find a housing provider liable for its negligent failure to correct resident-onresident or other third-party discriminatory conduct. The district court decision in Francis v. Kings Park Manor is the sole exception to that principle, and HUD disagrees with its ruling. HUD notes that this decision is on appeal to the Second Circuit. Section 100.7(a)(1)(iii) sets out a negligence standard of liability, which does not require proof of discriminatory 32 See e.g., Havens Realty Corp. v. Coleman, 455 U.S. 363, 380 (1982) (Congress intended Fair Housing Act to be broadly remedial); cf. Jones v. Alfred H. Mayer Co., 392 U.S. 409, 413 (1968) (describing the Fair Housing Act as ‘‘a comprehensive open housing law’’); 42 U.S.C. 3601 (‘‘It is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States.’’). E:\FR\FM\14SER1.SGM 14SER1 asabaliauskas on DSK3SPTVN1PROD with RULES Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations intent or animus on the part of the provider, but is far from strict liability. Under this standard, a plaintiff or the charging party must prove three elements to establish a housing provider’s liability for third-party harassment: (1) The third-party created a hostile environment for the plaintiff or complainant; (2) the housing provider knew or should have known about the conduct creating the hostile environment; and (3) the housing provider failed to take prompt action to correct and end the harassment while having the power to do so. HUD does not agree that a fourth element—that the housing provider’s failure to act was more than negligent, and was motivated by discriminatory intent—is necessary or appropriate. Contrary to one comment, the Supreme Court in Inclusive Communities Project has already ruled that the ‘‘because of’’ clause in the Fair Housing Act does not require proof of discriminatory intent. While not addressing every aspect of the cited decisions, HUD notes the following: In Lawrence v. Courtyards of Deerwood Ass’n, cited by another commenter, the court dismissed the discriminatory harassment claim not for lack of discriminatory intent on the part of the landlord, but because it found, inter alia, that the dispute did not involve discriminatory harassment of one tenant by another but instead reflected mutual antagonism between two tenants. The court in Lawrence distinguished Reeves v. Carrollsburg Condo. Unit Owners Ass’n, 1997 U.S. Dist. LEXIS 21762, *22 (D.D.C 1997), which held the landlord liable under the Fair Housing Act for its failure to adequately address sexual harassment of one tenant by another because ‘‘the [Carrollsburg Condo] association’s by-laws specifically authorized the association to curtail conduct that contravened the law’’ and provided that a violation of local or federal law was a violation of the association rules.33 Finally, the state court decision cited by one commenter did not involve claims under the Fair Housing Act and does not provide reason for HUD to alter § 100.7(a)(1)(iii) at the final rule stage. In Ohio Civil Rights Commission v. Akron Metropolitan Housing Authority, the Ohio Supreme Court’s refusal to hold a landlord liable under a state civil rights law for failing to take corrective action in response to one tenant’s racial harassment of another tenant was 33 Lawrence v. Courtyards of Deerwood Ass’n, 318 F. Supp. 2d at 1149 (citing Reeves v. Carrollsburg Condo. Unit Owners Ass’n, 1997 U.S. Dist. LEXIS 21762 at *22. VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 premised on an incorrect reading of Title VII jurisprudence. The court misconstrued Title VII case law to require an agency relationship between an employer and a perpetrator of harassment in order to hold the employer liable for negligently failing to stop sexual harassment by the perpetrator.34 In fact, under Title VII, an agency relationship is not required in order to hold employers liable for negligently failing to stop discriminatory harassment of which the employer knew or should have known. Both the EEOC and the federal courts have recognized that an employer may be held liable for negligently failing to stop discriminatory harassment in the workplace by non-employees or nonagents.35 The principle of liability codified in § 100.7(a)(1)(iii) of this final rule is consistent with these Title VII authorities and, in HUD’s view, appropriately serves the Fair Housing Act’s parallel antidiscrimination objectives in the housing context. In sum, the proposed rule and this final rule reflect HUD’s considered judgment, consistent with prevailing precedent and EEOC regulations, that a housing provider (including a homeowner’s association) or property manager is liable under the Act for negligently failing to take corrective action against a third-party harasser when the provider or manager knew or should have known of the harassment and had the power to end it. In light of the above, HUD declines to make the proposed revisions to the final rule. Issue: A commenter stated that the imposition of liability on private landlords for tenant-on-tenant harassment is inappropriate and will have several negative consequences. The commenter stated that private owners do not have the expertise or resources to undertake what is essentially a social services function to mediate disputes between neighbors. In addition, the commenter expressed concern that the proposed rule could make it more difficult and risky for property owners to take affirmative steps to operate racially integrated 34 892 NE.2d at 419–20. 29 CFR 1604.11(e) (‘‘An employer may also be responsible for the acts of non-employees, with respect to sexual harassment of employees in the workplace, where there employer (or its agents or supervisory employees) knows or should have known of the conduct and fails to take immediate and appropriate corrective action.’’); see also, e.g., Freeman v. Dal-Tile Corp., 750 F.3d 413, 422–24 (4th Cir. 2014) (employer potentially liable for failing to address discriminatory harassment by a customer); Lockard v. Pizza Hut, Inc., 162 F.3d 1062, 1072–75 (10th Cir. 1998) (same; collecting cases recognizing employer liability for failing to correct third-party harassment). 35 See PO 00000 Frm 00019 Fmt 4700 Sfmt 4700 63069 housing. The commenter stated that the rule will be an economic disincentive for individuals, companies, and other investors to engage in the business of renting residential real estate and that the Section 8 voucher program depends on the participation of these private entities in order to achieve other fair housing goals. The commenter expressed concern that the effect of the proposed rule will be to reduce the supply of available affordable units, thus disproportionately harming lowincome families. Other commenters raised concerns that landlords, when confronted by tenants who mutually accuse each other of harassment, will be unable to take necessary corrective actions because of the rule’s prohibition against moving or causing injury to a complaining tenant, or will reprimand the wrong tenant because they lack expertise with investigations. Numerous other commenters supported the rule’s recognition that a housing provider may be directly liable for harassment of a tenant by the housing provider’s employee or a thirdparty. These commenters stated that any suggestion that this rule will unduly burden housing providers is exaggerated, that the rule is wholly consistent with the ordinary responsibilities of housing providers to ensure habitability, and that housing providers are familiar with the tools they have to enforce their own rules— tools they frequently wield. HUD Response: The rule does not create new or enhanced liabilities for housing providers, including those who participate in the Section 8 program. HUD believes that this rule will help clarify the obligations that housing providers already have in offering and maintaining housing environments free from discrimination and that comply with the Fair Housing Act. We are long past the time when racial harassment is a tolerable price for integrated housing; a housing provider is responsible for maintaining its properties free from all discrimination prohibited by the Fair Housing Act. Under the Act, discriminatory practices are those that violate sections 804, 805, 806, or 818. Such practices do not encompass all incivilities, and thus it is important to note that not every quarrel among neighbors amounts to a violation of the Fair Housing Act.36 Ending harassing or 36 See, e.g., Bloch v. Frischholz, 587 F.3d at 783 (quoting Halprin v. Prairie Single Family Homes of Dearborn Park Ass’n, 388 F.3d 327, 330 (7th Cir. 2004) (noting that interference under § 818 ‘‘is more than a ‘quarrel among neighbors’ ’’); Sporn v. Ocean Colony Condominium Assn, 173 F. Supp. 2d 244, 251–52 (D.N.J. 2001) (noting that section 818 ‘‘does E:\FR\FM\14SER1.SGM Continued 14SER1 63070 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations asabaliauskas on DSK3SPTVN1PROD with RULES otherwise discriminatory conduct may necessitate evicting the tenant who has engaged in the conduct, not the aggrieved tenant.37 The Act does not, however, prohibit housing providers from offering to move an aggrieved tenant, as long as that tenant may refuse the offer without consequence or retaliation. Issue: Some commenters stated that the proposed rule outlining third-party liability conflicts with HUD’s PIH Notice 2015–19, titled Guidance for Public Housing Agencies (PHAs) and Owners of Federally-Assisted Housing on Excluding the Use of Arrest Records in Housing Decisions. One commenter was concerned that PIH Notice 2015–19 makes it harder for PHAs to correct situations that may lead to hostile environment harassment, while the proposed harassment rule would make it easier for PHAs to be held liable for the activities of tenants who take actions against other tenants to create a hostile environment. Another commenter was concerned that PHAs would be forced to choose whether to comply with HUD’s harassment rule or with HUD’s Notice, which prohibits the use of an arrest record as evidence of criminal activity that can support an adverse admission, termination, or eviction decision. These commenters therefore asked HUD to remove third-party liability from the rule. HUD Response: HUD believes the commenters’ concerns are misplaced because there is no conflict between this rule and PIH Notice 2015–19. The rule does not add any new forms of liability under the Fair Housing Act and the formalization of clear and consistent standards for evaluating harassment claims under the Act does not conflict with the requirements of the PIH Notice. Compliance with PIH Notice 2015–19 does not prevent a PHA from considering reliable evidence of relevant criminal activity when considering how to respond to complaints of harassment. Nor does this rule require a PHA to make use of arrest records to determine whether discriminatory harassment has occurred. Consistent with traditional not [] impose a code of civility’’ on neighbors); United States v. Weisz, 914 F. Supp. 1050, 1054– 55 (S.D.N.Y. 1996) (holding that allegations that Jewish neighbor harassed complainants because of their religion were ‘‘nothing more than a series of skirmishes in an unfortunate war between neighbors’’). But see Ohana v. 180 Prospect Place, 996 F. Supp. 238, 243 (E.D.N.Y. 1998) (neighbors who intentionally intrude upon quietude of another’s home may violate Act). 37 See, e.g., Miller v. Towne Oaks East Apartments, 797 F. Supp. 557, 562 (E.D. Tex.1992) (finding landlord liable for violating Act by evicting both harasser and victim of harassment instead of only harasser). VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 tort liability principles, as well as current federal Fair Housing Act jurisprudence, this rule codifies HUD’s longstanding view that a property owner, including a PHA, may be held liable for failing to take corrective action within its power in response to tenanton-tenant harassment of which the owner knew or should have known. Where a PHA receives a complaint or otherwise learns of possible discriminatory harassment of one resident by another, the PHA is advised to assess the situation and, if necessary, take appropriate corrective action to end the harassment. Issue: Several commenters expressed concern that application of the rule would conflict with HUD’s homeless or permanent supportive housing programs or might have a detrimental effect on persons with mental disabilities. A commenter stated that tenants with severe mental health disabilities may create a hostile environment for neighbors and asked HUD to explain what direct responsibility the housing provider has to correct negative behaviors. A commenter stated that the rule incentivizes evictions over efforts to determine whether a reasonable accommodation might be appropriate for persons with mental disabilities. Another commenter stated that because tenants with mental illness often have difficulty finding housing, the proposed rule might result in an increased rate of homelessness among persons with mental disabilities. A commenter asked HUD to revisit the proposed rule’s thirdparty liability provision to avoid harming this particularly vulnerable population. Other commenters stated that the rule would help protect many vulnerable persons from eviction. These commenters supported the statement in the proposed rule’s preamble that eviction is only one of the many corrective actions housing providers may utilize to address harassment. HUD Response: The rule neither changes a housing provider’s responsibilities toward tenants with mental disabilities nor incentivizes evictions of such persons. It is not uncommon for the behavior of one tenant to frustrate, displease, or annoy another tenant. This is true for behavior by tenants with and without psychiatric disabilities. The rule does not require a housing provider to take action whenever one tenant engages in behavior that another tenant finds objectionable. The Act prohibits discrimination against applicants and tenants with disabilities, including evicting individuals with disabilities because other tenants find them PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 frustrating, displeasing, or annoying. The Act does not, however, require that a dwelling be made available to a person whose tenancy would constitute a direct threat to the health or safety of others or would result in substantial physical damage to the property of others.38 The housing provider must make an individualized assessment as to whether such a threat exists based on reliable objective evidence that considers: (1) The nature, duration, and severity of the risk of injury; (2) the probability that injury will actually occur; and (3) whether there are any reasonable accommodations that will eliminate the direct threat. In evaluating a recent history of overt acts, a housing provider must take into account whether the individual has received intervening treatment or medication that has eliminated the direct threat. Reasonable accommodations must be made when they may be necessary to afford such persons an equal opportunity to use and enjoy a dwelling. HUD refers the reader to the Joint Statement of HUD and DOJ on Reasonable Accommodations under the Fair Housing Act for further information.39 1. Corrective Action: § 100.7(a)(2) Issue: A commenter asked HUD to remove the prohibition against causing injury to a complaining party. HUD Response: HUD declines to remove the prohibition on causing additional injury to a person who has already been injured by illegal harassment. Permitting such additional injury would be inconsistent with the Act’s purposes to prevent unlawful discrimination and remedy discrimination that has already occurred. Issue: One commenter requested further guidance as to what constitutes appropriate corrective action by a housing provider to stop tenant-ontenant harassment. The commenter specifically inquired whether a single verbal statement by a landlord to a tenant who allegedly engaged in harassing conduct would be sufficient corrective action to relieve a landlord from liability under the rule. Another commenter asked HUD to impose realistic and reasonable limitations on housing providers’ obligation to take corrective action. HUD Response: There is no one way that a housing provider must respond to complaints of third-party harassment, 38 42 U.S.C. 3604(f)(9). Joint Statement of HUD and DOJ on Reasonable Accommodations Under the Fair Housing Act (May 17, 2004), posted at http:// www.hud.gov/offices/fheo/library/ huddojstatement.pdf. 39 See E:\FR\FM\14SER1.SGM 14SER1 asabaliauskas on DSK3SPTVN1PROD with RULES Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations although the rule makes clear that a provider that fails to effectively respond may be subject to liability under the Act. Section 100.7(a)(2) provides that corrective actions must be effective in ending the discrimination, but may not injure the aggrieved persons. For example, corrective actions appropriate for a housing provider to utilize to stop tenant-on-tenant harassment or other third-party harassment might include verbal and written warnings; enforcing lease provisions to move, evict, or otherwise sanction tenants who harass or permit guests to harass; issuing notrespass orders against guests; or reporting conduct to the police. What constitutes appropriate and effective corrective action will depend on the nature, frequency, and severity of the harassment. While in some cases a single verbal reprimand by a housing provider may be sufficient to effectively end discriminatory harassment of one tenant by another, the housing provider should notify the victim that such action was taken, and it is advisable for the housing provider to document this action in its records. Additionally, the housing provider should follow up with the victim of the harassment after the corrective action is taken to ensure that it was effective. If the housing provider knows or should have known that the corrective action was ineffective, the provider has a responsibility to take additional corrective actions within its power. If, however, corrective action is effective in ending the discriminatory conduct, a housing provider is not required to take additional action simply because the victim believes further action should have been taken. HUD does not agree that there is a need to add a specific limitation on a housing provider’s responsibility to take corrective action within its power to act in response to discriminatory harassment of which the provider knew or should have known. Issue: A commenter stated that because tenants are not agents or employees, landlords cannot simply compel tenants to take or avoid particular action and do not have the ability to shape or alter tenants’ behavior beyond threatening and carrying out evictions. Another commenter asked HUD to consider that there are substantial practical differences between the ability of housing providers to take corrective action to end tenant-on-tenant harassment and their ability to control the actions of their employees because there is no agency relationship in the former. Another commenter stated that most homeowners would be very VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 concerned if association board members, employees, or agents injected themselves into the interpersonal relationships of homeowners and residents to investigate their interactions and relationships for discriminatory elements. This commenter also said that for PHAs, eviction is often unavailable as a remedy for alleged tenant-on-tenant harassment because the U.S. Housing Act of 1937 and federal regulations limit the ability of PHAs to carry out evictions, except for specified causes. In addition, the commenter stated that the result of these restrictions and the proposed rule would be to create significant new liability for PHAs for tenant-on-tenant harassment without creating any new mechanisms for PHAs to mitigate this liability. In contrast, other commenters stated that the rule does not create any new liability because landlords have an obligation to protect tenants’ rights to quiet enjoyment and generally have the right to take actions against renters and occupants who disturb the quiet enjoyment of others. HUD Response: Neither the proposed rule nor this final rule create new liability for housing providers, including PHAs or homeowner’s associations, regarding resident-onresident harassment. Nor does the rule require a housing provider to take action that is beyond the scope of its power to act. HUD recognizes that specific remedies that may be available to employers to stop an employee’s illegal practices will be distinct from those that a housing provider may use to stop residents who are engaging in discriminatory conduct. Creating and posting policy statements against harassment and establishing complaint procedures, offering fair housing training to residents and mediating disputes before they escalate, issuing verbal and written warnings and notices of rule violations, enforcing bylaws prohibiting illegal or disruptive conduct, issuing and enforcing notices to quit, issuing threats of eviction and, if necessary, enforcing evictions and involving the police are powerful tools available to a housing provider to control or remedy a tenant’s illegal conduct. These tools are also available to PHAs, and, contrary to one commenter’s concern, eviction is available to a PHA to correct a tenant’s discriminatory conduct as the PHA may terminate a tenancy for ‘‘serious or repeated violation of material terms of the lease,’’ 24 CFR 966.4(l)(2)(i), which include the obligation that tenants must ‘‘act . . . in a manner which will not disturb other residents’ peaceful PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 63071 enjoyment of their accommodations. . . .’’ 24 CFR 966.4(f)(11). Issue: A commenter expressed concern that a PHA may be held directly liable for failing to correct actions by third-parties over whom they have little or no control. As an example, the commenter cited harassment of a voucher-holding tenant by neighbors who are not also voucher-holders and not otherwise affiliated with the PHA. Similarly, another commenter stated that the rule could be interpreted to make landlords liable for conduct that occurs off their property or that has nothing to do with a tenant’s home. HUD Response: This rule describes the standard for assessing liability under the Fair Housing Act. These fair housing standards apply to private and public landlords alike and do not turn on whether a tenant holds a Housing Choice Voucher or receives other government rental assistance. HUD also reiterates that a housing provider is not responsible for correcting every negative action by any third-party. Rather, the third-party action must constitute a discriminatory housing practice as defined by the Act, and the housing provider must have the power to correct it. As provided in the final rule and discussed elsewhere in this preamble, whether a housing provider has the power to take corrective measures in a specific situation—and what corrective measures are appropriate—is dependent on the facts, including the extent of control or any other legal responsibility the person may have with respect to the conduct of such third-party. There may be instances where the ability to correct the unlawful conduct is beyond a housing provider’s control. Thus, when confronted with discriminatory harassment of one of its Housing Choice Voucher-holders or other tenants, the housing agency should explore what corrective actions are within its power and are appropriate to take. Issue: A commenter suggested that an unintended consequence of the proposed rule could be that property owners would remove security devices, such as video cameras and other surveillance mechanisms, for fear that such measures may create a duty on the part of the property owner to correct neighbor-on-neighbor harassment. In contrast, other commenters stated that housing providers may feel the need to provide for more oversight of residences which may interfere with residents’ right to peaceful enjoyment of their dwelling. HUD Response: Removing security devices will not relieve a housing provider of its obligation to take the E:\FR\FM\14SER1.SGM 14SER1 63072 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations asabaliauskas on DSK3SPTVN1PROD with RULES actions within its power to promptly correct and end a discriminatory housing practice. Elsewhere in the preamble, HUD discusses various options that may be available to housing providers to address neighbor-onneighbor harassment. Issue: A commenter stated that owners should be encouraged to use positive incentives, such as promoting better communication with—and healthy relationships among—tenants, and educating tenants about their rights to prevent harassment, instead of taking corrective actions that may harm tenants, such as ending a lease or evicting a tenant—. HUD Response: HUD agrees that positive incentives are useful tools for preventing harassment. HUD believes, however, that warnings, threats of evictions, evictions, and lease terminations may also be necessary corrective actions to end harassment. The preamble and rule make clear that there is no one way to prevent or correct harassment, only that the methods need to be effective at ending it. c. Vicarious Liability: § 100.7(b) Issue: Several commenters questioned the description of vicarious liability at § 100.7(b) of the proposed rule. One commenter said § 100.7(b) could be interpreted to impose vicarious liability on an organization’s directors, officers, or owners and suggested HUD clarify, consistent with Meyer v. Holley, that it is the organization—not the individual directors, officers, or board members— who are the ‘‘principal or employer’’ subject to vicarious liability under the Fair Housing Act. The commenter asked HUD to issue clarification that the proposed regulations do not contravene or attempt to reverse Meyer v. Holley, 537 U.S. 280 (2003). In contrast, other commenters applauded the description of vicarious liability in the rule, stated that the description follows wellestablished common law tort and agency principles, and expressed support for the proposed rule’s reliance on Meyer v. Holley. HUD Response: Subsection 100.7(b) merely describes the well-established concept of vicarious liability, under which principals may be held liable for the discriminatory acts of their agents or employees whether or not they knew of the discriminatory conduct. As articulated in Meyer v. Holley, and as explained in the preambles to the proposed rule and this final rule, traditional agency principles apply to the Fair Housing Act.40 Under agency principles, a principal is vicariously 40 537 U.S. at 282, 287. VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 liable for the actions of his or her agents taken within the scope of their relationship or employment, or for actions taken outside the scope of their relationship or employment when the agent is aided in the commission of such acts by the existence of the agency relationship.41 Determining whether an agency relationship exists is a factual determination that looks to an agent’s responsibilities, duties, and functions; whether the discriminatory conduct of the agent was within the scope of the agency relationship or aided by the existence of the agency relationship is also a fact-specific inquiry. Issue: Some commenters questioned the statement in the proposed rule’s preamble that a principal is vicariously liable for the actions of an agent or employee taken outside the scope of the agency relationship or employment when the agent or employee is aided in the commission of such acts by the existence of the agency relationship. A commenter agreed that a principal is vicariously liable for the acts of its agents committed within the scope of the agency, regardless of knowledge or intent to violate the Act by the principal, but believes that, in adopting the ‘‘aided in agency’’ standard, the proposed rule goes beyond traditional tort concepts and does not reflect the limited concepts of vicarious liability endorsed in Meyer v. Holley. The commenter considered it acceptable to hold a real estate company liable for discriminatory acts or statements made 41 See, e.g., Glover v. Jones, 522 F. Supp. 2d 496, 507 (W.D.N.Y. 2007) (holding that ‘‘a property owner may be vicariously liable under the Fair Housing Act for the actions of an employee even when they are outside the scope of employment . . . if the employee was aided in accomplishing the tort by the existence of the agency relation.’’) (quoting Mack v. Otis Elevator Co., 326 F. 3d 116, 123 (2d Cir. 2003) (internal quotation marks omitted); see also Boswell v. GumBayTay, No. 2:07– CV–135–WKW[WO], 2009 U.S. Dist. LEXIS 45954, *17 (M.D. Ala. June 1, 2009) (holding that vicarious liability attached to property owner where property manager’s ‘‘position essentially gave him unfettered access to communicate with and personally visit [the plaintiff]’’ and he ‘‘used his power as property manager as a vehicle through which to perpetrate his unlawful conduct by refusing repairs, raising the rent, and attempting to evict [the plaintiff] as a consequence for [her] refusal to provide sexual favors.’’); Glover at 522 F. Supp. 2d at 507 (rejecting defendant property owner’s motion for summary judgment on the issue of vicarious liability where evidence showed that property manager used his ‘‘position as the de facto landlord to perpetrate FHA [harassment] violations . . . giving] him the opportunity to visit the apartment when he wanted, and enabl[ing] him to control Plaintiff’s rent’’); Richards v. Bono, 2005 U.S. Dist. LEXIS 43585 at *30 (holding that wife/co-owner of property could be vicariously liable for husband’s harassment where husband acted as her agent and used his position as owner, property manager, and maintenance supervisor to subject plaintiff to sexual harassment by using a key to enter plaintiff’s apartment and threatening plaintiff with eviction). PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 by its brokers in the scope of their agency, but disagreed that a housing provider should be liable for misconduct of a janitorial employee outside the scope of that employee’s duty because he wore a badged uniform or possessed keys or passes to tenants’ dwellings. Another commenter asked for clarity on the reasoning behind the assertion in the preamble to the proposed rule that an agent who harasses residents or applicants is necessarily aided by his or her agency relationship with the housing provider. HUD Response: As discussed throughout this preamble, the proposed and final rule do not create new forms of liability. Instead, HUD has decided to adopt well-established principles of agency law, including that a principal may be vicariously liable for the actions of an agent or employee that are taken outside the scope of the employment or agency relationship if the agent or employee is aided in committing the acts by the existence of the employment or agency relationship. Agency law must be applied to the specific facts at issue to determine whether such a situation exists and gives rise to a principal’s liability. The statement in the proposed rule that an agent who engages in hostile environment harassment of residents or applicants is aided by the agency relationship with the housing provider was not intended to suggest the agent is necessarily so aided with respect to every discriminatory housing practice. It was intended to explain one of the reasons HUD chose not to import into the Fair Housing Act the Title VII affirmative defense to an employer’s vicarious liability for hostile environment harassment. As explained in that context, a housing provider’s agent who engages in harassment holds a position of power and authority over the victimized resident or applicant, regardless of the agent’s specific duties. This is because a resident or applicant has only an arms-length economic relationship with the housing provider, while an agent-perpetrator is clothed with the authority of the housing provider. Given this inherent imbalance of power and control over the terms or conditions of the housing environment, the distinction between harassment by supervisory and non-supervisory employees that supported the creation of the affirmative defense in the employment context do not extend to the housing context. D. Other Issues Issue: A commenter stated that HUD should apply the proposed rule only to its own investigative and administrative E:\FR\FM\14SER1.SGM 14SER1 asabaliauskas on DSK3SPTVN1PROD with RULES Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations actions and should not purport to preempt court-established rules. The commenter stated that in some instances it may be appropriate for federal courts to defer to agency rules, but that this is not a case where Chevron 42 deference is appropriate because HUD is not basing the rule on its own experience, but largely on interpretations of federal court decisions. The commenter stated that HUD has no particular expertise in tort law and no authority to interpret tort laws. Another commenter stated that HUD appears to be using the administrative rule-making process to substitute its views for those of the courts, and that HUD must pursue the change it seeks through Congress and/or the courts. HUD Response: The commenters misconstrue both the rule and HUD’s authority under the Act. The Act specifically grants the Secretary of HUD the authority and responsibility to administer and enforce the Act, including promulgating rules to carry out the Act.43 This rule-making authority is not limited to HUD’s investigations or administrative proceedings. Moreover, the rule does not construe tort law, but rather clarifies standards for liability under this part, based on traditional principles of tort liability. It imposes no new legal obligations or duties of care. In addition, the introductory portion of this preamble describes the grounds for Chevron deference. Issue: Some commenters disagreed with HUD’s statement in the preamble to the proposed rule that the rule does not create additional costs for housing providers and others covered by the Fair Housing Act. They stated that the proposed rule would lead to increased costs for and litigation against housing providers. Among the other costs cited by commenters are costs for compliance and training, increased insurance premiums, and increased liability because many housing providers would not have the ability to remain diligent to address all harassment claims, leaving them vulnerable to litigation. Another commenter said that the proposed rule creates the possibility for substantial judgments for money damages that PHAs have little ability to pay, because they may not use federal funds to pay judgments for damages. HUD Response: As noted throughout this preamble, this final rule does not impose any new or enhanced liabilities. Rather, it clarifies existing law under the Fair Housing Act and well42 Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). 43 42 U.S.C. 3608(a), 3610, 3615. VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 established common law tort and agency principles as they apply under the Act. The rule does not change substantive obligations, but merely formalizes them in a regulation. Because the standards articulated in the rule are already law, the risks of liability and costs of complying will not increase with issuance of the rule. HUD presumes that the vast majority of housing providers are in compliance with the law. Any costs incurred by housing providers to come into compliance as a result of this rulemaking will simply be the costs of compliance with a preexisting statute, administrative practice, and case law. In fact, by formalizing uniform standards for investigations and adjudications under the Fair Housing Act, the rule serves to reduce costs for housing providers by establishing greater clarity with respect to how a determination of liability is to be made. V. Findings and Certifications Regulatory Review—Executive Orders 12866 and 13563 Under Executive Order 12866 (Regulatory Planning and Review), a determination must be made whether a regulatory action is significant and therefore, subject to review by the Office of Management and Budget (OMB) in accordance with the requirements of the order. Executive Order 13563 (Improving Regulations and Regulatory Review) directs executive agencies to analyze regulations that are ‘‘outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned.’’ Executive Order 13563 also directs that, where relevant, feasible, and consistent with regulatory objectives, and to the extent permitted by law, agencies are to identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public. This rule was determined to be a ‘‘significant regulatory action’’ as defined in section 3(f) of Executive Order (although not an economically significant regulatory action, as provided under section 3(f)(1) of the Executive Order). This rule establishes uniform standards for use in investigations and processing cases involving harassment and liability under the Fair Housing Act. In establishing such standards, HUD is exercising its rulemaking authority to bring uniformity, clarity, and certainty to an area of legal practice. The docket file for this rule is available for public inspection between the hours of 8 a.m. and 5 p.m. weekdays PO 00000 Frm 00023 Fmt 4700 Sfmt 4700 63073 in the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, Room 10276, 451 7th Street SW., Washington, DC 20410–0500. Due to security measures at the HUD Headquarters building, please schedule an appointment to review the docket file by calling the Regulations Division at 202– 708–3055 (this is not a toll-free number). Persons with hearing or speech impairments may access the above telephone number via TTY by calling the toll-free Federal Relay Service at 800–877–8339. Environmental Impact This rule does not direct, provide for assistance or loan and mortgage insurance for, or otherwise govern or regulate, real property acquisition, disposition, leasing, rehabilitation, alteration, demolition or new construction, or establish, revise, or provide for standards for construction or construction materials, manufactured housing, or occupancy. This rule is limited to the procedures governing fair housing enforcement. Accordingly, under 24 CFR 50.19(c)(3), this rule is categorically excluded from environmental review under the National Environmental Policy Act (42 U.S.C. 4321). Regulatory Flexibility Act The Regulatory Flexibility Act (5 U.S.C. 4321, et seq.) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. The rule establishes standards for evaluating claims of harassment and liability under the Fair Housing Act. The scope of the rule is procedural, and the regulatory changes do not establish any substantive regulatory burdens on small entities. Accordingly, the undersigned certifies that this rule will not have a significant economic impact on a substantial number of small entities. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531– 1538) (UMRA) establishes requirements for federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments and the private sector. This rule does not impose any federal mandates on any state, local, or tribal governments or the private sector within the meaning of UMRA. E:\FR\FM\14SER1.SGM 14SER1 63074 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations Executive Order 13132, Federalism Executive Order 13132 (entitled ‘‘Federalism’’) prohibits an agency from publishing any rule that has federalism implications if the rule either (1) imposes substantial, direct compliance costs on state and local governments, and is not required by statute, or (2) preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive Order. Catalogue of Federal Domestic Assistance The Catalogue of Federal Domestic Assistance Number for the equal opportunity in housing program is 14.400. § 100.60 Unlawful refusal to sell or rent or to negotiate for the sale or rental. * List of Subjects in 24 CFR Part 100 Aged, Fair housing, Individuals with disabilities, Mortgages, Reporting and recordkeeping requirements. Accordingly, for the reasons stated in the preamble, and in accordance with HUD’s authority in 42 U.S.C. 3535(d), HUD amends 24 CFR part 100 as follows: PART 100—DISCRIMINATORY CONDUCT UNDER THE FAIR HOUSING ACT 1. The authority citation for 24 CFR part 100 continues to read as follows: ■ Authority: 42 U.S.C. 3535(d), 3600–3620. ■ 2. Add § 100.7 to read as follows: asabaliauskas on DSK3SPTVN1PROD with RULES § 100.7 Liability for discriminatory housing practices. (a) Direct liability. (1) A person is directly liable for: (i) The person’s own conduct that results in a discriminatory housing practice. (ii) Failing to take prompt action to correct and end a discriminatory housing practice by that person’s employee or agent, where the person knew or should have known of the discriminatory conduct. (iii) Failing to take prompt action to correct and end a discriminatory housing practice by a third-party, where the person knew or should have known of the discriminatory conduct and had the power to correct it. The power to take prompt action to correct and end a discriminatory housing practice by a third-party depends upon the extent of the person’s control or any other legal VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 responsibility the person may have with respect to the conduct of such thirdparty. (2) For purposes of determining liability under paragraphs (a)(1)(ii) and (iii) of this section, prompt action to correct and end the discriminatory housing practice may not include any action that penalizes or harms the aggrieved person, such as eviction of the aggrieved person. (b) Vicarious liability. A person is 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. ■ 3. In § 100.60, add paragraphs (b)(6) and (7) to read as follows: * * * * (b) * * * (6) Conditioning the availability of a dwelling, including the price, qualification criteria, or standards or procedures for securing the dwelling, on a person’s response to harassment because of race, color, religion, sex, handicap, familial status, or national origin. (7) Subjecting a person to harassment because of race, color, religion, sex, handicap, familial status, or national origin that causes the person to vacate a dwelling or abandon efforts to secure the dwelling. ■ 4. In § 100.65, add paragraphs (b)(6) and (7) to read as follows: § 100.65 Discrimination in terms, conditions and privileges and in services and facilities. * * * * * (b) * * * (6) Conditioning the terms, conditions, or privileges relating to the sale or rental of a dwelling, or denying or limiting the services or facilities in connection therewith, on a person’s response to harassment because of race, color, religion, sex, handicap, familial status, or national origin. (7) Subjecting a person to harassment because of race, color, religion, sex, handicap, familial status, or national origin that has the effect of imposing different terms, conditions, or privileges relating to the sale or rental of a dwelling or denying or limiting services or facilities in connection with the sale or rental of a dwelling. ■ 5. In § 100.80, add paragraph (b)(6) to read as follows: PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 § 100.80 Discriminatory representation on the availability of dwellings. * * * * * (b) * * * (6) Representing to an applicant that a unit is unavailable because of the applicant’s response to a request for a sexual favor or other harassment because of race, color, religion, sex, handicap, familial status, or national origin. ■ 6. In § 100.90, add paragraphs (b)(5) and (6) to read as follows: § 100.90 Discrimination in the provision of brokerage services. * * * * * (b) * * * (5) Conditioning access to brokerage services on a person’s response to harassment because of race, color, religion, sex, handicap, familial status, or national origin. (6) Subjecting a person to harassment because of race, color, religion, sex, handicap, familial status, or national origin that has the effect of discouraging or denying access to brokerage services. ■ 7. In § 100.120, add paragraphs (b)(3) and (4) to read as follows: § 100.120 Discrimination in the making of loans and in the provision of other financial assistance. * * * * * (b) * * * (3) Conditioning the availability of a loan or other financial assistance on a person’s response to harassment because of race, color, religion, sex, handicap, familial status, or national origin. (4) Subjecting a person to harassment because of race, color, religion, sex, handicap, familial status, or national origin that affects the availability of a loan or other financial assistance. ■ 8. In § 100.130, add paragraphs (b)(4) and (5) to read as follows: § 100.130 Discrimination in the terms and conditions for making available loans or other financial assistance. * * * * * (b) * * * (4) Conditioning an aspect of a loan or other financial assistance to be provided with respect to a dwelling, or the terms or conditions thereof, on a person’s response to harassment because of race, color, religion, sex, handicap, familial status, or national origin. (5) Subjecting a person to harassment because of race, color, religion, sex, handicap, familial status, or national origin that has the effect of imposing different terms or conditions for the availability of such loans or other financial assistance. E:\FR\FM\14SER1.SGM 14SER1 Federal Register / Vol. 81, No. 178 / Wednesday, September 14, 2016 / Rules and Regulations 9. In § 100.135, revise paragraph (d) to read as follows: ■ § 100.135 Unlawful practices in the selling, brokering, or appraising of residential real property. * * * * * (d) Practices which are unlawful under this section include, but are not limited to: (1) Using an appraisal of residential real property in connection with the sale, rental, or financing of any dwelling where the person knows or reasonably should know that the appraisal improperly takes into consideration race, color, religion, sex, handicap, familial status, or national origin. (2) Conditioning the terms of an appraisal of residential real property in connection with the sale, rental, or financing of a dwelling on a person’s response to harassment because of race, color, religion, sex, handicap, familial status, or national origin. ■ 10. In § 100.400, add paragraph (c)(6) to read as follows: § 100.400 Prohibited interference, coercion or intimidation. * * * * * (c) * * * (6) Retaliating against any person because that person reported a discriminatory housing practice to a housing provider or other authority. ■ 11. Add subpart H, consisting of § 100.600, to read as follows: Subpart H— Quid Pro Quo and Hostile Environment Harassment asabaliauskas on DSK3SPTVN1PROD with RULES § 100.600 Quid pro quo and hostile environment harassment. (a) General. Quid pro quo and hostile environment harassment because of race, color, religion, sex, familial status, national origin or handicap may violate sections 804, 805, 806 or 818 of the Act, depending on the conduct. The same conduct may violate one or more of these provisions. (1) Quid pro quo harassment. Quid pro quo harassment refers to an unwelcome request or demand to engage in conduct where submission to the request or demand, either explicitly or implicitly, is made a condition related to: The sale, rental or availability of a dwelling; the terms, conditions, or privileges of the sale or rental, or the provision of services or facilities in connection therewith; or the availability, terms, or conditions of a residential real estate-related transaction. An unwelcome request or demand may constitute quid pro quo harassment even if a person acquiesces in the unwelcome request or demand. VerDate Sep<11>2014 20:49 Sep 13, 2016 Jkt 238001 (2) Hostile environment harassment. Hostile environment harassment refers to unwelcome conduct that is sufficiently severe or pervasive as to interfere with: The availability, sale, rental, or use or enjoyment of a dwelling; the terms, conditions, or privileges of the sale or rental, or the provision or enjoyment of services or facilities in connection therewith; or the availability, terms, or conditions of a residential real estate-related transaction. Hostile environment harassment does not require a change in the economic benefits, terms, or conditions of the dwelling or housingrelated services or facilities, or of the residential real-estate transaction. (i) Totality of the circumstances. Whether hostile environment harassment exists depends upon the totality of the circumstances. (A) Factors to be considered to determine whether hostile environment harassment exists include, but are not limited to, the nature of the conduct, the context in which the incident(s) occurred, the severity, scope, frequency, duration, and location of the conduct, and the relationships of the persons involved. (B) Neither psychological nor physical harm must be demonstrated to prove that a hostile environment exists. Evidence of psychological or physical harm may, however, be relevant in determining whether a hostile environment existed and, if so, the amount of damages to which an aggrieved person may be entitled. (C) Whether unwelcome conduct is sufficiently severe or pervasive as to create a hostile environment is evaluated from the perspective of a reasonable person in the aggrieved person’s position. (ii) Title VII affirmative defense. The affirmative defense to an employer’s vicarious liability for hostile environment harassment by a supervisor under Title VII of the Civil Rights Act of 1964 does not apply to cases brought pursuant to the Fair Housing Act. (b) Type of conduct. Harassment can be written, verbal, or other conduct, and does not require physical contact. (c) Number of incidents. A single incident of harassment because of race, color, religion, sex, familial status, national origin, or handicap may constitute a discriminatory housing practice, where the incident is sufficiently severe to create a hostile environment, or evidences a quid pro quo. PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 63075 Dated: August 18, 2016. Gustavo Velasquez, Assistant Secretary for Fair Housing and Equal Opportunity. [FR Doc. 2016–21868 Filed 9–13–16; 8:45 am] BILLING CODE 4210–67–P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Parts 100 and 165 [Docket Number USCG–2015–0854] RIN 1625–AA00, AA08 Special Local Regulations and Safety Zones; Recurring Marine Events and Fireworks Displays Within the Fifth Coast Guard District Coast Guard, DHS. Final rule. AGENCY: ACTION: The Coast Guard is issuing a final rule that revises the list of special local regulations and safety zones established for recurring marine events and fireworks displays that take place within the Fifth Coast Guard District area of responsibility. This rule revises the listing of events that informs the public of regularly scheduled marine parades, regattas, other organized water events, and fireworks displays that require additional safety measures provided by regulations. Under this rule, the list of recurring marine events requiring special local regulations or safety zones is updated with revisions, additional events, and removal of events that no longer take place in the Fifth Coast Guard District. When these regulations are enforced, certain restrictions are placed on marine traffic in specified areas. This rulemaking project promotes efficiency by eliminating the need to produce a separate rule for each individual recurring event, and serves to provide notice of the known recurring events requiring a special local regulation or safety zone throughout the year. DATES: This rule is effective October 14, 2016. ADDRESSES: To view documents mentioned in this preamble as being available in the docket, go to http:// www.regulations.gov, type USCG–2015– 0854 in the ‘‘SEARCH’’ box and click ‘‘SEARCH’’. Click on Open Docket Folder on the line associated with this rule. FOR FURTHER INFORMATION CONTACT: If you have questions about this rulemaking, call or email Dennis Sens, SUMMARY: E:\FR\FM\14SER1.SGM 14SER1

Agencies

[Federal Register Volume 81, Number 178 (Wednesday, September 14, 2016)]
[Rules and Regulations]
[Pages 63054-63075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-21868]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 100

[Docket No. FR-5248-F-02]
RIN 2529-AA94


Quid Pro Quo and Hostile Environment Harassment and Liability for 
Discriminatory Housing Practices Under the Fair Housing Act

AGENCY: Office of the Assistant Secretary for Fair Housing and Equal 
Opportunity, HUD.

ACTION: Final rule.

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SUMMARY: This final rule amends HUD's fair housing regulations to 
formalize standards for use in investigations and adjudications 
involving allegations of harassment on the basis of race, color, 
religion, national origin, sex, familial status, or disability. The 
rule specifies how HUD will evaluate complaints of quid pro quo (``this 
for that'') harassment and hostile environment harassment under the 
Fair Housing Act. It will also provide for uniform treatment of Fair 
Housing Act claims raising allegations of quid pro quo and hostile 
environment harassment in judicial and administrative forums. This rule 
defines ``quid pro quo'' and ``hostile environment harassment,'' as 
prohibited under the Fair Housing Act, and provides illustrations of 
discriminatory housing practices that constitute such harassment. In 
addition, this rule clarifies the operation of traditional principles 
of direct and vicarious liability in the Fair Housing Act context.

DATES: Effective date: October 14, 2016.

FOR FURTHER INFORMATION CONTACT: Lynn Grosso, Acting Deputy Assistant 
Secretary for Enforcement and Programs, Office of Fair Housing and 
Equal Opportunity, Department of Housing and Urban Development, 451 7th 
Street SW., Room 5204, Washington DC 20410-2000; telephone number 202-
402-5361 (this is not a toll-free number). Persons with hearing or 
speech impairments may contact this number via TTY by calling the toll-
free Federal Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Executive Summary

A. Purpose of the Regulatory Action

    Both HUD and the courts have long recognized that Title VIII of the 
Civil Rights Act of 1968, as amended, (42 U.S.C. 3601 et seq.) (Fair 
Housing Act or Act) prohibits harassment in housing and housing-related 
transactions because of race, color, religion, sex, national origin, 
disability,\1\ and familial status, just as Title VII of the Civil 
Rights Act of 1964 (42 U.S.C. 2000e et seq.) (Title VII) prohibits such 
harassment in employment. But no standards had been formalized for 
assessing claims of harassment under the Fair Housing Act. Courts have 
often applied standards first adopted under Title VII to evaluate 
claims of harassment under the Fair Housing Act, but there are 
differences between the Fair Housing Act and Title VII, and between 
harassment in the workplace and harassment in or around one's home, 
that warrant this rulemaking.
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    \1\ This rule uses the term ``disability'' to refer to what the 
Fair Housing Act and its implementing regulations refer to as 
``handicap.'' Both terms have the same legal meaning. See Bragdon v. 
Abbott, 524 U.S. 624, 631 (1998).
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    This rule formalizes standards for evaluating claims of quid pro 
quo and hostile environment harassment in the housing context. The rule 
does so by defining ``quid pro quo harassment'' and ``hostile 
environment harassment'' as conduct prohibited under the Fair Housing 
Act, and by specifying the standards to be used to evaluate whether 
particular conduct creates a quid pro quo or hostile environment in 
violation of the Act. Such standards will apply both in administrative 
adjudications and in cases brought in federal and state courts under 
the Fair Housing Act. This rule also adds to HUD's existing Fair 
Housing Act regulations illustrations of discriminatory housing 
practices that may constitute illegal quid pro quo and hostile 
environment harassment.
    By establishing consistent standards for evaluating claims of quid 
pro quo and hostile environment harassment, this rule provides guidance 
to providers of housing or housing-related services seeking to ensure 
that their properties or businesses are free of unlawful harassment. 
The rule also provides clarity to victims of harassment and their 
representatives regarding how to assess potential claims of illegal 
harassment under the Fair Housing Act.
    In addition, this final rule clarifies when housing providers and 
other entities or individuals covered by the Fair Housing Act may be 
held directly or vicariously liable under the Act for

[[Page 63055]]

illegal harassment, as well as for other discriminatory housing 
practices that violate the Act. This rule sets forth how these 
traditional liability standards apply in the housing context because, 
in HUD's experience, there has been significant misunderstanding among 
public and private housing providers as to the circumstances under 
which they will be subject to liability under the Fair Housing Act for 
discriminatory housing practices undertaken by others.

B. Legal Authority for the Regulation

    The legal authority for this regulation is found in the Fair 
Housing Act, which gives the Secretary of HUD the ``authority and 
responsibility for administering this Act.'' 42 U.S.C. 3608(a). In 
addition, the Act provides that ``[t]he Secretary may make rules 
(including rules for the collection, maintenance, and analysis of 
appropriate data) to carry out this title. The Secretary shall give 
public notice and opportunity for comment with respect to all rules 
made under this section.'' 42 U.S.C. 3614a. HUD also has general 
rulemaking authority under the Department of Housing and Urban 
Development Act to make such rules and regulations as may be necessary 
to carry out its functions, powers and duties. See 42 U.S.C. 3535(d).

C. Summary of Major Provisions

    The major provisions of this rule:
     Formalize definitions of ``quid pro quo harassment'' and 
``hostile environment harassment'' under the Fair Housing Act.
     Formalize standards for evaluating claims of quid pro quo 
and hostile environment harassment under the Fair Housing Act.
     Add illustrations of prohibited quid pro quo and hostile 
environment harassment to HUD's existing Fair Housing Act regulations.
     Identify traditional principles of direct and vicarious 
liability applicable to all discriminatory housing practices under the 
Fair Housing Act, including quid pro quo and hostile environment 
harassment.
    Please refer to section III of this preamble, entitled ``This Final 
Rule,'' for a discussion of the changes made to HUD's regulations by 
this final rule.

D. Costs and Benefits

    This rule formalizes clear, consistent, nationwide standards for 
evaluating harassment claims under the Fair Housing Act. The rule does 
not create any new forms of liability under the Fair Housing Act and 
thus adds no additional costs for housing providers and others engaged 
in housing transactions.
    The benefits of the rule are that it will assist in ensuring 
compliance with the Fair Housing Act by defining quid pro quo and 
hostile environment harassment that violates the Act and by specifying 
traditional principles of direct and vicarious liability, consistent 
with Supreme Court precedent. Articulating clear standards enables 
entities subject to the Fair Housing Act's prohibitions and persons 
protected by its terms to understand the types of conduct that 
constitute actionable quid pro quo and hostile environment harassment. 
As a result, HUD expects this rule to facilitate more effective 
training to avoid discriminatory harassment in housing and decrease the 
need for protracted litigation to resolve disputed claims.

II. Background

    Title VIII of the Civil Rights Act of 1968, as amended (the Fair 
Housing Act or Act), prohibits discrimination in the availability and 
enjoyment of housing and housing-related services, facilities, and 
transactions because of race, color, national origin, religion, sex, 
disability, and familial status. 42 U.S.C. 3601-19. The Act prohibits a 
wide range of discriminatory housing and housing-related practices, 
including, among other things, making discriminatory statements, 
refusing to rent or sell, denying access to services, setting different 
terms or conditions, refusing to make reasonable modifications or 
accommodations, discriminating in residential real estate-related 
transactions, and retaliating. See 42 U.S.C. 3604, 3605, 3606 and 3617.
    In 1989, HUD promulgated fair housing regulations at 24 CFR part 
100 that address discriminatory conduct in housing generally. The 1989 
regulations include examples of discriminatory housing practices that 
cover quid pro quo sexual harassment and hostile environment harassment 
generally. Section 100.65(b)(5) identifies, as an example of unlawful 
conduct, denying or limiting housing-related services or facilities 
because a person refused to provide sexual favors. Section 
100.400(c)(2) offers as an example of illegal conduct ``. . . 
interfering with persons in their enjoyment of a dwelling because of 
race, color, religion, sex, handicap, familial status, or national 
origin of such persons, or of visitors or associates of such persons.'' 
The 1989 regulations do not, however, expressly define quid pro quo or 
hostile environment harassment, specify standards for examining such 
claims, or provide illustrations of other types of quid pro quo or 
hostile environment harassment prohibited by the Act. The 1989 
regulations also do not discuss liability standards for prohibited 
harassment or other discriminatory housing practices.
    Over time, forms of harassment that violate civil rights laws have 
coalesced into two legal doctrines--quid pro quo and hostile 
environment. Although HUD and the courts have recognized that the Fair 
Housing Act prohibits harassment because of race or color,\2\ 
disability,\3\ religion,\4\ national origin,\5\ familial status,\6\ and 
sex,\7\ the doctrines of quid pro quo and hostile environment 
harassment are not well developed under the Fair Housing Act.
---------------------------------------------------------------------------

    \2\ See, e.g., Smith v. Mission Assoc. Ltd. P'ship, 225 F. Supp. 
2d 1293, 1298-99 (D. Kan. 2002) (42 U.S.C. 3604(b)); HUD v. Tucker, 
2002 ALJ LEXIS 33, *3-4 (HUD ALJ 2002) (42 U.S.C. 3604(a) and (b)).
    \3\ See, e.g., Neudecker v. Boisclair Corp., 351 F. 3d 361, 364 
(8th Cir. 2003) (42 U.S.C. 3604(f)(2)).
    \4\ See, e.g., Bloch v. Frischholz, 587 F. 3d 771, 787 (7th Cir. 
2009) (42 U.S.C. 3604(b), 3617).
    \5\ See, e.g., Effendi v. Amber Fields Homeowners Assoc., 2011 
U.S. Dist. Lexis 35265, *1 (N.D. Ill. 2011) (42 U.S.C. 3604(b) and 
3617); Texas v. Crest Asset Mgmt., 85 F. Supp. 722, 736 (S.D. TX 
2000) (42 U.S.C. 3604(a) and (b), 3617).
    \6\ See, e.g., Bischoff v. Brittain, 2014 U.S. Dist. LEXIS 
145945, *13-14, *17 (E.D. Cal. 2014) (3604(b)); United States v. M. 
Westland Co., 1995 U.S. Dist. LEXIS 22466, *4 (C.D. Cal. 1995) (Fair 
Housing Act provision not specified).
    \7\ See, e.g., Quigley v. Winter, 598 F. 3d 938, 946 (8th Cir. 
2010) (42 U.S.C. 804(b), 3617); Krueger v. Cuomo, 115 F. 3d 487, 491 
(7th Cir. 1997) (42 U.S.C. 3604(b), 3617); Honce v. Vigil, 1 F. 3d 
1085, 1088 (10th Cir. 1993) (42 U.S.C. 3604(b)); Shellhammer v. 
Lewallen, 770 F. 2d 167 (6th Cir. 1985) (sexual harassment under the 
Fair Housing Act in general).
---------------------------------------------------------------------------

    As a result, when deciding harassment cases under the Fair Housing 
Act, courts have often looked to case law decided under Title VII, 
which prohibits employment discrimination because of race, color, 
religion, sex, and national origin.\8\ But the home and the workplace 
are significantly different environments such that strict reliance on 
Title VII case law is not always appropriate. One's home is a place of 
privacy, security, and refuge (or should be), and harassment that 
occurs in or around one's home can be far more intrusive, violative and 
threatening than harassment in the more public environment of one's 
work place.\9\ Consistent with this reality, the

[[Page 63056]]

Supreme Court has recognized that individuals have heightened 
expectations of privacy within the home.\10\
---------------------------------------------------------------------------

    \8\ See, e.g., Honce v. Vigil, 1 F. 3d at 1088; Shellhammer v. 
Lewallen, 770 F. 2d 167; Glover v. Jones, 522 F. Supp. 2d 496, 503 
(W.D.N.Y. 2007); Beliveau v. Caras, 873 F. Supp. 1393, 1396 (C.D. 
Cal. 1995); see also Neudecker v. Boisclair Corp., 351 F. 3d at 364 
(applying Title VII concepts to find hostile environment based on 
disability violated Act). Unlike Title VII, the Act also includes 
disability and familial status among its protected characteristics.
    \9\ See, e.g., Quigley v. Winter, 598 F. 3d at 947 (emphasizing 
that defendant's harassing conduct was made ``even more egregious'' 
by the fact that it occurred in plaintiff's home, ``a place where 
[she] was entitled to feel safe and secure and need not flee.''); 
Salisbury v. Hickman, 974 F. Supp. 2d 1282, 1292 (E.D. Cal. 2013) 
(``[c]ourts have recognized that harassment in one's own home is 
particularly egregious and is a factor that must be considered in 
determining the seriousness of the alleged harassment''); Williams 
v. Poretsky Management, 955 F. Supp. 490, 498 (D. Md. 1996) (noting 
sexual harassment in the home more severe than in workplace); 
Beliveau v. Caras, 873 F. Supp. at 1398 (describing home as place 
where one should be safe and not vulnerable to sexual harassment); 
D. Benjamin Barros, Home As a Legal Concept, 46 Santa Clara L. Rev. 
255, 277-82 (2006) (discussing legal concept of home as source of 
security, liberty and privacy which justifies favored legal status 
in many circumstances); Nicole A. Forkenbrock Lindemyer, Article, 
Sexual Harassment on the Second Shift: The Misfit Application of 
Title VII Employment Standards to Title VIII Housing Cases, 18 Law & 
Ineq. 351, 368-80 (2000) (noting that transporting of Title VII 
workplace standards for sexual harassment into Fair Housing Act 
cases of residential sexual harassment ignores important 
distinctions between the two settings); Michelle Adams, Knowing Your 
Place: Theorizing Sexual Harassment at Home, 40 Ariz. L. Rev. 17, 
21-28 (1998) (describing destabilizing effect of sexual harassment 
in the home).
    \10\ See, e.g. Frisby v. Schultz, 487 U.S. 474, 484 (1988) 
(``[w]e have repeatedly held that individuals are not required to 
welcome unwanted speech into their own homes and that the government 
may protect this freedom'').
---------------------------------------------------------------------------

    This rule therefore formalizes standards to address harassment in 
and around one's home and identifies some of the differences between 
harassment in the home and harassment in the workplace. While Title VII 
and Fair Housing Act case law contain many similar concepts, this 
regulation describes the appropriate analytical framework for 
harassment claims under the Fair Housing Act.
    The rule addresses only quid pro quo and hostile environment 
harassment, and not conduct generically referred to as harassment that, 
for different reasons, may violate section 818 or other provisions of 
the Fair Housing Act. For example, a racially hostile statement by a 
housing provider could indicate a discriminatory preference in 
violation of section 804(c) of the Act, or it could evidence intent to 
deny housing or discriminate in the terms or conditions of housing in 
violation of sections 804(a) or 804(b), even if the statement does not 
create a hostile environment or establish a quid pro quo. Section 818, 
which makes it unlawful to ``coerce, intimidate, threaten, or interfere 
with any person in the exercise or enjoyment of'' rights protected by 
the Act, or on account of a person having aided others in exercising or 
enjoying rights protected by the Act, could be violated by conduct that 
creates a quid pro quo or hostile environment. It is not, however, 
limited to quid pro quo or hostile environment claims and could be 
violated by other conduct that constitutes retaliation or another form 
of coercion, intimidation, threats, or interference because of a 
protected characteristic. In sum, this rule provides standards that are 
uniformly applicable to claims of quid pro quo and hostile environment 
harassment under the Fair Housing Act, regardless of the section of the 
Act that is alleged to have been violated, and the same discriminatory 
conduct could violate more than one provision of the Act whether or not 
it also constitutes quid pro quo or hostile environment harassment.

III. Changes Made at the Final Rule Stage

A. Overview of Changes Made at the Final Rule Stage

    In response to public comment and upon further consideration by HUD 
of the issues presented in this rulemaking, HUD makes the following 
changes at this final rule stage:
     Re-words proposed Sec.  100.7(a)(1)(iii) to avoid 
confusing the substantive obligation to comply with the Fair Housing 
Act with the standard of liability for discriminatory third-party 
conduct. Proposed Sec.  100.7(a)(1)(iii) stated that a person is 
directly liable for ``failing to fulfill a duty to take prompt action 
to correct and end a discriminatory housing practice by a third-party, 
where the person knew or should have known of the discriminatory 
conduct. The duty to take prompt action to correct and end a 
discriminatory housing practice by a third-party derives from an 
obligation to the aggrieved person created by contract or lease 
(including bylaws or other rules of a homeowner's association, 
condominium or cooperative), or by federal, state or local law.'' 
Section 100.7(a)(1)(iii) of this final rule provides that a person is 
directly liable for ``failing to take prompt action to correct and end 
a discriminatory housing practice by a third-party, where the person 
knew or should have known of the discriminatory conduct and had the 
power to correct it. The power to take prompt action to correct a 
discriminatory housing practice by a third-party depends upon the 
extent of control or any other legal responsibility the person may have 
with respect to the conduct of such third-party.''
     Adds to Sec.  100.400 a new paragraph (c)(6) specifying as 
an example of a discriminatory housing practice retaliation because a 
person reported a discriminatory housing practice, including quid pro 
quo or hostile environment harassment.
     Adds to Sec.  100.600(a)(2)(i), ``Totality of the 
circumstances,'' a new paragraph (C) that explains the reasonable 
person standard under which hostile environment harassment is assessed 
``Whether unwelcome conduct is sufficiently severe or pervasive as to 
create a hostile environment is evaluated from the perspective of a 
reasonable person in the aggrieved person's position.''
     Re-words proposed Sec.  100.600(a)(2)(i)(B) to clarify 
that proof of hostile environment would not require demonstrating 
psychological or physical harm to avoid any confusion on that point. 
Proposed Sec.  100.600(a)(2)(i)(B) stated ``Evidence of psychological 
or physical harm is relevant in determining whether a hostile 
environment was created, as well as the amount of damages to which an 
aggrieved person may be entitled. Neither psychological nor physical 
harm, however, must be demonstrated to prove that a hostile environment 
exists.'' Section 100.600(a)(2)(i)(B) in this final rule provides: 
``Neither psychological nor physical harm must be demonstrated to prove 
that a hostile environment exists. Evidence of psychological or 
physical harm may, however, be relevant in determining whether a 
hostile environment existed and, if so, the amount of damages to which 
an aggrieved person may be entitled.''
     Re-words proposed Sec.  100.600(c) to clarify that a 
single incident may constitute either quid pro quo or hostile 
environment harassment if the incident meets the standard for either 
type of harassment under Sec.  100.600(a)(1) or (a)(2). Proposed Sec.  
100.600(c) provided ``A single incident of harassment because of race, 
color, religion, sex, familial status, national origin, or handicap may 
constitute a discriminatory housing practice, where the incident is 
severe, or evidences a quid pro quo.'' Section 100.600(c) in this final 
rule provides ``A single incident of harassment because of race, color, 
religion, sex, familial status, national origin, or handicap may 
constitute a discriminatory housing practice, where the incident is 
sufficiently severe to create a hostile environment, or evidences a 
quid pro quo.''
     Corrects the illustration in proposed Sec.  100.65(b)(7) 
to fix a typographical error in the proposed rule. In the final rule, 
the word ``service'' is corrected and made plural.

[[Page 63057]]

IV. The Public Comments

    On October 21, 2015, at 80 FR 63720, HUD published for public 
comment a proposed rule on Quid Pro Quo and Hostile Environment 
Harassment and Liability for Discriminatory Housing Practices Under the 
Fair Housing Act. The public comment period closed on December 21, 
2015. HUD received 63 comments. The comments were submitted by public 
housing agencies (PHAs) and other government agencies; private housing 
providers and their representatives; nonprofit organizations, including 
fair housing, civil rights, housing advocacy, and legal groups; tenants 
and other individuals. This section of the preamble addresses 
significant issues raised in the public comments and provides HUD's 
responses. All public comments can be viewed at: http://www.regulations.gov/#!docketDetail;D=HUD-2015-0095.
    The majority of the commenters were generally supportive of the 
rule, with some urging HUD to publish the rule quickly. This summary 
does not provide responses to comments that expressed support for the 
proposed rule without suggesting any modifications to the rule. General 
supportive comments included statements of the importance of the rule 
in addressing and preventing sexual assault of tenants by landlords and 
descriptions of how the rule would empower housing providers, renters, 
and other consumers to understand and avoid illegal housing practices 
by defining and illustrating quid pro quo and hostile environment 
harassment. Some commenters stated that this rule may help providers 
focus on the importance of eliminating harassment on their properties, 
and some commenters identified provisions of the rule that would 
provide useful guidance to housing providers, tenants, residents, and 
others involved in housing transactions.
    More specifically, commenters expressed appreciation that the rule 
would apply not solely to sexual harassment but to harassment because 
of all protected characteristics, with some commenters sharing 
anecdotes of harassment based on a variety of protected characteristics 
that they believe the rule may help remedy. Other commenters supported 
the proposed rule's distinction between the Fair Housing Act and Title 
VII, with commenters endorsing the Department's proposal not to adopt 
the Title VII affirmative defense to an employer's vicarious liability.
    A number of commenters assessed the rule to be in accord with case 
law, and approved of the balance the rule strikes between the rights 
and obligations of the parties in a fair housing matter. Some 
commenters noted that the proposed standard for determining whether 
conduct constitutes a hostile environment is appropriately 
individualized to the facts of each case. Some commenters specifically 
identified the benefits provided by the rule in establishing a uniform 
framework for fairly evaluating and appropriately responding to alleged 
harassment, which minimizes the subjective nature of adjudicating such 
claims. Other commenters expressed appreciation for the proposed rule's 
recognition that a single incident may establish hostile environment 
harassment. Some commenters expressed support for the rule's 
acknowledgement of the fear of retaliation many individuals with 
disabilities experience when trying to address issues of harassment in 
their housing.
    Many commenters stated that the rule's description of traditional 
principles of agency liability is accurate and not an expansion of 
existing liability. Some commenters expressed appreciation that the 
rule would incorporate traditional liability principles for any type of 
discriminatory housing practice, not just harassment, and would rely on 
negligence principles and distinguish between direct and vicarious 
liability. Other commenters stated that the rule would not burden 
housing providers because the direct liability standard is aligned with 
established housing provider business practice. Some commenters 
expressed appreciation that the rule would place landlords on notice 
that they should take corrective action early on, once they know or 
should have known of the discrimination.
    Several commenters stated that housing providers are already in 
possession of the tools they need to create living environments free 
from harassment. In particular, the commenters stated that housing 
providers are familiar with the corrective actions they may take in 
order to enforce their own rules. Another commenter stated that housing 
providers are in the best position to select, train, oversee, and 
assure the correct behavior of their agents, noting that effective 
enforcement of the rule depends on the potential for liability on the 
part of housing providers.
    Some commenters expressed support for the proposed rule while 
seeking modifications at the final rule stage. For example, a commenter 
encouraged broad application of the rule so that intervention and 
corrective action would occur before victims of housing discrimination 
are forced out of their homes. Another commenter sought an expansive 
reading of the rule in order to prevent all forms of bullying. Some 
commenters sought to add factors to the totality of circumstances 
consideration, while other commenters sought to add to the classes 
protected by the rule.
    Following are HUD's responses to commenters' suggested 
modifications to the rule and the other significant issues raised in 
the public comments.

A. Quid Pro Quo and Hostile Environment Harassment: Sec.  100.600

a. General: Sec.  100.600(a)
    Issue: A commenter requested that HUD add seniors as a protected 
class under the rule. Other commenters stated that elderly persons 
often have disabilities, which make them particularly vulnerable to 
harassment. These commenters requested that the final rule make clear 
that the rule protects elderly persons from harassment because of 
disability.
    HUD Response: HUD shares the commenters' concern for elderly 
persons but does not have the authority to add a new protected class to 
the Fair Housing Act and therefore is unable to adopt the commenters' 
recommendation to expand the scope of the rule in this way. Neither age 
nor senior status is a protected characteristic under the Act, although 
persons who are discriminated against because of their disabilities are 
protected under the Act without regard to their age. Therefore, elderly 
individuals who are subjected to quid pro quo or hostile environment 
harassment on the basis of disability or another protected 
characteristic are protected under the Act and this final rule.
    Issue: A commenter suggested that HUD include a clause in the final 
rule to protect whistleblowers who experience harassment for reporting 
quid pro quo or hostile environment harassment. The commenter reported 
having witnessed such harassment and explained that whistleblowers are 
particularly vulnerable to quid pro quo and hostile environment 
harassment, but because they are not harassed on the basis of their 
race, color, religion, national origin, sex, familial status, or 
disability, they are not directly protected by the proposed regulation.
    HUD Response: Anyone who is harassed for reporting discriminatory 
harassment in housing is protected by the Fair Housing Act. Section 818 
of the Act makes it unlawful to coerce, intimidate, threaten, or 
interfere with a person on account of his or her having

[[Page 63058]]

aided or encouraged another person in the exercise or enjoyment of any 
right granted or protected by sections 803-806 of the Act. To highlight 
the essential role whistleblower protection plays in ensuring fair 
housing, HUD is adding to Sec.  100.400 a new paragraph (c)(6), which 
provides the following example of a discriminatory housing practice 
``Retaliating against any person because that person reported a 
discriminatory housing practice to a housing provider or other 
authority.''
    Issue: Several commenters urged HUD to state in the final rule that 
harassment against persons who are lesbian, gay, bisexual, or 
transgender (LGBT), or because of pregnancy, violates the Fair Housing 
Act. They asked HUD to define harassment because of sex to include 
harassment based on sexual orientation, gender identity, sex 
stereotyping, or pregnancy. The commenters referenced studies about the 
pervasive harassment and discrimination such persons face in housing. 
They also noted that a number of federal courts and federal agencies 
have interpreted Title VII and other laws prohibiting discrimination 
because of sex to include discrimination on the basis of gender 
identity, gender transition, or transgender status. The commenters also 
pointed to HUD's ``Equal Access to Housing in HUD Programs Regardless 
of Sexual Orientation or Gender Identity'' rule, which provides that 
persons may not be denied access to HUD programs because of sexual 
orientation or gender identity.
    HUD Response: The Fair Housing Act already expressly prohibits 
discrimination based on pregnancy as part of its prohibition of 
discrimination because of familial status (42 U.S.C. 3602(k)), and 
HUD's Equal Access Rule applies only to HUD programs.
    HUD agrees with the commenters' view that the Fair Housing Act's 
prohibition on sex discrimination prohibits discrimination because of 
gender identity. In Price Waterhouse v. Hopkins, the Supreme Court 
interpreted Title VII's prohibition of sex discrimination to encompass 
discrimination based on non-conformance with sex stereotypes, stating 
that ``[i]n forbidding employers to discriminate against individuals 
because of their sex, Congress intended to strike at the entire 
spectrum of disparate treatment of men and women resulting from sex 
stereotypes.'' \11\ Taking note of Price Waterhouse and its progeny, in 
2010, HUD issued a memorandum recognizing that sex discrimination 
prohibited by the Fair Housing Act includes discrimination because of 
gender identity. In 2012, the Equal Employment Opportunity Commission 
(EEOC) reached the same conclusion, ``clarifying that claims of 
discrimination based on transgender status, also referred to as claims 
of discrimination based on gender identity, are cognizable under Title 
VII's sex discrimination prohibition.'' \12\ Following the EEOC's 
decision, the Attorney General also concluded that:
---------------------------------------------------------------------------

    \11\ 490 U.S. 228, 251 (1989).
    \12\ Macy v. Dept. of Justice, No. 0120120821, 2012 EEOPUB LEXIS 
1181, *13 (EEOC Apr. 20, 2012); see also Lusardi v. Dept. of the 
Army, No. 0120133395, 2015 EEOPUB LEXIS 896, *17 (EEOC Apr. 1, 
2015).

the best reading of Title VII's prohibition of sex discrimination is 
that it encompasses discrimination based on gender identity, 
including transgender status. The most straightforward reading of 
Title VII is that discrimination ``because of . . . sex'' includes 
discrimination because an employee's gender identification is as a 
member of a particular sex, or because the employee is 
transitioning, or has transitioned, to another sex.\13\
---------------------------------------------------------------------------

    \13\ Attorney General Memorandum, Treatment of Transgender 
Employment Discrimination Claims Under Title VII of the Civil Rights 
Act of 1964 (Dec. 15, 2014), posted at http://www.justice.gov/file/188671/download. Similarly, the Office of Personnel Management 
revised its nondiscrimination regulations to make clear that sex 
discrimination under Title VII includes discrimination based on 
gender identity. See 5 CFR 300.102-300.103; see also OFCCP Directive 
2014-02, Gender Identity and Sex Discrimination (Aug. 19, 2014) 
(stating that discrimination based on gender identity or transgender 
status is discrimination based on sex), posted at http://www.dol.gov/ofccp/regs/compliance/directives/Directive_2014-02_508c.pdf.

    HUD reaffirms its view that under the Fair Housing Act, 
discrimination based on gender identity is sex discrimination. 
Accordingly, quid pro quo or hostile environment harassment in housing 
because of a person's gender identity is indistinguishable from 
harassment because of sex.\14\
---------------------------------------------------------------------------

    \14\ See Glenn v. Brumby, 663 F.3d at 1317 (``discrimination 
against a transgender individual because of her gender nonconformity 
is sex discrimination, whether it is described as being on the basis 
of sex or gender.''); see also Finkle v. Howard Cnty, 12 F. Supp. 3d 
780, 788 (D. Md. 2014) (holding that ``Plaintiff's claim that she 
was discriminated against `because of her obvious transgender[] 
status is a cognizable claim of sex discrimination under Title 
VII''); Rumble v. Fairview Health Services, No. 14-cv-2037, 2015 
U.S. Dist. LEXIS 31591, *4-5 (D. Minn. Mar. 16, 2015) (in Affordable 
Care Act case, holding that ``[b]ecause the term `transgender' 
describes people whose gender expression differs from their assigned 
sex at birth, discrimination based on an individual's transgender 
status constitutes discrimination based on gender stereotyping. 
Therefore, Plaintiff's transgender status is necessarily part of his 
`sex' or `gender' identity'').
---------------------------------------------------------------------------

    HUD, in its 2010 memorandum, also advised that claims of housing 
discrimination because of sexual orientation can be investigated under 
the Price Waterhouse sex-stereotyping theory. Over the past two 
decades, an increasing number of Federal courts, building on the Price 
Waterhouse rationale, have found protections under Title VII for those 
asserting discrimination claims related to their sexual 
orientation.\15\ Many Federal-sector EEOC decisions have found the 
same.\16\ Although some Federal

[[Page 63059]]

appellate courts have declined to find sex discrimination under Title 
VII based on the sole fact of the person's sexual orientation, those 
courts nonetheless recognized the Price Waterhouse sex-stereotyping 
theory may be used to find discrimination based on sex.\17\ These Title 
VII legal authorities are consistent with HUD's 2010 memorandum, in 
which HUD interprets the Fair Housing Act's prohibition on sex 
discrimination to include, at a minimum, discrimination related to an 
individual's sexual orientation where the evidence establishes that the 
discrimination is based on sex stereotypes. HUD's interpretation of sex 
discrimination under the Fair Housing Act is also consistent with the 
Department of Health and Human Services' rule interpreting sex 
discrimination under Section 1557 the Affordable Care Act \18\ and the 
Department of Labor's rule interpreting sex discrimination under Title 
VII of the Civil Rights Act of 1964.\19\
---------------------------------------------------------------------------

    \15\ See, e.g., Prowel v. Wise Bus. Forms, Inc., 579 F.3d 285, 
291-92 (3rd Cir. 2009) (harassment of a plaintiff because of his 
``effeminate traits'' and behaviors could constitute sufficient 
evidence that he ``was harassed because he did not conform to [the 
employer's] vision of how a man should look, speak, and act--rather 
than harassment based solely on his sexual orientation''); Nichols 
v. Azteca Rest. Enter., Inc., 256 F.3d 864, 874-75 (9th Cir. 2001) 
(coworkers' and supervisors' harassment of a gay male because he did 
not conform to gender norms created a hostile work environment in 
violation of Title VII); Hall v. BNSF Ry. Co., No. C13-2160 RSM, 
2014 U.S. Dist. LEXIS 132878 *8-9 (W.D. Wash. September 22, 2014) 
(plaintiff's allegation that ``he (as a male who married a male) was 
treated differently in comparison to his female coworkers who also 
married males'' stated a sex discrimination claim under Title VII); 
Terveer v. Billington, 34 F. Supp. 3d 100, 116 (D.D.C. 2014) (Title 
VII claim based on sex stated when plaintiff's ``orientation as 
homosexual'' removed him from the employer's preconceived definition 
of male); Heller v. Columbia Edgewater Country Club, 195 F. Supp. 2d 
1212, 1224 (D. Or. 2002) (``[A] jury could find that Cagle 
repeatedly harassed (and ultimately discharged) Heller because 
Heller did not conform to Cagle's stereotype of how a woman ought to 
behave. Heller is attracted to and dates other women, whereas Cagle 
believes that a woman should be attracted to and date only men.''); 
Centola v. Potter, 183 F. Supp. 2d 403, 410 (D. Mass. 2002) 
(``Sexual orientation harassment is often, if not always, motivated 
by a desire to enforce heterosexually defined gender norms. In fact, 
stereotypes about homosexuality are directly related to our 
stereotype about the proper roles of men and women.''). Cf. Videckis 
v. Pepperdine Univ., 2015 U.S. Dist. LEXIS 167672, *16 (C.D. Cal. 
2015) (``It is impossible to categorically separate `sexual 
orientation discrimination' from discrimination on the basis of sex 
or from gender stereotypes; to do so would result in a false choice. 
Simply put, to allege discrimination on the basis of sexuality is to 
state a Title IX claim on the basis of sex or gender.'').
    \16\ Baldwin v. Dep't of Transp., EEOC Appeal No. 0120133080, 
slip op. at 9-11 (July 16, 2015); Complainant v. Dep't of Homeland 
Sec., EEOC Appeal No. 0120110576, slip op. at 1 (Aug. 20, 2014) 
(``While Title VII's prohibition of discrimination does not 
explicitly include sexual orientation as a basis, Title VII 
prohibits sex discrimination, including sex-stereotyping 
discrimination and gender discrimination'' and ``sex discrimination 
claims may intersect with claims of sexual orientation 
discrimination.''); Couch v. Dep't of Energy, EEOC Appeal No. 
0120131136, slip op. at 1 (Aug. 13, 2013) (finding harassment claim 
based on perceived sexual orientation is a discrimination claim 
based on failure to conform to gender stereotypes); Culp v. Dep't of 
Homeland Sec., EEOC Appeal 0720130012, slip op. at 1 (May 7, 2013) 
(Title VII covers discrimination based on associating with lesbian 
colleague); Castello v. U.S. Postal Serv., EEOC Appeal No. 
0520110649, slip op. at 1 (Dec. 20, 2011) (vacating prior decision 
and holding that complainant stated claim of discrimination based on 
sex-stereotyping through evidence of offensive comments by manager 
about female subordinate's relationships with women); Veretto v. 
U.S. Postal Serv., EEOC Appeal No. 0120110873, slip op. at 1 (July 
1, 2011) (court found that ``Complainant has alleged a plausible 
sex-stereotyping'' claim of harassment because he married a man).
    \17\ See, e.g., Gilbert v. Country Music Ass'n, 432 F. App'x 
516, 520 (6th Cir. 2011) (acknowledging the validity of a sex-
stereotyping claim ``based on gender non-conforming `behavior 
observed at work or affecting . . . job performance,' such as . . . 
`appearance or mannerisms on the job,' '' but rejecting the 
plaintiff's sex discrimination claim because his ``allegations 
involve discrimination based on sexual orientation, nothing more. He 
does not make a single allegation that anyone discriminated against 
him based on his `appearance or mannerisms' or for his `gender non-
conformity.' '') (quoting Vickers v. Fairfield Med. Ctr., 453 F.3d 
757, 763 (6th Cir. 2006); Pagan v. Gonzalez, 430 F. App'x 170, 171-
72 (3d Cir. 2011) (recognizing that ``discrimination based on a 
failure to conform to gender stereotypes is cognizable'' but 
affirming dismissal of the plaintiff's sex discrimination claim 
based on ``the absence of any evidence to show that the 
discrimination was based on Pagan's acting in a masculine manner''); 
Dawson v. Bumble & Bumble, 398 F.3d 211, 221, 222-23 (2d Cir. 2005) 
(observing that ``one can fail to conform to gender stereotypes in 
two ways: (1) Through behavior or (2) through appearance, but 
dismissing the plaintiff's sex discrimination claim because she 
``has produced no substantial evidence from which we may plausibly 
infer that her alleged failure to conform her appearance to feminine 
stereotypes resulted in her suffering any adverse employment 
action''). See also Hively v. Ivy Tech Community College, 2016 U.S. 
App. LEXIS 13746, *16-25 (7th Cir. 2016) (reviewing this line of 
cases).
    \18\ Nondiscrimination in Health Programs and Activities, 81 FR 
31376, 31388-90 (May 18, 2016) (to be codified at 45 CFR part 92).
    \19\ Discrimination Because of Sex, 81 FR 39108, 39137-40 (June 
15, 2016) (to be codified at 41 CFR part 60-20).
---------------------------------------------------------------------------

    Issue: Some commenters asked HUD to provide a definition of 
harassment. A commenter noted that the proposed rule defines two types 
of harassment--quid pro quo and hostile environment, but does not 
define the general term ``harassment.'' Another commenter stated that 
if HUD believes that other types of harassment may also violate the 
Fair Housing Act, HUD should provide a definition of harassment. Other 
commenters strongly supported the rule's definitions of quid pro quo 
and hostile environment harassment, describing them as clear and 
inclusive, and stated that the definitions and related examples 
provided in the rule clarify what conduct the Fair Housing Act 
prohibits and will aid all stakeholders' understanding of the rule's 
provisions.
    HUD Response: The term harassment has broad colloquial usage with 
no defined parameters. For this reason, the final rule defines the 
specific terms ``quid pro quo'' and ``hostile environment harassment.'' 
Other conduct that might generically be referred to as harassment might 
fall in the categories of quid pro quo or hostile environment, or the 
conduct may constitute a different type of discriminatory housing 
practice in violation of section 818 of the Act or other provisions of 
the Act, or the conduct may not violate the Act at all. As the preamble 
to the proposed rule explained, a violation of section 818 may be 
established using the standards for quid pro quo or hostile environment 
harassment or by the specific elements of a section 818 violation, 
i.e., (1) the plaintiff or complainant exercised or enjoyed--or aided 
or encouraged another person in the exercise or enjoyment of--a right 
guaranteed by sections 803-06; (2) the defendant's or respondent's 
conduct constituted coercion, intimidation, a threat, or interference; 
and (3) a causal connection existed between the exercise, enjoyment, 
aid or encouragement of the right and the defendant's or respondent's 
conduct.
    Issue: Some commenters expressed concern that the proposed rule did 
not expressly state that sections 804(b) and 818 of the Fair Housing 
Act apply to discrimination that occurs after the complainant or 
plaintiff acquires the dwelling. The commenters stated that some courts 
have held that these provisions apply only to discrimination that 
affects access to housing and urged HUD to add language to the rule 
making clear that these particular provisions apply to post-acquisition 
discrimination claims.
    HUD Response: HUD believes that the definitions of ``quid pro quo'' 
and ``hostile environment harassment'' make clear HUD's view that the 
Act covers post-acquisition conduct and therefore no additional 
language is required. These definitions mirror the coverage of sections 
804(b), 804(f)(2), and 818 of the Fair Housing Act, which plainly apply 
to both pre-acquisition and post-acquisition discrimination claims. 
Moreover, HUD has long interpreted and enforced these provisions of the 
Act and others to protect against discrimination that occurs before one 
acquires a dwelling as well as while one is living in the dwelling. 
HUD's 1989 regulations interpreting sections 804(b), 804(f)(2), and 818 
of the Act, for example, provide that discrimination prohibited under 
these provisions includes the ``maintenance or repairs of sale or 
rental dwellings,'' ``[d]enying or limiting the use of privileges, 
services, or facilities associated with a dwelling,'' and threatening, 
intimidating or interfering with persons ``in their enjoyment of a 
dwelling.'' The inclusion of language covering the maintenance of 
housing, the continued use of privileges, services, or facilities 
associated with housing, and the ``exercise or enjoyment'' of housing 
indicates circumstances in which residents--as opposed to just 
applicants--benefit from the Act's protections throughout their 
residency.
    Sections 100.65(b)(6)-(7) of the proposed and of the final rule 
further illustrate some ways in which a person may violate sections 
804(b), 804(f)(2), and 818 of the Fair Housing Act: ``conditioning the 
terms, conditions, or privileges relating to the sale or rental of a 
dwelling, or denying or limiting the services or facilities in 
connection therewith, on a person's response to harassment because of 
[a protected characteristic]; ``subjecting a person to harassment 
because of [a protected characteristic] that has the effect of imposing 
different terms, conditions, or privileges relating to the sale or 
rental of a dwelling or denying or limiting services or facilities in 
connection with the sale or rental of a dwelling.'' In sum, the Act and 
HUD's regulations, including this final rule, make clear that the Act 
prohibits discrimination that occurs while a person resides in a 
dwelling, and courts have repeatedly interpreted the Act similarly.\20\
---------------------------------------------------------------------------

    \20\ See, e.g., Bloch v. Frischholz, 587 F.3d at779-81 (ruling 
that post-sale conduct by a homeowner's association could violate 
section 804(b) of the Act and allowing section 3604(b) claims to 
address post-acquisition conduct was consistent with HUD's 
regulations (citing 24 CFR 100.65(b)(4))); Comm. Concerning Cmty. 
Improvement v. City of Modesto, 583 F.3d 690, 713 (9th Cir. 2009) 
(concluding that the Act covers post-acquisition discrimination); 
Neudecker v. Boisclair Corp., 351 F.3d at 364 (finding plaintiff's 
post-acquisition harassment claim valid under the Act); DiCenso v. 
Cisneros, 96 F.3d 1004, 1008 (7th Cir. 1996) (recognizing claim for 
sexual harassment hostile housing environment under the Act); Honce 
v. Vigil, 1 F.3d at 1089-90 (recognizing that the Act prohibits both 
quid pro quo and hostile housing environment sexual harassment); 
Woods-Drake v. Lundy, 667 F.2d 1198, 1201 (5th Cir. 1982) (finding 
that a landlord's discriminatory conduct against current tenants 
violated section 3604(b) of the Act); Richards v. Bono, No. 
5:04CV484-OC-10GRJ, 2005 WL 1065141, at *3 (M.D. Fla. May 2, 2005) 
(``[b]ecause the plain meaning of `rental' contemplates an ongoing 
relationship, the use of that term in Sec.  3604(b) means that the 
statute prohibits discrimination at any time during the landlord/
tenant relationship, including after the tenant takes possession of 
the property''); United States v. Koch, 352 F. Supp. 2d 970, 976 (D. 
Neb. 2004) (``[I]t is difficult to imagine a privilege that flows 
more naturally from the purchase or rental of a dwelling than the 
privilege of residing therein.''); U.S. Department of Housing and 
Urban Development, Office of Fair Housing and Equal Opportunity, 
Questions and Answers on Sexual Harassment under the Fair Housing 
Act (2008), available at http://portal.hud.gov/hudportal/documents/huddoc?id=QAndASexualHarassment.pdf (recognizing that current 
tenants may file fair housing complaints under the Act); Robert G. 
Schwemm, Fair Housing Litigation After Inclusive Communities: What's 
New and What's Not, 115 Colum. L. Rev. Sidebar 106, 122-23 (2015) 
(explaining that many post-acquisition actions, such as evictions 
and harassment, may give rise to violations under sections 804(a) 
and 804(b) of the Act).

---------------------------------------------------------------------------

[[Page 63060]]

    Issue: Some commenters asked HUD to clarify how to distinguish 
potentially actionable harassment under the Fair Housing Act from 
protected speech under the First Amendment. A commenter said that it is 
not clear how conduct that allegedly constitutes harassment under the 
rule may be distinguished from other speech or conduct that is 
constitutionally protected or so trivial so as not to qualify as 
harassment in the first place. Another commenter said that courts have 
consistently held that the First Amendment protects a tenant who 
publicly speaks about a neighbor, even if that conduct is motivated by 
discriminatory intent. Another commenter asked whether the proposed 
rule would implicate constitutional protections of free speech or free 
exercise of religion if the housing provider evicts a tenant where, for 
example, two tenants are having heated religious arguments about the 
other's choice of religious attire. Another commenter stated that the 
proposed rule properly balanced the competing rights at issue and did 
not interfere with constitutionally protected speech because the rule 
would not encompass speech that is merely offensive or that causes 
nothing more than hurt feelings.
    HUD Response: As discussed elsewhere in this preamble, not every 
dispute between neighbors is a violation of the Fair Housing Act. 
Moreover, speech that is protected by the First Amendment is not within 
the Act's prohibitions. First Amendment protections do not extend to 
certain acts of coercion, intimidation, or threats of bodily harm 
proscribed by section 818 of the Act. As the Supreme Court has stated, 
``true threats'' have no First Amendment protection.\21\ In Notice 
FHEO-2015-01, HUD has set out substantive and procedural guidelines 
regarding the filing and investigation of Fair Housing Act complaints 
that may implicate the First Amendment.\22\ The Notice discusses how 
HUD handles complaints against persons who are not otherwise covered by 
the Act, but who are alleged to have violated Section 818 of the Act.
---------------------------------------------------------------------------

    \21\ See, e.g., R.A.V. v. City of St. Paul, 505 U.S. 377, 388 
(1992).
    \22\ Notice FHEO 2015-01 found at: http://portal.hud.gov/hudportal/documents/huddoc?id=5-26-2015notice.pdf.
---------------------------------------------------------------------------

    Issue: A commenter suggested that the rule is unnecessary because 
other administrative and legal remedies already exist for victims of 
harassment under state and local law. Another commenter suggested that 
the rule is unnecessary because HUD has already charged cases involving 
harassment under the Act.
    HUD Response: This final rule formalizes and provides uniform 
standards for evaluating complaints of quid pro quo and hostile 
environment harassment under the Fair Housing Act. While other 
administrative and legal causes of action may exist for victims of quid 
pro quo and hostile environment harassment under landlord-tenant law, 
tort law, or other state law, they do not substitute for the 
protections against discrimination and the remedies provided under the 
Act. Moreover, the fact that HUD has previously issued charges of 
discrimination involving quid pro quo or hostile environment harassment 
does not negate the need for this rule.
    Issue: A commenter asked HUD to abandon the rulemaking process and 
instead provide specific, clear guidance to the regulated community so 
that housing providers can ascertain the types of behavior that do and 
do not constitute harassment under the Fair Housing Act. Other 
commenters requested that HUD provide technical assistance on various 
aspects of the rule to residents, housing providers, and practitioners 
to ensure all parties know their rights under the law.
    HUD Response: HUD declines to abandon this rulemaking. This 
regulation is needed to formalize standards for assessing claims of 
harassment under the Fair Housing Act and to clarify when housing 
providers and others covered by the Act may be liable for illegal 
harassment or other discriminatory housing practices. It has been HUD's 
experience that there is significant misunderstanding among public and 
private housing providers about the circumstances under which they may 
be liable. This regulation provides greater clarity in making that 
assessment. HUD will continue to offer guidance and training on the 
Fair Housing Act generally and on this final rule, as needed.
    Issue: A commenter recommended that the rule expand the limits for 
damages in cases that establish sexual harassment in housing.
    HUD Response: HUD declines to make this change because it is 
unnecessary. The Act contains no limit on damages that may be awarded, 
specifically authorizing an award of ``actual damages.'' 42 U.S.C. 
3612(g)(3); 3613(c)(1); 3614(d)(1)(B).
    Issue: A commenter asked HUD to consider expanding the time for 
filing sexual harassment complaints where a hostile environment case 
includes subsequent harassment that occurs many months after the 
initial act of sexual harassment.
    HUD Response: HUD declines to adopt this recommendation because the 
Fair Housing Act specifically defines the statute of limitations for 
filing complaints. It is one year after an alleged discriminatory 
housing practice occurred or terminated for a complaint with HUD and 
two years after an alleged discriminatory housing practice occurred or 
terminated for a civil action in federal district court or state court. 
See 42 U.S.C. 3610; 3613. If a violation is continuing, the limitations 
period runs from the date of the last occurrence or termination of the 
discriminatory act.\23\
---------------------------------------------------------------------------

    \23\ See, e.g., Havens Realty Corp. v. Coleman, 455 U.S. 363, 
380-81 (1982); Neudecker v. Boisclair Corp., 351 F.3d at 363 ; Spann 
v. Colonial Vill., Inc., 899 F.2d 24, 34-35 (D.C. Cir. 1990); 
Heights Cmty Congress v. Hilltop Realty, Inc., 774 F.2d 135, 139-41 
(6th Cir. 1985).
---------------------------------------------------------------------------

1. Quid Pro Quo Harassment: Sec.  100.600(a)(1)
    Issue: A commenter asked how the rule would ``differentiate between 
a situation of involuntary quid pro quo that genuinely must be governed 
by the Act and a situation where one party is manipulating the rule 
following a mutually beneficial and agreed upon transaction.''
    HUD Response: The rule's definition of quid pro quo harassment 
requires a request or demand that is ``unwelcome.'' A mutually 
beneficial and agreed upon transaction is not unwelcome and would not 
constitute quid pro quo harassment under the rule or the Act. It is 
important to note, however, that, as the rule states, if an individual

[[Page 63061]]

acquiesces to an unwelcome request or demand, unlawful quid pro quo 
harassment may have occurred. Moreover, if a housing provider regularly 
or routinely confers housing benefits based upon the granting of sexual 
favors, such conduct may constitute quid pro quo harassment or hostile 
environment harassment against others who do not welcome such conduct, 
regardless of whether any objectionable conduct is directed at them and 
regardless of whether the individuals who received favorable treatment 
willingly granted the sexual favors.\24\ Liability in all situations 
involving allegations of harassment must be determined on a case-by-
case basis.
---------------------------------------------------------------------------

    \24\ Cf. EEOC Policy Guidance No. N-915.048, Employer Liability 
under Title VII for Sexual Favoritism (Jan. 12, 1990) (providing 
that widespread sexual favoritism based upon solicitations for and/
or the granting of sexual favors or other sexual conduct ``can form 
the basis of an implicit `quid pro quo' harassment claim for female 
employees, as well as a hostile environment claim for both women and 
men who find this offensive'').
---------------------------------------------------------------------------

    Issue: A commenter stated that the preamble to the proposed rule 
was vague in stating that ``a person is aggrieved if that person is 
denied or delayed in receiving a housing-related opportunity or benefit 
because another received the benefit.'' The commenter was concerned 
that this statement would require a PHA to identify, investigate, and 
document a defense to any tenant-perceived delay in receiving benefits.
    HUD Response: The quoted phrase is not vague when read in context, 
which explains the meaning of quid pro quo harassment under the Fair 
Housing Act. The phrase refers to a person who is aggrieved because he 
or she is denied a benefit that went to another in exchange for sexual 
favors, for example. Aggrieved persons under the Act and HUD's 
regulation are limited to those who were injured (or are about to be 
injured) by a discriminatory housing practice as defined in the Act. 
Neither the Fair Housing Act nor this final rule prohibits delays in 
receiving housing-related opportunities or benefits for 
nondiscriminatory reasons. If, however, an applicant or tenant alleges 
that he or she has been denied or delayed in receiving a benefit 
because others submitted to requests for sexual favors, the PHA should 
investigate to determine if quid pro quo or hostile environment 
harassment has occurred.
2. Hostile Environment Harassment: Sec.  100.600(a)(2)
    Issue: Several commenters recommended that HUD ensure consistency 
of the discussion of hostile environment harassment throughout the 
preamble in order to prevent any unintentional barriers for harassment 
victims seeking to bring claims under the Fair Housing Act. The 
commenters specifically stated that in one section of the preamble to 
the proposed rule, HUD defines ``hostile environment harassment'' to 
require unwelcome conduct because of a protected characteristic that 
``unreasonably interferes'' with the use and enjoyment of a dwelling, 
or with the exercise of other rights protected by the Act. By contrast, 
the commenters stated, other sections of the preamble rightly omit the 
``unreasonably'' qualifier when discussing hostile environment 
harassment. The commenters requested that the word ``unreasonably'' be 
removed from the discussion in the preamble because it is unnecessary 
and will create confusion. They stated that unwelcome conduct that is 
``sufficiently severe or pervasive'' as to interfere with one's 
enjoyment of rights protected under the Act is in itself unreasonable.
    HUD Response: The term ``unreasonably'' does not appear in the 
definition of ``hostile environment harassment'' in the regulatory text 
of the proposed rule. The term ``unreasonably'' was used in the 
preamble to the proposed rule to convey how a claim of hostile 
environment would be evaluated; that is, from the perspective of a 
reasonable person in the aggrieved person's position. HUD agrees that 
the use of the term ``unreasonably'' in the preamble may have caused 
confusion by conflating the substantive standard with the method of 
proof. In this final rule, as was the case in the proposed rule, the 
definition of ``hostile environment harassment'' in Sec.  100.600(a)(2) 
is not phrased as requiring proof that unwelcome conduct 
``unreasonably'' interfere with a right protected by the Fair Housing 
Act. But it remains that whether unwelcome conduct is sufficiently 
severe or pervasive as to interfere with rights protected by the Act, 
and therefore constitute hostile environment harassment, is evaluated 
from the perspective of a reasonable person in the aggrieved person's 
position.
    Issue: A commenter suggested that HUD include definitions and 
descriptions of ``bullying'' in this final rule because bullying is 
very similar to hostile environment harassment.
    HUD Response: HUD does not agree that it is necessary to add the 
word ``bullying'' to the final rule in order to cover conduct that 
could be considered bullying. Section 100.600(a)(2) of the proposed 
rule and of this final rule, which defines hostile environment 
harassment and specifies the factors to be considered when evaluating 
whether particular conduct creates a hostile environment in violation 
of the Act, is broadly worded and fully captures the concept of 
bullying because of a protected characteristic that the commenter seeks 
to include.
    Issue: A commenter said HUD should include social isolation and 
neglect as forms of harassment under the rule, especially when they 
occur with the intent to drive a person from his or her home or 
interfere with his or her enjoyment of a dwelling. According to the 
commenter, these actions have major implications for the psychological 
well-being of an individual.
    HUD Response: HUD appreciates that social isolation and neglect are 
serious concerns. This rule is limited to conduct engaged in because of 
a protected characteristic. If a tenant is subjected to unwanted severe 
or pervasive conduct because of a disability, for example, which leads 
to social isolation with the intent or effect of driving the tenant 
from his or her home or interfering with his or her enjoyment of a 
dwelling, such conduct could constitute hostile environment harassment 
under the standards set forth in the rule.
    Issue: A commenter said the rule could more clearly distinguish 
harassment from inappropriate behavior or disputes that do not rise to 
the level of harassment. Other commenters stated that they appreciated 
the rule's emphasis on the totality of the circumstances, which will 
ensure that mere disagreements, mistaken remarks, or isolated words 
spoken in the heat of the moment will not result in liability unless 
the totality of the circumstances establishes hostile environment 
harassment.
    HUD Response: HUD agrees that not every disagreement between 
persons involved in a housing transaction constitutes unlawful 
harassment because of a protected characteristic in violation of the 
Act and believes the rule appropriately captures the distinction. 
Section 100.600(a)(2) of the proposed rule and of this final rule 
defining hostile environment harassment requires that the unwelcome 
conduct be ``sufficiently severe or pervasive'' as to interfere with 
defined features of the housing transaction: The availability, sale, 
rental, or use or enjoyment of a dwelling; the terms, conditions, or 
privileges of the sale or rental, or the provision or enjoyment of 
services or facilities in connection therewith; or the availability, 
terms or conditions of a residential real estate-related transaction.

[[Page 63062]]

    Issue: A commenter recommended that the final rule recognize the 
role of preferential treatment for services and living arrangements, 
except when provided because of disability, as a type of 
discrimination. The commenter said that preferential treatment is a 
means through which to encourage and reward secondary actors for their 
role in creating a hostile environment, and the rule should recognize 
it as such. The commenter also recommended that HUD request and make 
available data regarding repairs or upgrades so any non-monetary favor 
in exchange for harassment, by an agent not directly employed by the 
management or owner, may be determined.
    HUD Response: HUD declines to adopt the commenter's suggestions 
because the rule as currently proposed already accommodates the 
commenter's concerns. Providing preferential treatment that creates a 
hostile environment because of race, color, religion, sex, familial 
status, or national origin already violates the Fair Housing Act under 
the standards proposed in the rule. Moreover, HUD's regulations already 
contain illustrations as to this type of violation. Therefore, 
additional language regarding preferential treatment is not needed. In 
addition, processes for requesting and making available data regarding 
repairs or upgrades are outside the scope of this rule. HUD notes that 
in investigations, it requests data regarding repairs or upgrades as 
appropriate to determine whether a violation of the Fair Housing Act 
has occurred.
    Issue: Two commenters asked whether the rule would apply to 
situations in which residential property managers or other employees of 
a housing provider are harassed by the housing provider's tenants. One 
of the commenters explained that she was a resident of the building she 
managed, that she had a disability, and that she had suffered 
harassment and threats by other residents.
    HUD Response: The proposed standards generally would not apply to 
situations in which a property manager or other housing provider 
employee is harassed by the housing provider's tenants because such 
situations ordinarily do not involve a housing-related transaction 
covered by the Act. Where, however, a property manager is also a 
resident of the building that the property manager manages (e.g., a 
resident-manager), the property manager is entitled to the same 
protection from discriminatory harassment under the Act and under this 
final rule as any other resident. Additionally, Section 818 of the Act 
makes it unlawful to coerce, intimidate, threaten, or interfere with 
any person on account of the person having assisted others in enjoying 
or exercising their fair housing rights. Therefore, to the extent that 
a property manager or other housing provider employee (whether a 
resident or not) is subjected to coercion, intimidation, threats, or 
interference because he or she aided or encouraged other people in 
exercising or enjoying a right protected by the Act--e.g., by receiving 
and responding to one tenant's complaint of discriminatory harassment 
by another tenant--the manager or employee may be entitled to 
protection under the Act.\25\
---------------------------------------------------------------------------

    \25\ A property manager may also be protected by Title VII, 
whether or not he or she resides at the housing.
---------------------------------------------------------------------------

i. Totality of the Circumstances: Sec.  100.600(a)(2)(i)
    Issue: Some commenters requested that HUD clarify the definition of 
``totality of the circumstances'' in Sec.  100.600(a)(2)(i) because, in 
the commenters' view, the proposed rule does not sufficiently explain 
the showing required to prove hostile environment harassment in 
violation of the Fair Housing Act. Other commenters supported HUD's 
standard for determining whether conduct constitutes a hostile 
environment, stating that the standard and its factors are clear and 
permit an appropriately individualized assessment of the facts of each 
case. These commenters stated that the rule's explanation of hostile 
environment harassment provides meaningful guidance to both housing 
providers and potential claimants.
    HUD Response: HUD believes the ``totality of the circumstances'' 
standard in this final rule provides an appropriate standard for 
assessing claims of hostile environment harassment, while also 
providing courts with the flexibility to consider the numerous and 
varied factual circumstances that may be relevant when assessing a 
specific claim. HUD therefore chooses not to alter the definition of 
the term ``totality of the circumstances,'' although it will add to the 
final rule the standard by which the evidence is to be evaluated, which 
is from the perspective of a reasonable person in the aggrieved 
person's position. Section 100.600(a)(2) defines what constitutes 
hostile environment harassment under the Act. In accordance with this 
provision, establishing a hostile environment harassment violation 
requires proving that: A person was subjected to unwelcome spoken, 
written, or physical conduct; the conduct was because of a protected 
characteristic; and the conduct was, considering the totality of the 
circumstances, sufficiently severe or pervasive as to interfere with or 
deprive the victim of his or her right to use and enjoy the housing or 
to exercise other rights protected by the Act. Whether a hostile 
environment harassment violation has occurred is a fact-specific 
inquiry, and the rule supplies a non-exhaustive list of factors that 
must be considered in making that determination. It would be impossible 
to quantify in the rule the amount of evidence necessary to make such a 
showing in every case involving a claim of hostile environment 
harassment. The additional instruction in the rule text, and not just 
the preamble, that the ``totality of the circumstances'' is to be 
evaluated from the perspective of a reasonable person in the aggrieved 
person's position will aid all parties in assessing whether a ``hostile 
environment'' has been created.
    Issue: HUD received several comments regarding the explanation in 
the preamble to the proposed rule that hostile environment harassment 
should be assessed from the perspective of a reasonable person in the 
aggrieved person's position. A commenter expressed concern that this 
standard is too subjective, stating that one reasonable person's 
measure may be different from another reasonable person's measure. 
Another commenter asked HUD to provide a definition of the term 
``reasonable person.'' Other commenters approved of the standard 
articulated in the preamble to the proposed rule and commended HUD for 
recognizing that the reasonable person standard must take into account 
the circumstances of the aggrieved person. A commenter recommended that 
the rule text itself explicitly state this objective standard. Another 
commenter, however, recommended that HUD not add the standard to the 
rule text itself because such addition may invite courts to second-
guess the rationality and behavior of the actual victim, rather than 
focusing on the conduct and its surrounding circumstances.
    HUD Response: As HUD explained in the preamble to the proposed 
rule, whether unwelcome conduct is sufficiently severe or pervasive to 
create a hostile housing environment is evaluated from the perspective 
of a reasonable person in the aggrieved person's position. This 
standard is an objective one, but ensures that an assessment of the 
totality of the circumstances includes consideration of whether persons 
of the same protected class and of like personal experience as

[[Page 63063]]

the plaintiff or complainant would find the challenged conduct to 
create a hostile environment. At the proposed rule stage, HUD chose not 
to add the ``reasonable person in the aggrieved person's position'' 
standard to the text of the rule itself. But in light of the confusion 
expressed by some of the commenters, HUD has added this standard to the 
text of the final rule discussing the totality of the circumstances 
standard. In adding this reasonable person standard for assessing the 
evidence to the rule text, HUD does not intend to create an additional 
requirement for proving a hostile environment harassment claim beyond 
the showing required under Sec.  100.600(a)(2) of the rule. The 
definition of hostile environment harassment in this final rule remains 
unchanged and focuses on defining the types of conduct that may 
establish a claim of hostile environment harassment under the Fair 
Housing Act.

(A) Factors To Be Considered: Sec.  100.600(a)(2)(i)(A)

    Issue: Several commenters commended HUD's explanation in the 
preamble to the proposed rule that individuals have heightened rights 
within their home for privacy and freedom from unwelcome speech and 
conduct. Many commenters agreed with HUD that harassment in or around 
one's home can be far more intrusive, violative, and threatening than 
harassment in the more public environment of one's workplace. Some 
commenters said these considerations should be explicitly incorporated 
into the text of the rule itself. Commenters specifically requested 
that HUD revise proposed Sec.  100.600(a)(2)(i)(A) by adding as a 
factor to be considered in determining whether hostile environment 
harassment exists ``the heightened rights in or around one's home for 
privacy and freedom from harassment'' or ``the heightened reasonable 
expectation of privacy and freedom from harassment in one's home.'' 
Another commenter said that Sec.  100.600(a)(2)(i)(A) should expressly 
state that conduct occurring in one's home may result in a violation of 
the Fair Housing Act even though the same conduct in one's place of 
employment may not violate Title VII.
    HUD Response: HUD declines to add language regarding individuals' 
heightened rights within the home for privacy and freedom from 
unwelcome speech and conduct to the rule text in Sec.  
100.600(a)(2)(i)(A). The non-exhaustive list of factors included in 
Sec.  100.600(a)(2)(i)(A) identifies circumstances that can be 
demonstrated with evidence during the adjudication of a claim of 
hostile environment harassment under the Act. Evidence regarding the 
``location of the conduct,'' as explicitly identified in Sec.  
100.600(a)(2)(i)(A), is a critical factor for consideration and will 
allow courts to take into account the heightened privacy and other 
rights that exist within the home when determining whether hostile 
environment harassment occurred. For similar reasons, HUD also declines 
to add language stating that harassing conduct may result in a 
violation of the Fair Housing Act even though such conduct might not 
violate Title VII. HUD believes that by establishing a hostile 
environment harassment standard tailored to the specific rights 
protected by the Fair Housing Act and by directing that hostile 
environment claims under the Act are to be evaluated by assessing the 
totality of the circumstances--including the location of the unwelcome 
conduct and the context in which it occurred--the final rule ensures 
that courts consider factors unique to the housing context when making 
the fact-specific determination of whether the particular conduct at 
issue violates the Act. Therefore, while HUD agrees that unwelcome 
conduct in or around the home can be particularly intrusive and 
threatening and may violate the Fair Housing Act even though the same 
or similar conduct in an employment setting may not violate Title VII, 
HUD does not believe the proposed additions to Sec.  
100.600(a)(2)(i)(A) are necessary.
    Issue: A commenter supported HUD's identification of the 
relationship of the persons involved as a factor to be considered when 
determining whether hostile environment harassment has occurred, but 
recommended that the final rule further refine the concept. 
Specifically, in the homeowner's association context, the commenter 
drew distinctions between the relationships among the different 
resident-owners and between a board member and a resident-owner. The 
commenter also distinguished these relationships from landlord-tenant 
relationships.
    HUD Response: HUD appreciates these distinctions and believes the 
rule already accommodates them by requiring the relationship of the 
parties involved be taken into account in determining whether a hostile 
environment has been created. This is one of several factors that HUD 
identified for evaluating allegations of hostile environment 
harassment. In a community governed by a homeowner's association, for 
example, the influence an owner-board member has over another resident 
by virtue of his or her authority to make association policy, to 
approve homeowner requests, and to bring or adjudicate charges of 
association rule violations may be greater than a non-board member, and 
thus each person's relationship to the victim should be considered when 
assessing whether a hostile environment exists. No further refinement 
to the rule is necessary to address the commenter's concerns; nor is 
any further refinement desirable, as it would risk inadvertently 
inserting limiting factors into the otherwise broad and flexible 
totality of the circumstances test.

(B) Physiological or Physical Harm: Sec.  100.600(a)(2)(i)(B)

    Issue: A commenter stated that Sec.  100.600(a)(2)(i)(B) of the 
proposed rule, which concerns psychological or physical harm, is 
confusing. The commenter requested that HUD clarify the meaning of this 
provision.
    HUD Response: HUD agrees that Sec.  100.600(a)(2)(i)(B) may be 
confusing and has revised this provision at the final rule stage; the 
revision is intended to clarify without altering the meaning of the 
provision. Proposed Sec.  100.600(a)(2)(i)(B) provided that ``Evidence 
of psychological or physical harm is relevant in determining whether a 
hostile environment was created, as well as the amount of damages to 
which an aggrieved person may be entitled. Neither psychological nor 
physical harm, however, must be demonstrated to prove that a hostile 
environment exists.'' Final Sec.  100.600(a)(2)(i)(B) provides that 
``Neither psychological nor physical harm must be demonstrated to prove 
that a hostile environment exists. Evidence of psychological or 
physical harm may, however, be relevant in determining whether a 
hostile environment was created and, if so, the amount of damages to 
which an aggrieved person may be entitled.'' As explained at the 
proposed rule stage, evidence of such harm is but one of many factors 
that may be considered in assessing the totality of the circumstances. 
So long as the unwelcome conduct is sufficiently severe or pervasive as 
to interfere with or deprive the victim of a right protected by the 
Act, there is no need to also demonstrate psychological or physical 
injury in order to prove a hostile environment violation.
ii. Title VII Affirmative Defense: Sec.  100.600(a)(2)(ii)
    Issue: HUD received several comments on Sec.  100.600(a)(2)(ii) of 
the proposed rule, which provides that the

[[Page 63064]]

Title VII affirmative defense to an employer's vicarious liability for 
hostile environment harassment by a supervisor does not apply to claims 
brought pursuant to the Fair Housing Act. Several commenters commended 
HUD's decision not to extend the Title VII affirmative defense to the 
Fair Housing Act and agreed with HUD that such a defense would be 
inappropriate in the housing context, in part because of the lack of an 
exhaustion requirement under the Fair Housing Act, as well as the 
differences between an agent in the employment context versus an agent 
in the housing context.
    Other commenters recommended that HUD apply the judicially-created 
Title VII affirmative defense to Fair Housing Act claims. One such 
commenter stated that HUD, by rule, cannot import a Title VII cause of 
action onto the Fair Housing Act without the judicially-created 
limitations on a Title VII employer's liability under that cause of 
action. Another commenter believed that HUD eliminated an existing 
affirmative defense for housing providers that is available in the 
employment context. Given the scope of potential harassment claims, 
this commenter found unwarranted HUD's position that the Title VII 
affirmative defense is not relevant to harassment in the housing 
context because, in HUD's view, a housing agent who harasses residents 
is inevitably aided by his or her agency relationship with the housing 
provider. In the commenter's view, a responsible housing provider who 
exercises reasonable care to prevent harassment, and who provides a 
complaint mechanism that a resident unreasonably fails to invoke, 
should be afforded the same affirmative defense available to employers 
in analogous situations. Another commenter asked HUD to reconsider its 
decision to reject the affirmative defense as it appears unfair and 
based on an assertion that agents of housing providers are equivalent 
to a supervisory employer in terms of their power over applicants and/
or tenants.
    HUD Response: After carefully considering the analysis provided by 
the commenters on both sides of the issue, HUD has retained its view 
that the Title VII affirmative defense is not appropriate to include as 
a defense under the Fair Housing Act. HUD has never found occasion to 
employ such a defense and remains unaware of any court having extended 
the Title VII affirmative defense to fair housing claims, and 
commenters did not identify any such case law. Moreover, unlike Title 
VII, which requires employees to exhaust their administrative remedies 
before filing an action in court, the Fair Housing Act has no 
exhaustion requirement, and nothing in the text of the Fair Housing Act 
otherwise indicates that Congress intended to permit a housing provider 
to avoid vicarious liability for discriminatory harassment perpetrated 
by its agents by establishing its own complaint process or procedure. 
To the contrary, the Act authorizes any aggrieved person to directly 
commence a civil action in federal or state court, whether or not the 
individual has previously chosen to file an administrative complaint 
with HUD.\26\ Therefore, as explained in the preamble to the proposed 
rule, the Title VII affirmative defense is not appropriately applied to 
harassment in the housing context because its adoption would impose 
burdens on victims of discriminatory harassment that are incompatible 
with the broad protections and streamlined enforcement mechanisms 
afforded by the Fair Housing Act.
---------------------------------------------------------------------------

    \26\ See 42 U.S.C. 3614(a).
---------------------------------------------------------------------------

    HUD notes that some comments on this issue demonstrated a 
misunderstanding of the potential scope of the Title VII affirmative 
defense. The Title VII affirmative defense does not apply to harassment 
claims based on direct liability. Thus, contrary to the perceptions of 
some commenters, the affirmative defense does not apply to cases in 
which an employer--or housing provider--knew or should have known of an 
agent or third-party's harassment and failed to stop it, because such 
cases involve direct rather than vicarious liability.
    Therefore, in exercising its power to promulgate rules to interpret 
and carry out the Act, HUD believes it would be inappropriate to add, 
for the first time, an affirmative defense that would require victims 
of hostile environment harassment--who are often housing insecure or 
otherwise especially vulnerable--to choose between the risk of 
retaliation by the perpetrator and the risk of losing their right to 
hold a housing provider liable for the acts of its agents. Instead, the 
traditional principles of vicarious liability--including those 
standards that hold a principal liable for an agent's conduct that is 
taken within the scope of employment, with the apparent authority of 
the principal, or that is otherwise aided by the agency relationship--
will continue to govern a housing provider's liability for harassment. 
While HUD declines to extend the Title VII affirmative defense to the 
Fair Housing Act, the development and dissemination of anti-harassment 
policies will still assist housing providers to avoid litigation by 
identifying and quickly addressing improper conduct by employees or 
other agents.
    Issue: A commenter requested that HUD create safe harbors from 
liability for housing providers for harassment by their agents and 
third-parties. Specifically, the commenter stated that liability for 
unknown and unintended harassment by an agent or third-party should not 
be imposed on a housing provider where the housing provider: (1) 
Provides periodic mandatory fair housing training for its employees and 
agents (including training related to harassment claims); (2) requires 
unaffiliated management companies to conduct similar training of their 
employees, report to the property owner on a regular basis about the 
steps it is taking to avoid fair housing claims generally, and promptly 
report any potential fair housing claim to a designated official of the 
housing provider; and (3) implements and publicizes a hotline or other 
secure communication mechanism whereby a tenant can confidentially 
notify the housing provider about possible harassment by employees or 
other tenants.
    Another commenter expressed concern that the rule as proposed would 
expand a PHA's exposure to liability by making the PHA liable for 
perceived hostile environment harassment that occurs beyond its 
knowledge or control and fails to create or incentivize any new 
remedies to protect tenants against hostile environment harassment. As 
a result, according to the commenter, the proposed rule raises the 
possibility that future litigation over alleged harassment might be 
driven by plaintiff attorneys' fees rather than the merit of the 
allegations or effective remedies. In light of these concerns, the 
commenter suggested that HUD revise the proposed rule to adopt defenses 
similar to those applicable to public agencies under California state 
law for injuries caused by dangerous conditions on the public agency's 
property. As described by the commenter, the State law defense provides 
that liability attaches to the public agency if the plaintiff 
establishes that: (1) The public employee's negligence or wrongful act 
or omission created the dangerous condition; or (2) the public entity 
had actual or constructive notice of the dangerous condition before the 
injury occurred. The commenter believes this standard incentivizes the 
public agency to maintain its property and train its staff in order to 
limit its exposure to liability and reduce the risk of injuries.

[[Page 63065]]

    HUD Response: As explained in the preamble to the proposed rule, 
traditional principles of tort liability and agency law apply in fair 
housing cases. The standards for direct and vicarious liability 
established in this final rule continue to reflect such principles and 
do not impose any new legal obligations or create or define new agency 
relationships or duties of care. For the same reasons that HUD does not 
interpret the Fair Housing Act to import the Title VII affirmative 
defense for a claim of hostile environment harassment by the provider's 
agent, HUD does not believe the requested safe harbor or state law-
derived defense from liability is appropriate.
    The California State law identified by the commenter essentially 
imposes a negligence standard for public agency liability, which is 
akin to the standard of direct liability that governs Fair Housing Act 
claims under Sec.  100.7(a)(1)(ii). In addition, under traditional 
principles of agency law, a housing provider may be held vicariously 
liable for the discriminatory acts of an employee or agent regardless 
of whether the housing provider knew of or intended the discriminatory 
conduct where the employee was acting within scope of his or her 
agency, or where the harassment was aided by the agency relationship. 
HUD believes that traditional tort and agency law standards for 
assessing liability under the Act will encourage housing providers to 
provide appropriate training for their staff and to ensure compliance 
with the Act.
    Issue: A commenter asserted that the proposed rule, including HUD's 
decision not to adopt the Title VII affirmative defense, raises 
Federalism implications. The commenter stated that the proposed rule 
creates a cause of action based on Title VII law that could, 
ostensibly, be brought against a State, even when the actions are 
performed by a city or other sub-recipient of funds, and obviate the 
State's sovereign immunity despite its ongoing assertion that it has 
not waived such sovereign immunity. The commenter said that the rule 
would do so while removing the judicially-created Title VII affirmative 
defense. The commenter recommended that HUD withdraw the rule or create 
a specific carve-out for actions against a State that limits and 
defines the extent of vicarious liability, including a safe-haven for 
conduct or policy akin to an affirmative defense.
    HUD Response: Executive Order 13132 (entitled ``Federalism'') 
prohibits an agency from publishing any rule that has federalism 
implications if the rule either (1) imposes substantial, direct 
compliance costs on state and local governments and is not required by 
statute, or (2) preempts state law, unless the agency meets the 
consultation and funding requirements of section 6 of the Executive 
Order. Under the Executive Order, Federalism implications are those 
having substantial direct effects on states or local governments 
(individually or collectively), on the relationship between the 
national government and the states, or on the distribution of power and 
responsibilities among the various levels of government. This final 
rule does not have such implications. As discussed elsewhere, the rule 
creates no new cause of action, liability or obligation on the part of 
any housing provider, including a State. The rule interprets the Fair 
Housing Act's prohibition on discriminatory harassment, and in doing 
so, neither alters the substantive prohibitions against discrimination 
in the Act nor creates enhanced liability or compliance costs for 
States or any other entities or individuals. Similarly, the rule does 
not alter any sovereign immunity protections that a State may have 
under the Eleventh Amendment. In addition, the rule does not remove a 
pre-existing affirmative defense, because no court of which HUD is 
aware has ever applied the Title VII affirmative defense or any other 
affirmative defense or safe harbor to Fair Housing Act claims; nor has 
HUD ever applied such a standard. HUD notes further that creating an 
affirmative defense or safe harbor for States would not be consistent 
with Congressional intent, for the reasons discussed above.
b. Type of Conduct: Sec.  100.600(b)
    Issue: A commenter inquired whether a verbal or written account 
from an aggrieved tenant would be enough to comprise a showing of 
hostile environment harassment under the Act.
    HUD Response: A verbal or written account from an aggrieved tenant 
may be enough to provide notice to a housing provider that a hostile 
environment may be occurring, but whether it would be sufficient to 
establish that the conduct is sufficiently severe or pervasive to 
create a hostile environment depends on the totality of the 
circumstances.
c. Number of Incidents: Sec.  100.600(c)
    Issue: A commenter expressed concern that the proposed rule 
includes both a ``totality of the circumstances standard'' and a 
``single incident standard'' and asked HUD to provide more descriptive 
language to determine the existence of a hostile environment based on 
such standards. The commenter asked HUD to clarify or provide examples 
of when a single incident of harassment would be sufficient to create a 
hostile environment. Several other commenters expressed approval of 
Sec.  100.600(c) of the proposed rule, which provides that a single 
incident of harassment because of race, color, religion, sex, familial 
status, national origin, or disability may constitute a discriminatory 
housing practice, where the incident is severe, or evidences a quid pro 
quo. Other commenters stated that in some cases a single act can be so 
severe as to deprive individuals of their right to use and enjoy their 
housing.
    HUD Response: HUD did not intend to propose two different standards 
for determining whether hostile environment harassment has occurred. To 
avoid confusion and better clarify the relationship between Sec.  
100.600(c) and Sec.  100.600(a)(2), HUD is revising Sec.  100.600(c) at 
this final rule stage. Section 100.600(a)(2) of the rule provides the 
only standard that must be met to prove a claim of hostile environment 
harassment under the Act--namely, that: A person was subjected to 
unwelcome spoken, written, or physical conduct; the conduct was because 
of a protected characteristic; and the conduct was sufficiently severe 
or pervasive as to interfere with or deprive the victim of his or her 
right to use and enjoy the housing or to exercise other rights 
protected by the Act. As provided in Sec.  100.600(a)(2)(i), a 
determination of whether this standard has been met is to be based on 
the totality of the circumstances. Section 100.600(c) is included in 
the rule to make clear that a single incident of harassment because of 
a protected characteristic, if sufficiently severe, can constitute a 
hostile environment harassment violation (as defined in Sec.  
100.600(a)(2)). Whether a claim of hostile environment harassment is 
based on a single incident or repeated incidents of unwelcome conduct, 
an assessment of the totality of the circumstances is still required. 
For example, the nature of the unwelcome conduct (e.g., whether it was 
spoken, written and/or physical) and the location of the conduct (e.g., 
whether it occurred inside the victim's apartment or in a common 
space), among other potential considerations, would factor into an 
assessment of whether a single incident of harassment was sufficiently 
severe to interfere with or deprive the victim of his or her right to 
use and enjoy the housing or to exercise other rights protected by the 
Act.
    HUD is revising proposed Sec.  100.600(c) at this final rule stage 
as follows.

[[Page 63066]]

Proposed Sec.  100.600(c) provided that: ``A single incident of 
harassment because of race, color, religion, sex, familial status, 
national origin, or handicap may constitute a discriminatory housing 
practice, where the incident is severe, or evidences a quid pro quo.'' 
Final Sec.  100.600(c) now provides: ``A single incident of harassment 
because of race, color, religion, sex, familial status, national 
origin, or handicap may constitute a discriminatory housing practice, 
where the incident is sufficiently severe to create a hostile 
environment, or evidences a quid pro quo.''

B. Illustrations: Sec. Sec.  100.60, 100.65, 100.80, 100.90, 100.120, 
100.130, and 100.135

    Issue: Several commenters supported the illustrations included 
throughout the proposed rule and asked HUD to provide additional 
examples of prohibited practices in the final rule. They requested more 
examples of: Unwelcome conduct; how quid pro quo harassment occurs with 
respect to protected classes other than sex; single incidents that 
constitute a hostile environment; and when direct liability exists. 
Commenters also recommended that HUD add to the final rule examples 
clarifying the relationship between age and disability and add examples 
of harassment of pregnant women, Muslims, persons with limited English 
proficiency, persons with mental health-related disabilities or HIV/
AIDS, and persons who assert their rights to organize. Another 
commenter stated that HUD has provided useful illustrations of what 
does not violate the Act in other fair housing contexts, and requested 
that HUD do the same here, citing 24 CFR 100.205(b) (concerning the 
impracticality of meeting the Act's design and construction standards).
    HUD Response: HUD retains the illustrations contained in the 
proposed rule, but otherwise declines to add more illustrations to the 
final rule. The rule contains numerous illustrations of possible quid 
pro quo and hostile environment harassment referencing all protected 
classes. But whether illegal harassment has or has not occurred in a 
particular situation is fact-specific and must be determined on a case-
by-case basis. For this reason, the illustrations provided are simply 
more specific descriptions of the legal standard, e.g., conditioning 
the availability of housing on a person's response to sexual harassment 
illustrates an unlawful refusal to sell or rent. Providing 
illustrations as to what does not violate the Act would not be 
appropriate because of the necessarily fact-specific nature of such an 
inquiry. HUD notes that Sec.  100.205(b), which the commenter cited, 
does not describe conduct that does not violate the Act, but rather 
provides examples of when the impracticality exception to the Act's 
design and construction requirements is applicable. Lastly, some of the 
suggested examples are outside the scope of the Act, e.g., the right to 
organize, but HUD notes that persons would be protected by the Act to 
the extent the harassment is because of their race, color, religion, 
sex, familial status, national origin, or disability.

C. Liability for Discriminatory Housing Practices: Sec.  100.7

a. Direct Liability for One's Own Discriminatory Conduct: Sec.  
100.7(a)(1)(i)
    Issue: A commenter stated that the language in Sec.  
100.7(a)(1)(i), which states that a person is directly liable for the 
person's own conduct that results in a discriminatory housing practice, 
may lead to the liability of innocent actors and third-parties who 
somehow contributed to an illegal discriminatory action. The commenter 
gave as an example a situation in which a person supplied the pen that 
a housing provider used to make notes on an application that the 
housing provider later rejected because of a protected characteristic 
of the applicant.
    HUD Response: The rule creates no new or enhanced forms of 
liability. As discussed in the preamble of the proposed rule, Sec.  
100.7(a)(1)(i) does nothing more than restate the most basic form of 
direct liability, i.e., that a person is directly liable for his or her 
own discriminatory housing practices, as defined by the Act. Whether a 
person's conduct constitutes a discriminatory housing practice under 
sections 804-806 or 818 of the Act depends upon the specific facts.
b. Direct Liability for Negligent Failure To Correct and End 
Discrimination: Sec.  100.7(a)(1)(ii) and (iii)
    Issue: Several commenters expressed concern about the ``should have 
known'' standard in proposed Sec.  100.7(a)(1)(ii) and (iii), which 
states that a person is directly liable for ``(ii) [f]ailing to take 
prompt action to correct and end a discriminatory housing practice by 
that person's employee or agent, where the person knew or should have 
known of the discriminatory conduct,'' and ``(iii) [f]ailing to fulfill 
a duty to take prompt action to correct and end a discriminatory 
housing practice by a third-party, where the person knew or should have 
known of the discriminatory conduct . . . '' (emphasis added).
    Some commenters stated that this standard creates almost certain 
liability for landlords and that requiring actual knowledge would be 
more fair to property owners because liability would only attach for 
failing to act on known discrimination. A commenter stated that the 
final rule should limit liability where a housing provider has limited 
knowledge of misconduct. In contrast, other commenters stated that the 
``knew or should have known'' standard is reasonable and consistent 
with the Fair Housing Act, legal negligence principles, and business 
practices of housing providers. One commenter complained that the 
proposed rule appears to require actual knowledge, even though the 
standard only requires that a defendant ``should have known'' of the 
harassment.
    Commenters asked HUD to clarify how a housing provider ``should 
have known'' about harassment, especially in the context of tenant-on-
tenant harassment. A commenter questioned what the housing provider 
needs to know before liability attaches and whether the housing 
provider needs to know that the harasser's actions violate the Fair 
Housing Act or only that the harasser took some action toward the 
victim. Several commenters expressed concern that a PHA might be liable 
when a housing voucher holder is harassed but neither the apartment 
owner nor voucher holder informs the housing agency about the 
harassment. One commenter expressed a similar concern that owners 
living in another city or state may not learn that harassment is taking 
place on their property unless the tenant tells the owner, and another 
commenter asked about a PHA's potential liability when harassment 
occurs over the internet but is unknown to the housing agency.
    HUD Response: The ``knew or should have known'' standard is well 
established in civil rights and tort law.\27\ A housing provider 
``should have known'' of the harassment of one resident by another when 
the housing provider had knowledge from which a reasonable person would 
conclude that the harassment was occurring. Such knowledge can come 
from, for example, the harassed resident, another resident,

[[Page 63067]]

or a friend of the harassed resident.\28\ There is no requirement that 
the resident contact the housing provider about the harassment, only 
that the housing provider have knowledge from which a reasonable person 
would conclude that harassment was occurring. If the housing provider 
has no information from which a reasonable person would conclude that 
one resident or a third-party was harassing another resident, the 
housing provider is not liable for failing to take action to correct 
and end the harassment. If the knowledge component is not met, a 
housing provider cannot be held liable for a resident's or third-
party's discriminatory conduct. HUD disagrees that this standard will 
subject landlords to certain liability. Application of this standard to 
the liability provisions of the rule helps clarify the Act's coverage 
for residents and housing providers. It is intended to help guide 
housing providers in their assessment of when to intervene to prevent 
or end discriminatory conduct. HUD encourages housing providers to 
create safe, welcoming, and responsive housing environments by 
regularly training staff, developing and publicizing anti-
discrimination policies, and acting quickly to resolve complaints once 
sufficient information exists that would lead a reasonable person to 
conclude that harassment was occurring.
---------------------------------------------------------------------------

    \27\ As the Supreme Court has recognized, fair housing actions 
are essentially tort actions. See Meyer v. Holley, 537 U.S. 280, 285 
(2003) (citing Curtis v. Loether, 415 U.S. 189, 195-96 (1974)); see 
also Burlington Indus. v. Ellerth, 524 U.S. 742, 759 (``An employer 
is negligent with respect to sexual harassment if it knew or should 
have known about the conduct and failed to stop it. Negligence sets 
a minimum standard for employer liability under Title VII. . . .'') 
(emphasis added).
    \28\ See, e.g., Neudecker v. Boisclair Corp., 351 F.3d at 364 
(owner may be liable for acts of tenants and management's children 
after failing to respond to plaintiff's complaints of harassment); 
Bradley v. Carydale Enterprises, 707 F. Supp. 217 (E.D. Va. 1989) 
(finding that owners and managers' failure to address one tenant's 
complaints of racial harassment by another tenant stated a claim 
under 42 U.S.C. 1981 and 1982).
---------------------------------------------------------------------------

    Issue: A commenter was concerned that Sec.  100.7(a)(1)(ii) is 
seeking to hold the agent liable for the actions of its principal, 
contrary to Supreme Court precedent, and asked why this provision is 
necessary in light of proposed Sec.  100.7(b) (vicarious liability), 
which states that the housing provider is already liable for the 
unlawful actions of the agent, whether known or not.
    HUD Response: Section 100.7(a)(1)(ii) addresses a principal's 
direct liability for the principal's own negligent conduct in 
overseeing (or failing to oversee) its agent or employee. Under the 
negligence theory of direct liability, the principal is liable only if 
the principal knew or should have known of the agent's discriminatory 
conduct and failed to take corrective action to end it. Section 
100.7(b), by contrast, holds the principal vicariously liable for the 
discriminatory conduct of its agent, regardless of whether the 
principal knew or should have known of the agent's conduct. As the 
commenter noted, an agent is not vicariously liable for the principal's 
conduct, but is directly liable for his or her own actions. Section 
100.7 does not create liability that does not already exist; it does 
not hold the agent liable for the conduct of the principal, and it is 
entirely consistent with traditional agency principles and Supreme 
Court precedent.
    Issue: A commenter asked for clarification of the term ``third-
party'' in Sec.  100.7(a)(1)(iii). The commenter was concerned that if 
left undefined, the term would include everyone. The commenter asked 
HUD to limit the term to what the commenter perceived to be HUD's 
primary concern--``liability resulting from a landlord's failure to 
assist a tenant subject to another tenant's harassment.''
    HUD Response: HUD does not agree that its use of the term ``third-
party'' requires further clarification in the text of the rule. In the 
context of the rule, liability for discriminatory conduct by a ``third-
party'' is appropriately limited to a non-employee or non-agent who 
engaged in quid pro quo or hostile environment harassment of which the 
housing provider knew or should have known and had the power to 
correct.
    Issue: A commenter stated that it is unclear from the proposed rule 
whether the obligation in proposed Sec.  100.7(a)(1)(iii) to take 
action to end a discriminatory housing practice by a third-party must 
be derived from a contract, lease, or law, or whether it could be 
derived from these sources. The commenter also requested that HUD 
clarify in the rule whether generic lease provisions related to the use 
and enjoyment of one's home that are found in almost every lease would 
be enough to create the obligation and related liability contemplated 
in Sec.  100.7(a)(1)(iii). Another commenter expressed a concern that 
housing providers would take steps to minimize their liability for 
failing to take corrective action by revising their leases and other 
documents so that they do not create a duty to protect tenants. A 
commenter expressed concern that the term ``duty,'' incorporated from 
other laws and contracts, is difficult to fully assess and therefore 
bound to create unanticipated consequences.
    HUD Response: HUD recognizes that proposed Sec.  100.7(a)(1)(iii) 
may have caused some confusion, so HUD has reworded the provision in 
the final rule. Proposed Sec.  100.7(a)(1)(iii) stated that a person is 
directly liable for ``failing to fulfill a duty to take prompt action 
to correct and end a discriminatory housing practice by a third-party, 
where the person knew or should have known of the discriminatory 
conduct. The duty to take prompt action to correct and end a 
discriminatory housing practice by a third-party derives from an 
obligation to the aggrieved person created by contract or lease 
(including bylaws or other rules of a homeowner's association, 
condominium or cooperative), or by federal, state or local law.'' 
Revised section 100.7(a)(1)(iii) of this final rule provides that a 
person is directly liable for ``failing to take prompt action to 
correct and end a discriminatory housing practice by a third-party, 
where the person knew or should have known of the discriminatory 
conduct and had the power to correct it. The power to take prompt 
action to correct a discriminatory housing practice by a third-party 
depends upon the extent of control or any other legal responsibility 
the person may have with respect to the conduct of such third-party.'' 
The final rule does not use the term ``duty,'' and no longer identifies 
specific categories of potential sources for such a duty. A housing 
provider's obligation to take prompt action to correct and end a 
discriminatory housing practice by a third-party derives from the Fair 
Housing Act itself, and its liability for not correcting the 
discriminatory conduct of which it knew or should have known depends 
upon the extent of the housing provider's control or any other legal 
responsibility the provider may have with respect to the conduct of 
such third-party.\29\ For example, when a housing provider enters into 
a lease agreement with a tenant, the lease typically obligates the 
housing provider to exercise reasonable care to protect the residents' 
safety and curtail unlawful conduct in areas under the housing 
provider's control, whether or not the lease contains specific language 
creating that responsibility. Even if the lease does not expressly 
create such obligations, the power to act may derive from other legal 
responsibilities or the operation of law.\30\
---------------------------------------------------------------------------

    \29\ See, e.g., Neudecker v. Boisclair Corp., 351 F. 3d at 364 
(owner may be liable for acts of tenants and management's children 
after failing to respond to plaintiff's complaints of harassment); 
Fahnbulleh v. GFZ Realty, LLC, 795 F. Supp. 2d 360, 364-65 (D. Md. 
2011) (denying landlord's motion to dismiss because the Act imposes 
no categorical rule against landlord liability for tenant-on-tenant 
harassment); Reeves v. Carrollsburg Condo. Unit Owners Ass'n, 1997 
U.S. Dist. LEXIS 21762, *26 (D.D.C. 1997) (condo association that 
knew of harassment by resident but failed to take corrective actions 
may violate Act).
    \30\ See, e.g., Wilstein v. San Tropai Condo. Master Ass'n, 1999 
U.S. Dist. LEXIS 7031, *28-33 (N.D. Ill. Apr. 21, 1999) (rejecting 
condo association's argument that it had no duty to stop harassment 
of plaintiff by other residents and holding that association could 
be liable where evidence indicated that association knew of the 
harassment and bylaws authorized the association to regulate such 
conduct); see also Bradley v. Carydale Enterprises, 707 F. Supp. 217 
(E.D. Va. 1989) (finding that owners and managers' failure to 
address one tenant's racial harassment of a neighboring tenant 
states a claim under 42 U.S.C. 1981, 1982).

---------------------------------------------------------------------------

[[Page 63068]]

    Issue: A commenter expressed concern that proposed Sec.  
100.7(a)(1)(iii) creates liability on the part of a community 
association (homeowner association, condominium or cooperative) for the 
illegal acts of residents over whom they have no control. The commenter 
urged HUD to remove or revise the proposed rule's extension of direct 
liability to community associations for the discriminatory actions of 
non-agents. The commenter stated that community associations generally 
lack legal authority to mandate that residents take actions described 
in the preamble of the proposed rule because the associations cannot 
evict homeowners or otherwise impose conditions not specifically 
authorized by the association's covenants, conditions, and restrictions 
(CC&Rs) or state law. The commenter suggested that if the language in 
Sec.  100.7(a)(1)(iii) remains, it should be modified to clearly state 
which terms and conditions in association bylaws and regulations 
constitute a duty on the part of an association or its agents to 
investigate and punish residents for illegal discriminatory housing 
practices.
    HUD Response: As noted above, HUD has slightly revised Sec.  
100.7(a)(1)(iii) to clarify that a housing provider is liable under the 
Fair Housing Act for third-party conduct if the provider knew or should 
have known of the discriminatory conduct, has the power to correct it, 
and failed to do so. HUD also notes that the rule does not add any new 
forms of liability under the Act or create obligations that do not 
otherwise exist. The rule does not impose vicarious liability (see 
Sec.  100.7(b)) on a community association for the actions of persons 
who are not its agents. Section 100.7(a)(1)(ii) describes a community 
association's liability for its own negligent supervision of its 
agents, and Sec.  100.7(a)(1)(iii) describes a community association's 
liability for its own negligence for failing to take prompt action to 
correct and end a discriminatory housing practice by a third-party. 
With respect to Sec.  100.7(a)(1)(iii), the rule requires that when a 
community association has the power to act to correct a discriminatory 
housing practice by a third party of which it knows or should have 
known, the community association must do so.
    As the commenter recognizes, a community association generally has 
the power to respond to third-party harassment by imposing conditions 
authorized by the association's CC&Rs or by other legal authority.\31\ 
Community associations regularly require residents to comply with CC&Rs 
and community rules through such mechanisms as notices of violations, 
threats of fines, and fines. HUD understands that community 
associations may not always have the ability to deny a unit owner 
access to his or her dwelling; the rule merely requires the community 
association to take whatever actions it legally can take to end the 
harassing conduct.
---------------------------------------------------------------------------

    \31\ See, e.g., Wilstein v. San Tropai Condo. Master Ass'n, 
supra*28-33; Reeves v. Carrollsburg Condo. Unit Owners Ass'n, 1997 
U.S. Dist. LEXIS 21762, *26. See also Freeman v. Dal-Tile Corp., 750 
F. 3d 413, 422-23 (4th Cir. 2014) (holding that ``an employer is 
liable under Title VII for third parties creating a hostile work 
environment if the employer knew or should have known of the 
harassment and failed to take prompt remedial action reasonably 
calculated to end [it].'') (internal quotation marks and citations 
omitted); Galdamez v. Potter, 415 F. 3d 1015, 1022 (9th Cir. 2005) 
(``An employer may be held liable for the actionable third-party 
harassment of its employees where it ratifies or condones the 
conduct by failing to investigate and remedy it after learning of 
it.'').
---------------------------------------------------------------------------

    Issue: A few commenters suggested that HUD should reconsider 
imposing liability on a landlord for tenant-on-tenant harassment 
because the law in this area is not well-settled. The commenters 
expressed concern that proposed Sec.  100.7(a)(1)(iii) exceeds the 
scope of the Act by expanding liability for housing providers to 
include liability for third-party harassment of a resident when the 
housing provider did not act with discriminatory intent. One commenter, 
relying on Title VII case law and an interpretation of the phrase 
``because of,'' stated that a landlord must have acted with 
discriminatory intent in order to be liable under the Fair Housing Act. 
Another commenter stated that although section 804(a) of the Fair 
Housing Act does not require a showing of intentional discrimination, 
claims brought under sections 804(b) and 817 of the Act do, citing 
Francis v. King Park Manor, Inc., 91 F. Supp. 3d 420 (E.D.N.Y. 2015). 
Another comment stated that to establish a housing provider's liability 
for failing to take action to correct third-party harassment, the 
plaintiff must show not just that the housing provider failed to 
correct the harassment but also that the housing provider did so 
because of animus against the victim due to a protected characteristic. 
A commenter pointed to Lawrence v. Courtyards of Deerwood Ass'n, Inc., 
318 F. Supp. 2d 1133 (S.D. Fla. 2004), as an example of a case in which 
the court dismissed the fair housing claim against the housing provider 
because the plaintiffs failed to establish that the housing provider's 
ineffective response to the harassment was due to racial animus. 
Commenters also pointed to Ohio Civil Rights Comm'n v. Akron Metro. 
Hous. Auth., 892 NE.2d 415, 420 (Ohio 2008), in which the court 
declined to impose liability on landlords for failing to take 
corrective action in response to discriminatory harassment committed by 
the landlord's tenants. A commenter also suggested that not requiring 
discriminatory animus on the part of the housing provider would amount 
to strict liability. The commenters proposed that in light of these 
contrary federal and state court decisions, HUD should require proof of 
some degree of animus by the housing provider before subjecting the 
provider to direct liability for the acts of third parties.
    HUD Response: HUD does not agree that a housing provider's failure 
to act to correct third-party harassment must be motivated by a 
discriminatory intent or animus before the provider can be held liable 
for a Fair Housing Act violation. In reaching this conclusion, HUD 
considered its own experience in administering and enforcing the Fair 
Housing Act, the broad remedial purposes of the Act,\32\ relevant case 
law including the Supreme Court's recent ruling in Texas Department of 
Community Affairs v. Inclusive Communities Project, Inc. holding that 
the Fair Housing Act is not limited to claims of intentional 
discrimination, and the views of the EEOC regarding Title VII. The case 
law cited by the commenters fails to support the proposition that the 
Fair Housing Act requires discriminatory intent in order to find a 
housing provider liable for its negligent failure to correct resident-
on-resident or other third-party discriminatory conduct. The district 
court decision in Francis v. Kings Park Manor is the sole exception to 
that principle, and HUD disagrees with its ruling. HUD notes that this 
decision is on appeal to the Second Circuit.
---------------------------------------------------------------------------

    \32\ See e.g., Havens Realty Corp. v. Coleman, 455 U.S. 363, 380 
(1982) (Congress intended Fair Housing Act to be broadly remedial); 
cf. Jones v. Alfred H. Mayer Co., 392 U.S. 409, 413 (1968) 
(describing the Fair Housing Act as ``a comprehensive open housing 
law''); 42 U.S.C. 3601 (``It is the policy of the United States to 
provide, within constitutional limitations, for fair housing 
throughout the United States.'').
---------------------------------------------------------------------------

    Section 100.7(a)(1)(iii) sets out a negligence standard of 
liability, which does not require proof of discriminatory

[[Page 63069]]

intent or animus on the part of the provider, but is far from strict 
liability. Under this standard, a plaintiff or the charging party must 
prove three elements to establish a housing provider's liability for 
third-party harassment: (1) The third-party created a hostile 
environment for the plaintiff or complainant; (2) the housing provider 
knew or should have known about the conduct creating the hostile 
environment; and (3) the housing provider failed to take prompt action 
to correct and end the harassment while having the power to do so. HUD 
does not agree that a fourth element--that the housing provider's 
failure to act was more than negligent, and was motivated by 
discriminatory intent--is necessary or appropriate.
    Contrary to one comment, the Supreme Court in Inclusive Communities 
Project has already ruled that the ``because of'' clause in the Fair 
Housing Act does not require proof of discriminatory intent. While not 
addressing every aspect of the cited decisions, HUD notes the 
following: In Lawrence v. Courtyards of Deerwood Ass'n, cited by 
another commenter, the court dismissed the discriminatory harassment 
claim not for lack of discriminatory intent on the part of the 
landlord, but because it found, inter alia, that the dispute did not 
involve discriminatory harassment of one tenant by another but instead 
reflected mutual antagonism between two tenants. The court in Lawrence 
distinguished Reeves v. Carrollsburg Condo. Unit Owners Ass'n, 1997 
U.S. Dist. LEXIS 21762, *22 (D.D.C 1997), which held the landlord 
liable under the Fair Housing Act for its failure to adequately address 
sexual harassment of one tenant by another because ``the [Carrollsburg 
Condo] association's by-laws specifically authorized the association to 
curtail conduct that contravened the law'' and provided that a 
violation of local or federal law was a violation of the association 
rules.\33\
---------------------------------------------------------------------------

    \33\ Lawrence v. Courtyards of Deerwood Ass'n, 318 F. Supp. 2d 
at 1149 (citing Reeves v. Carrollsburg Condo. Unit Owners Ass'n, 
1997 U.S. Dist. LEXIS 21762 at *22.
---------------------------------------------------------------------------

    Finally, the state court decision cited by one commenter did not 
involve claims under the Fair Housing Act and does not provide reason 
for HUD to alter Sec.  100.7(a)(1)(iii) at the final rule stage. In 
Ohio Civil Rights Commission v. Akron Metropolitan Housing Authority, 
the Ohio Supreme Court's refusal to hold a landlord liable under a 
state civil rights law for failing to take corrective action in 
response to one tenant's racial harassment of another tenant was 
premised on an incorrect reading of Title VII jurisprudence. The court 
misconstrued Title VII case law to require an agency relationship 
between an employer and a perpetrator of harassment in order to hold 
the employer liable for negligently failing to stop sexual harassment 
by the perpetrator.\34\ In fact, under Title VII, an agency 
relationship is not required in order to hold employers liable for 
negligently failing to stop discriminatory harassment of which the 
employer knew or should have known. Both the EEOC and the federal 
courts have recognized that an employer may be held liable for 
negligently failing to stop discriminatory harassment in the workplace 
by non-employees or non-agents.\35\ The principle of liability codified 
in Sec.  100.7(a)(1)(iii) of this final rule is consistent with these 
Title VII authorities and, in HUD's view, appropriately serves the Fair 
Housing Act's parallel antidiscrimination objectives in the housing 
context. In sum, the proposed rule and this final rule reflect HUD's 
considered judgment, consistent with prevailing precedent and EEOC 
regulations, that a housing provider (including a homeowner's 
association) or property manager is liable under the Act for 
negligently failing to take corrective action against a third-party 
harasser when the provider or manager knew or should have known of the 
harassment and had the power to end it. In light of the above, HUD 
declines to make the proposed revisions to the final rule.
---------------------------------------------------------------------------

    \34\ 892 NE.2d at 419-20.
    \35\ See 29 CFR 1604.11(e) (``An employer may also be 
responsible for the acts of non-employees, with respect to sexual 
harassment of employees in the workplace, where there employer (or 
its agents or supervisory employees) knows or should have known of 
the conduct and fails to take immediate and appropriate corrective 
action.''); see also, e.g., Freeman v. Dal-Tile Corp., 750 F.3d 413, 
422-24 (4th Cir. 2014) (employer potentially liable for failing to 
address discriminatory harassment by a customer); Lockard v. Pizza 
Hut, Inc., 162 F.3d 1062, 1072-75 (10th Cir. 1998) (same; collecting 
cases recognizing employer liability for failing to correct third-
party harassment).
---------------------------------------------------------------------------

    Issue: A commenter stated that the imposition of liability on 
private landlords for tenant-on-tenant harassment is inappropriate and 
will have several negative consequences. The commenter stated that 
private owners do not have the expertise or resources to undertake what 
is essentially a social services function to mediate disputes between 
neighbors. In addition, the commenter expressed concern that the 
proposed rule could make it more difficult and risky for property 
owners to take affirmative steps to operate racially integrated 
housing. The commenter stated that the rule will be an economic 
disincentive for individuals, companies, and other investors to engage 
in the business of renting residential real estate and that the Section 
8 voucher program depends on the participation of these private 
entities in order to achieve other fair housing goals. The commenter 
expressed concern that the effect of the proposed rule will be to 
reduce the supply of available affordable units, thus 
disproportionately harming low-income families. Other commenters raised 
concerns that landlords, when confronted by tenants who mutually accuse 
each other of harassment, will be unable to take necessary corrective 
actions because of the rule's prohibition against moving or causing 
injury to a complaining tenant, or will reprimand the wrong tenant 
because they lack expertise with investigations.
    Numerous other commenters supported the rule's recognition that a 
housing provider may be directly liable for harassment of a tenant by 
the housing provider's employee or a third-party. These commenters 
stated that any suggestion that this rule will unduly burden housing 
providers is exaggerated, that the rule is wholly consistent with the 
ordinary responsibilities of housing providers to ensure habitability, 
and that housing providers are familiar with the tools they have to 
enforce their own rules--tools they frequently wield.
    HUD Response: The rule does not create new or enhanced liabilities 
for housing providers, including those who participate in the Section 8 
program. HUD believes that this rule will help clarify the obligations 
that housing providers already have in offering and maintaining housing 
environments free from discrimination and that comply with the Fair 
Housing Act. We are long past the time when racial harassment is a 
tolerable price for integrated housing; a housing provider is 
responsible for maintaining its properties free from all discrimination 
prohibited by the Fair Housing Act. Under the Act, discriminatory 
practices are those that violate sections 804, 805, 806, or 818. Such 
practices do not encompass all incivilities, and thus it is important 
to note that not every quarrel among neighbors amounts to a violation 
of the Fair Housing Act.\36\ Ending harassing or

[[Page 63070]]

otherwise discriminatory conduct may necessitate evicting the tenant 
who has engaged in the conduct, not the aggrieved tenant.\37\ The Act 
does not, however, prohibit housing providers from offering to move an 
aggrieved tenant, as long as that tenant may refuse the offer without 
consequence or retaliation.
---------------------------------------------------------------------------

    \36\ See, e.g., Bloch v. Frischholz, 587 F.3d at 783 (quoting 
Halprin v. Prairie Single Family Homes of Dearborn Park Ass'n, 388 
F.3d 327, 330 (7th Cir. 2004) (noting that interference under Sec.  
818 ``is more than a `quarrel among neighbors' ''); Sporn v. Ocean 
Colony Condominium Assn, 173 F. Supp. 2d 244, 251-52 (D.N.J. 2001) 
(noting that section 818 ``does not [] impose a code of civility'' 
on neighbors); United States v. Weisz, 914 F. Supp. 1050, 1054-55 
(S.D.N.Y. 1996) (holding that allegations that Jewish neighbor 
harassed complainants because of their religion were ``nothing more 
than a series of skirmishes in an unfortunate war between 
neighbors''). But see Ohana v. 180 Prospect Place, 996 F. Supp. 238, 
243 (E.D.N.Y. 1998) (neighbors who intentionally intrude upon 
quietude of another's home may violate Act).
    \37\ See, e.g., Miller v. Towne Oaks East Apartments, 797 F. 
Supp. 557, 562 (E.D. Tex.1992) (finding landlord liable for 
violating Act by evicting both harasser and victim of harassment 
instead of only harasser).
---------------------------------------------------------------------------

    Issue: Some commenters stated that the proposed rule outlining 
third-party liability conflicts with HUD's PIH Notice 2015-19, titled 
Guidance for Public Housing Agencies (PHAs) and Owners of Federally-
Assisted Housing on Excluding the Use of Arrest Records in Housing 
Decisions. One commenter was concerned that PIH Notice 2015-19 makes it 
harder for PHAs to correct situations that may lead to hostile 
environment harassment, while the proposed harassment rule would make 
it easier for PHAs to be held liable for the activities of tenants who 
take actions against other tenants to create a hostile environment. 
Another commenter was concerned that PHAs would be forced to choose 
whether to comply with HUD's harassment rule or with HUD's Notice, 
which prohibits the use of an arrest record as evidence of criminal 
activity that can support an adverse admission, termination, or 
eviction decision. These commenters therefore asked HUD to remove 
third-party liability from the rule.
    HUD Response: HUD believes the commenters' concerns are misplaced 
because there is no conflict between this rule and PIH Notice 2015-19. 
The rule does not add any new forms of liability under the Fair Housing 
Act and the formalization of clear and consistent standards for 
evaluating harassment claims under the Act does not conflict with the 
requirements of the PIH Notice. Compliance with PIH Notice 2015-19 does 
not prevent a PHA from considering reliable evidence of relevant 
criminal activity when considering how to respond to complaints of 
harassment. Nor does this rule require a PHA to make use of arrest 
records to determine whether discriminatory harassment has occurred. 
Consistent with traditional tort liability principles, as well as 
current federal Fair Housing Act jurisprudence, this rule codifies 
HUD's longstanding view that a property owner, including a PHA, may be 
held liable for failing to take corrective action within its power in 
response to tenant-on-tenant harassment of which the owner knew or 
should have known. Where a PHA receives a complaint or otherwise learns 
of possible discriminatory harassment of one resident by another, the 
PHA is advised to assess the situation and, if necessary, take 
appropriate corrective action to end the harassment.
    Issue: Several commenters expressed concern that application of the 
rule would conflict with HUD's homeless or permanent supportive housing 
programs or might have a detrimental effect on persons with mental 
disabilities. A commenter stated that tenants with severe mental health 
disabilities may create a hostile environment for neighbors and asked 
HUD to explain what direct responsibility the housing provider has to 
correct negative behaviors. A commenter stated that the rule 
incentivizes evictions over efforts to determine whether a reasonable 
accommodation might be appropriate for persons with mental 
disabilities. Another commenter stated that because tenants with mental 
illness often have difficulty finding housing, the proposed rule might 
result in an increased rate of homelessness among persons with mental 
disabilities. A commenter asked HUD to revisit the proposed rule's 
third-party liability provision to avoid harming this particularly 
vulnerable population.
    Other commenters stated that the rule would help protect many 
vulnerable persons from eviction. These commenters supported the 
statement in the proposed rule's preamble that eviction is only one of 
the many corrective actions housing providers may utilize to address 
harassment.
    HUD Response: The rule neither changes a housing provider's 
responsibilities toward tenants with mental disabilities nor 
incentivizes evictions of such persons. It is not uncommon for the 
behavior of one tenant to frustrate, displease, or annoy another 
tenant. This is true for behavior by tenants with and without 
psychiatric disabilities. The rule does not require a housing provider 
to take action whenever one tenant engages in behavior that another 
tenant finds objectionable. The Act prohibits discrimination against 
applicants and tenants with disabilities, including evicting 
individuals with disabilities because other tenants find them 
frustrating, displeasing, or annoying. The Act does not, however, 
require that a dwelling be made available to a person whose tenancy 
would constitute a direct threat to the health or safety of others or 
would result in substantial physical damage to the property of 
others.\38\ The housing provider must make an individualized assessment 
as to whether such a threat exists based on reliable objective evidence 
that considers: (1) The nature, duration, and severity of the risk of 
injury; (2) the probability that injury will actually occur; and (3) 
whether there are any reasonable accommodations that will eliminate the 
direct threat. In evaluating a recent history of overt acts, a housing 
provider must take into account whether the individual has received 
intervening treatment or medication that has eliminated the direct 
threat. Reasonable accommodations must be made when they may be 
necessary to afford such persons an equal opportunity to use and enjoy 
a dwelling. HUD refers the reader to the Joint Statement of HUD and DOJ 
on Reasonable Accommodations under the Fair Housing Act for further 
information.\39\
---------------------------------------------------------------------------

    \38\ 42 U.S.C. 3604(f)(9).
    \39\ See Joint Statement of HUD and DOJ on Reasonable 
Accommodations Under the Fair Housing Act (May 17, 2004), posted at 
http://www.hud.gov/offices/fheo/library/huddojstatement.pdf.
---------------------------------------------------------------------------

1. Corrective Action: Sec.  100.7(a)(2)
    Issue: A commenter asked HUD to remove the prohibition against 
causing injury to a complaining party.
    HUD Response: HUD declines to remove the prohibition on causing 
additional injury to a person who has already been injured by illegal 
harassment. Permitting such additional injury would be inconsistent 
with the Act's purposes to prevent unlawful discrimination and remedy 
discrimination that has already occurred.
    Issue: One commenter requested further guidance as to what 
constitutes appropriate corrective action by a housing provider to stop 
tenant-on-tenant harassment. The commenter specifically inquired 
whether a single verbal statement by a landlord to a tenant who 
allegedly engaged in harassing conduct would be sufficient corrective 
action to relieve a landlord from liability under the rule. Another 
commenter asked HUD to impose realistic and reasonable limitations on 
housing providers' obligation to take corrective action.
    HUD Response: There is no one way that a housing provider must 
respond to complaints of third-party harassment,

[[Page 63071]]

although the rule makes clear that a provider that fails to effectively 
respond may be subject to liability under the Act. Section 100.7(a)(2) 
provides that corrective actions must be effective in ending the 
discrimination, but may not injure the aggrieved persons. For example, 
corrective actions appropriate for a housing provider to utilize to 
stop tenant-on-tenant harassment or other third-party harassment might 
include verbal and written warnings; enforcing lease provisions to 
move, evict, or otherwise sanction tenants who harass or permit guests 
to harass; issuing no-trespass orders against guests; or reporting 
conduct to the police. What constitutes appropriate and effective 
corrective action will depend on the nature, frequency, and severity of 
the harassment. While in some cases a single verbal reprimand by a 
housing provider may be sufficient to effectively end discriminatory 
harassment of one tenant by another, the housing provider should notify 
the victim that such action was taken, and it is advisable for the 
housing provider to document this action in its records. Additionally, 
the housing provider should follow up with the victim of the harassment 
after the corrective action is taken to ensure that it was effective. 
If the housing provider knows or should have known that the corrective 
action was ineffective, the provider has a responsibility to take 
additional corrective actions within its power. If, however, corrective 
action is effective in ending the discriminatory conduct, a housing 
provider is not required to take additional action simply because the 
victim believes further action should have been taken. HUD does not 
agree that there is a need to add a specific limitation on a housing 
provider's responsibility to take corrective action within its power to 
act in response to discriminatory harassment of which the provider knew 
or should have known.
    Issue: A commenter stated that because tenants are not agents or 
employees, landlords cannot simply compel tenants to take or avoid 
particular action and do not have the ability to shape or alter 
tenants' behavior beyond threatening and carrying out evictions. 
Another commenter asked HUD to consider that there are substantial 
practical differences between the ability of housing providers to take 
corrective action to end tenant-on-tenant harassment and their ability 
to control the actions of their employees because there is no agency 
relationship in the former. Another commenter stated that most 
homeowners would be very concerned if association board members, 
employees, or agents injected themselves into the interpersonal 
relationships of homeowners and residents to investigate their 
interactions and relationships for discriminatory elements. This 
commenter also said that for PHAs, eviction is often unavailable as a 
remedy for alleged tenant-on-tenant harassment because the U.S. Housing 
Act of 1937 and federal regulations limit the ability of PHAs to carry 
out evictions, except for specified causes. In addition, the commenter 
stated that the result of these restrictions and the proposed rule 
would be to create significant new liability for PHAs for tenant-on-
tenant harassment without creating any new mechanisms for PHAs to 
mitigate this liability.
    In contrast, other commenters stated that the rule does not create 
any new liability because landlords have an obligation to protect 
tenants' rights to quiet enjoyment and generally have the right to take 
actions against renters and occupants who disturb the quiet enjoyment 
of others.
    HUD Response: Neither the proposed rule nor this final rule create 
new liability for housing providers, including PHAs or homeowner's 
associations, regarding resident-on-resident harassment. Nor does the 
rule require a housing provider to take action that is beyond the scope 
of its power to act. HUD recognizes that specific remedies that may be 
available to employers to stop an employee's illegal practices will be 
distinct from those that a housing provider may use to stop residents 
who are engaging in discriminatory conduct. Creating and posting policy 
statements against harassment and establishing complaint procedures, 
offering fair housing training to residents and mediating disputes 
before they escalate, issuing verbal and written warnings and notices 
of rule violations, enforcing bylaws prohibiting illegal or disruptive 
conduct, issuing and enforcing notices to quit, issuing threats of 
eviction and, if necessary, enforcing evictions and involving the 
police are powerful tools available to a housing provider to control or 
remedy a tenant's illegal conduct. These tools are also available to 
PHAs, and, contrary to one commenter's concern, eviction is available 
to a PHA to correct a tenant's discriminatory conduct as the PHA may 
terminate a tenancy for ``serious or repeated violation of material 
terms of the lease,'' 24 CFR 966.4(l)(2)(i), which include the 
obligation that tenants must ``act . . . in a manner which will not 
disturb other residents' peaceful enjoyment of their accommodations. . 
. .'' 24 CFR 966.4(f)(11).
    Issue: A commenter expressed concern that a PHA may be held 
directly liable for failing to correct actions by third-parties over 
whom they have little or no control. As an example, the commenter cited 
harassment of a voucher-holding tenant by neighbors who are not also 
voucher-holders and not otherwise affiliated with the PHA. Similarly, 
another commenter stated that the rule could be interpreted to make 
landlords liable for conduct that occurs off their property or that has 
nothing to do with a tenant's home.
    HUD Response: This rule describes the standard for assessing 
liability under the Fair Housing Act. These fair housing standards 
apply to private and public landlords alike and do not turn on whether 
a tenant holds a Housing Choice Voucher or receives other government 
rental assistance. HUD also reiterates that a housing provider is not 
responsible for correcting every negative action by any third-party. 
Rather, the third-party action must constitute a discriminatory housing 
practice as defined by the Act, and the housing provider must have the 
power to correct it. As provided in the final rule and discussed 
elsewhere in this preamble, whether a housing provider has the power to 
take corrective measures in a specific situation--and what corrective 
measures are appropriate--is dependent on the facts, including the 
extent of control or any other legal responsibility the person may have 
with respect to the conduct of such third-party. There may be instances 
where the ability to correct the unlawful conduct is beyond a housing 
provider's control. Thus, when confronted with discriminatory 
harassment of one of its Housing Choice Voucher-holders or other 
tenants, the housing agency should explore what corrective actions are 
within its power and are appropriate to take.
    Issue: A commenter suggested that an unintended consequence of the 
proposed rule could be that property owners would remove security 
devices, such as video cameras and other surveillance mechanisms, for 
fear that such measures may create a duty on the part of the property 
owner to correct neighbor-on-neighbor harassment. In contrast, other 
commenters stated that housing providers may feel the need to provide 
for more oversight of residences which may interfere with residents' 
right to peaceful enjoyment of their dwelling.
    HUD Response: Removing security devices will not relieve a housing 
provider of its obligation to take the

[[Page 63072]]

actions within its power to promptly correct and end a discriminatory 
housing practice. Elsewhere in the preamble, HUD discusses various 
options that may be available to housing providers to address neighbor-
on-neighbor harassment.
    Issue: A commenter stated that owners should be encouraged to use 
positive incentives, such as promoting better communication with--and 
healthy relationships among--tenants, and educating tenants about their 
rights to prevent harassment, instead of taking corrective actions that 
may harm tenants, such as ending a lease or evicting a tenant--.
    HUD Response: HUD agrees that positive incentives are useful tools 
for preventing harassment. HUD believes, however, that warnings, 
threats of evictions, evictions, and lease terminations may also be 
necessary corrective actions to end harassment. The preamble and rule 
make clear that there is no one way to prevent or correct harassment, 
only that the methods need to be effective at ending it.
c. Vicarious Liability: Sec.  100.7(b)
    Issue: Several commenters questioned the description of vicarious 
liability at Sec.  100.7(b) of the proposed rule. One commenter said 
Sec.  100.7(b) could be interpreted to impose vicarious liability on an 
organization's directors, officers, or owners and suggested HUD 
clarify, consistent with Meyer v. Holley, that it is the organization--
not the individual directors, officers, or board members--who are the 
``principal or employer'' subject to vicarious liability under the Fair 
Housing Act. The commenter asked HUD to issue clarification that the 
proposed regulations do not contravene or attempt to reverse Meyer v. 
Holley, 537 U.S. 280 (2003). In contrast, other commenters applauded 
the description of vicarious liability in the rule, stated that the 
description follows well-established common law tort and agency 
principles, and expressed support for the proposed rule's reliance on 
Meyer v. Holley.
    HUD Response: Subsection 100.7(b) merely describes the well-
established concept of vicarious liability, under which principals may 
be held liable for the discriminatory acts of their agents or employees 
whether or not they knew of the discriminatory conduct. As articulated 
in Meyer v. Holley, and as explained in the preambles to the proposed 
rule and this final rule, traditional agency principles apply to the 
Fair Housing Act.\40\ Under agency principles, a principal is 
vicariously liable for the actions of his or her agents taken within 
the scope of their relationship or employment, or for actions taken 
outside the scope of their relationship or employment when the agent is 
aided in the commission of such acts by the existence of the agency 
relationship.\41\ Determining whether an agency relationship exists is 
a factual determination that looks to an agent's responsibilities, 
duties, and functions; whether the discriminatory conduct of the agent 
was within the scope of the agency relationship or aided by the 
existence of the agency relationship is also a fact-specific inquiry.
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    \40\ 537 U.S. at 282, 287.
    \41\ See, e.g., Glover v. Jones, 522 F. Supp. 2d 496, 507 
(W.D.N.Y. 2007) (holding that ``a property owner may be vicariously 
liable under the Fair Housing Act for the actions of an employee 
even when they are outside the scope of employment . . . if the 
employee was aided in accomplishing the tort by the existence of the 
agency relation.'') (quoting Mack v. Otis Elevator Co., 326 F. 3d 
116, 123 (2d Cir. 2003) (internal quotation marks omitted); see also 
Boswell v. GumBayTay, No. 2:07-CV-135-WKW[WO], 2009 U.S. Dist. LEXIS 
45954, *17 (M.D. Ala. June 1, 2009) (holding that vicarious 
liability attached to property owner where property manager's 
``position essentially gave him unfettered access to communicate 
with and personally visit [the plaintiff]'' and he ``used his power 
as property manager as a vehicle through which to perpetrate his 
unlawful conduct by refusing repairs, raising the rent, and 
attempting to evict [the plaintiff] as a consequence for [her] 
refusal to provide sexual favors.''); Glover at 522 F. Supp. 2d at 
507 (rejecting defendant property owner's motion for summary 
judgment on the issue of vicarious liability where evidence showed 
that property manager used his ``position as the de facto landlord 
to perpetrate FHA [harassment] violations . . . giving] him the 
opportunity to visit the apartment when he wanted, and enabl[ing] 
him to control Plaintiff's rent''); Richards v. Bono, 2005 U.S. 
Dist. LEXIS 43585 at *30 (holding that wife/co-owner of property 
could be vicariously liable for husband's harassment where husband 
acted as her agent and used his position as owner, property manager, 
and maintenance supervisor to subject plaintiff to sexual harassment 
by using a key to enter plaintiff's apartment and threatening 
plaintiff with eviction).
---------------------------------------------------------------------------

    Issue: Some commenters questioned the statement in the proposed 
rule's preamble that a principal is vicariously liable for the actions 
of an agent or employee taken outside the scope of the agency 
relationship or employment when the agent or employee is aided in the 
commission of such acts by the existence of the agency relationship. A 
commenter agreed that a principal is vicariously liable for the acts of 
its agents committed within the scope of the agency, regardless of 
knowledge or intent to violate the Act by the principal, but believes 
that, in adopting the ``aided in agency'' standard, the proposed rule 
goes beyond traditional tort concepts and does not reflect the limited 
concepts of vicarious liability endorsed in Meyer v. Holley. The 
commenter considered it acceptable to hold a real estate company liable 
for discriminatory acts or statements made by its brokers in the scope 
of their agency, but disagreed that a housing provider should be liable 
for misconduct of a janitorial employee outside the scope of that 
employee's duty because he wore a badged uniform or possessed keys or 
passes to tenants' dwellings. Another commenter asked for clarity on 
the reasoning behind the assertion in the preamble to the proposed rule 
that an agent who harasses residents or applicants is necessarily aided 
by his or her agency relationship with the housing provider.
    HUD Response: As discussed throughout this preamble, the proposed 
and final rule do not create new forms of liability. Instead, HUD has 
decided to adopt well-established principles of agency law, including 
that a principal may be vicariously liable for the actions of an agent 
or employee that are taken outside the scope of the employment or 
agency relationship if the agent or employee is aided in committing the 
acts by the existence of the employment or agency relationship. Agency 
law must be applied to the specific facts at issue to determine whether 
such a situation exists and gives rise to a principal's liability. The 
statement in the proposed rule that an agent who engages in hostile 
environment harassment of residents or applicants is aided by the 
agency relationship with the housing provider was not intended to 
suggest the agent is necessarily so aided with respect to every 
discriminatory housing practice. It was intended to explain one of the 
reasons HUD chose not to import into the Fair Housing Act the Title VII 
affirmative defense to an employer's vicarious liability for hostile 
environment harassment. As explained in that context, a housing 
provider's agent who engages in harassment holds a position of power 
and authority over the victimized resident or applicant, regardless of 
the agent's specific duties. This is because a resident or applicant 
has only an arms-length economic relationship with the housing 
provider, while an agent-perpetrator is clothed with the authority of 
the housing provider. Given this inherent imbalance of power and 
control over the terms or conditions of the housing environment, the 
distinction between harassment by supervisory and non-supervisory 
employees that supported the creation of the affirmative defense in the 
employment context do not extend to the housing context.

D. Other Issues

    Issue: A commenter stated that HUD should apply the proposed rule 
only to its own investigative and administrative

[[Page 63073]]

actions and should not purport to preempt court-established rules. The 
commenter stated that in some instances it may be appropriate for 
federal courts to defer to agency rules, but that this is not a case 
where Chevron \42\ deference is appropriate because HUD is not basing 
the rule on its own experience, but largely on interpretations of 
federal court decisions. The commenter stated that HUD has no 
particular expertise in tort law and no authority to interpret tort 
laws. Another commenter stated that HUD appears to be using the 
administrative rule-making process to substitute its views for those of 
the courts, and that HUD must pursue the change it seeks through 
Congress and/or the courts.
---------------------------------------------------------------------------

    \42\ Chevron U.S.A., Inc. v. Natural Resources Defense Council, 
Inc., 467 U.S. 837 (1984).
---------------------------------------------------------------------------

    HUD Response: The commenters misconstrue both the rule and HUD's 
authority under the Act. The Act specifically grants the Secretary of 
HUD the authority and responsibility to administer and enforce the Act, 
including promulgating rules to carry out the Act.\43\ This rule-making 
authority is not limited to HUD's investigations or administrative 
proceedings. Moreover, the rule does not construe tort law, but rather 
clarifies standards for liability under this part, based on traditional 
principles of tort liability. It imposes no new legal obligations or 
duties of care. In addition, the introductory portion of this preamble 
describes the grounds for Chevron deference.
---------------------------------------------------------------------------

    \43\ 42 U.S.C. 3608(a), 3610, 3615.
---------------------------------------------------------------------------

    Issue: Some commenters disagreed with HUD's statement in the 
preamble to the proposed rule that the rule does not create additional 
costs for housing providers and others covered by the Fair Housing Act. 
They stated that the proposed rule would lead to increased costs for 
and litigation against housing providers. Among the other costs cited 
by commenters are costs for compliance and training, increased 
insurance premiums, and increased liability because many housing 
providers would not have the ability to remain diligent to address all 
harassment claims, leaving them vulnerable to litigation. Another 
commenter said that the proposed rule creates the possibility for 
substantial judgments for money damages that PHAs have little ability 
to pay, because they may not use federal funds to pay judgments for 
damages.
    HUD Response: As noted throughout this preamble, this final rule 
does not impose any new or enhanced liabilities. Rather, it clarifies 
existing law under the Fair Housing Act and well-established common law 
tort and agency principles as they apply under the Act. The rule does 
not change substantive obligations, but merely formalizes them in a 
regulation. Because the standards articulated in the rule are already 
law, the risks of liability and costs of complying will not increase 
with issuance of the rule. HUD presumes that the vast majority of 
housing providers are in compliance with the law. Any costs incurred by 
housing providers to come into compliance as a result of this 
rulemaking will simply be the costs of compliance with a preexisting 
statute, administrative practice, and case law. In fact, by formalizing 
uniform standards for investigations and adjudications under the Fair 
Housing Act, the rule serves to reduce costs for housing providers by 
establishing greater clarity with respect to how a determination of 
liability is to be made.

V. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and therefore, subject to review by the Office of Management and Budget 
(OMB) in accordance with the requirements of the order. Executive Order 
13563 (Improving Regulations and Regulatory Review) directs executive 
agencies to analyze regulations that are ``outmoded, ineffective, 
insufficient, or excessively burdensome, and to modify, streamline, 
expand, or repeal them in accordance with what has been learned.'' 
Executive Order 13563 also directs that, where relevant, feasible, and 
consistent with regulatory objectives, and to the extent permitted by 
law, agencies are to identify and consider regulatory approaches that 
reduce burdens and maintain flexibility and freedom of choice for the 
public. This rule was determined to be a ``significant regulatory 
action'' as defined in section 3(f) of Executive Order (although not an 
economically significant regulatory action, as provided under section 
3(f)(1) of the Executive Order).
    This rule establishes uniform standards for use in investigations 
and processing cases involving harassment and liability under the Fair 
Housing Act. In establishing such standards, HUD is exercising its 
rulemaking authority to bring uniformity, clarity, and certainty to an 
area of legal practice.
    The docket file for this rule is available for public inspection 
between the hours of 8 a.m. and 5 p.m. weekdays in the Regulations 
Division, Office of General Counsel, Department of Housing and Urban 
Development, Room 10276, 451 7th Street SW., Washington, DC 20410-0500. 
Due to security measures at the HUD Headquarters building, please 
schedule an appointment to review the docket file by calling the 
Regulations Division at 202-708-3055 (this is not a toll-free number). 
Persons with hearing or speech impairments may access the above 
telephone number via TTY by calling the toll-free Federal Relay Service 
at 800-877-8339.

Environmental Impact

    This rule does not direct, provide for assistance or loan and 
mortgage insurance for, or otherwise govern or regulate, real property 
acquisition, disposition, leasing, rehabilitation, alteration, 
demolition or new construction, or establish, revise, or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. This rule is limited to the procedures governing 
fair housing enforcement. Accordingly, under 24 CFR 50.19(c)(3), this 
rule is categorically excluded from environmental review under the 
National Environmental Policy Act (42 U.S.C. 4321).

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 4321, et seq.) generally 
requires an agency to conduct a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements, unless the 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. The rule establishes 
standards for evaluating claims of harassment and liability under the 
Fair Housing Act. The scope of the rule is procedural, and the 
regulatory changes do not establish any substantive regulatory burdens 
on small entities. Accordingly, the undersigned certifies that this 
rule will not have a significant economic impact on a substantial 
number of small entities.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments and the private sector. This rule does not impose 
any federal mandates on any state, local, or tribal governments or the 
private sector within the meaning of UMRA.

[[Page 63074]]

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either (1) imposes substantial, direct compliance costs on state and 
local governments, and is not required by statute, or (2) preempts 
state law, unless the agency meets the consultation and funding 
requirements of section 6 of the Executive Order. This rule does not 
have federalism implications and does not impose substantial direct 
compliance costs on state and local governments or preempt state law 
within the meaning of the Executive Order.

Catalogue of Federal Domestic Assistance

    The Catalogue of Federal Domestic Assistance Number for the equal 
opportunity in housing program is 14.400.

List of Subjects in 24 CFR Part 100

    Aged, Fair housing, Individuals with disabilities, Mortgages, 
Reporting and recordkeeping requirements.

    Accordingly, for the reasons stated in the preamble, and in 
accordance with HUD's authority in 42 U.S.C. 3535(d), HUD amends 24 CFR 
part 100 as follows:

PART 100--DISCRIMINATORY CONDUCT UNDER THE FAIR HOUSING ACT

0
1. The authority citation for 24 CFR part 100 continues to read as 
follows:

    Authority:  42 U.S.C. 3535(d), 3600-3620.


0
2. Add Sec.  100.7 to read as follows:


Sec.  100.7   Liability for discriminatory housing practices.

    (a) Direct liability. (1) A person is directly liable for:
    (i) The person's own conduct that results in a discriminatory 
housing practice.
    (ii) Failing to take prompt action to correct and end a 
discriminatory housing practice by that person's employee or agent, 
where the person knew or should have known of the discriminatory 
conduct.
    (iii) Failing to take prompt action to correct and end a 
discriminatory housing practice by a third-party, where the person knew 
or should have known of the discriminatory conduct and had the power to 
correct it. The power to take prompt action to correct and end a 
discriminatory housing practice by a third-party depends upon the 
extent of the person's control or any other legal responsibility the 
person may have with respect to the conduct of such third-party.
    (2) For purposes of determining liability under paragraphs 
(a)(1)(ii) and (iii) of this section, prompt action to correct and end 
the discriminatory housing practice may not include any action that 
penalizes or harms the aggrieved person, such as eviction of the 
aggrieved person.
    (b) Vicarious liability. A person is 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.

0
3. In Sec.  100.60, add paragraphs (b)(6) and (7) to read as follows:


Sec.  100.60  Unlawful refusal to sell or rent or to negotiate for the 
sale or rental.

* * * * *
    (b) * * *
    (6) Conditioning the availability of a dwelling, including the 
price, qualification criteria, or standards or procedures for securing 
the dwelling, on a person's response to harassment because of race, 
color, religion, sex, handicap, familial status, or national origin.
    (7) Subjecting a person to harassment because of race, color, 
religion, sex, handicap, familial status, or national origin that 
causes the person to vacate a dwelling or abandon efforts to secure the 
dwelling.

0
4. In Sec.  100.65, add paragraphs (b)(6) and (7) to read as follows:


Sec.  100.65  Discrimination in terms, conditions and privileges and in 
services and facilities.

* * * * *
    (b) * * *
    (6) Conditioning the terms, conditions, or privileges relating to 
the sale or rental of a dwelling, or denying or limiting the services 
or facilities in connection therewith, on a person's response to 
harassment because of race, color, religion, sex, handicap, familial 
status, or national origin.
    (7) Subjecting a person to harassment because of race, color, 
religion, sex, handicap, familial status, or national origin that has 
the effect of imposing different terms, conditions, or privileges 
relating to the sale or rental of a dwelling or denying or limiting 
services or facilities in connection with the sale or rental of a 
dwelling.

0
5. In Sec.  100.80, add paragraph (b)(6) to read as follows:


Sec.  100.80  Discriminatory representation on the availability of 
dwellings.

* * * * *
    (b) * * *
    (6) Representing to an applicant that a unit is unavailable because 
of the applicant's response to a request for a sexual favor or other 
harassment because of race, color, religion, sex, handicap, familial 
status, or national origin.

0
6. In Sec.  100.90, add paragraphs (b)(5) and (6) to read as follows:


Sec.  100.90  Discrimination in the provision of brokerage services.

* * * * *
    (b) * * *
    (5) Conditioning access to brokerage services on a person's 
response to harassment because of race, color, religion, sex, handicap, 
familial status, or national origin.
    (6) Subjecting a person to harassment because of race, color, 
religion, sex, handicap, familial status, or national origin that has 
the effect of discouraging or denying access to brokerage services.

0
7. In Sec.  100.120, add paragraphs (b)(3) and (4) to read as follows:


Sec.  100.120  Discrimination in the making of loans and in the 
provision of other financial assistance.

* * * * *
    (b) * * *
    (3) Conditioning the availability of a loan or other financial 
assistance on a person's response to harassment because of race, color, 
religion, sex, handicap, familial status, or national origin.
    (4) Subjecting a person to harassment because of race, color, 
religion, sex, handicap, familial status, or national origin that 
affects the availability of a loan or other financial assistance.

0
8. In Sec.  100.130, add paragraphs (b)(4) and (5) to read as follows:


Sec.  100.130  Discrimination in the terms and conditions for making 
available loans or other financial assistance.

* * * * *
    (b) * * *
    (4) Conditioning an aspect of a loan or other financial assistance 
to be provided with respect to a dwelling, or the terms or conditions 
thereof, on a person's response to harassment because of race, color, 
religion, sex, handicap, familial status, or national origin.
    (5) Subjecting a person to harassment because of race, color, 
religion, sex, handicap, familial status, or national origin that has 
the effect of imposing different terms or conditions for the 
availability of such loans or other financial assistance.

[[Page 63075]]


0
9. In Sec.  100.135, revise paragraph (d) to read as follows:


Sec.  100.135  Unlawful practices in the selling, brokering, or 
appraising of residential real property.

* * * * *
    (d) Practices which are unlawful under this section include, but 
are not limited to:
    (1) Using an appraisal of residential real property in connection 
with the sale, rental, or financing of any dwelling where the person 
knows or reasonably should know that the appraisal improperly takes 
into consideration race, color, religion, sex, handicap, familial 
status, or national origin.
    (2) Conditioning the terms of an appraisal of residential real 
property in connection with the sale, rental, or financing of a 
dwelling on a person's response to harassment because of race, color, 
religion, sex, handicap, familial status, or national origin.

0
10. In Sec.  100.400, add paragraph (c)(6) to read as follows:


Sec.  100.400  Prohibited interference, coercion or intimidation.

* * * * *
    (c) * * *
    (6) Retaliating against any person because that person reported a 
discriminatory housing practice to a housing provider or other 
authority.

0
11. Add subpart H, consisting of Sec.  100.600, to read as follows:

Subpart H-- Quid Pro Quo and Hostile Environment Harassment


Sec.  100.600  Quid pro quo and hostile environment harassment.

    (a) General. Quid pro quo and hostile environment harassment 
because of race, color, religion, sex, familial status, national origin 
or handicap may violate sections 804, 805, 806 or 818 of the Act, 
depending on the conduct. The same conduct may violate one or more of 
these provisions.
    (1) Quid pro quo harassment. Quid pro quo harassment refers to an 
unwelcome request or demand to engage in conduct where submission to 
the request or demand, either explicitly or implicitly, is made a 
condition related to: The sale, rental or availability of a dwelling; 
the terms, conditions, or privileges of the sale or rental, or the 
provision of services or facilities in connection therewith; or the 
availability, terms, or conditions of a residential real estate-related 
transaction. An unwelcome request or demand may constitute quid pro quo 
harassment even if a person acquiesces in the unwelcome request or 
demand.
    (2) Hostile environment harassment. Hostile environment harassment 
refers to unwelcome conduct that is sufficiently severe or pervasive as 
to interfere with: The availability, sale, rental, or use or enjoyment 
of a dwelling; the terms, conditions, or privileges of the sale or 
rental, or the provision or enjoyment of services or facilities in 
connection therewith; or the availability, terms, or conditions of a 
residential real estate-related transaction. Hostile environment 
harassment does not require a change in the economic benefits, terms, 
or conditions of the dwelling or housing-related services or 
facilities, or of the residential real-estate transaction.
    (i) Totality of the circumstances. Whether hostile environment 
harassment exists depends upon the totality of the circumstances.
    (A) Factors to be considered to determine whether hostile 
environment harassment exists include, but are not limited to, the 
nature of the conduct, the context in which the incident(s) occurred, 
the severity, scope, frequency, duration, and location of the conduct, 
and the relationships of the persons involved.
    (B) Neither psychological nor physical harm must be demonstrated to 
prove that a hostile environment exists. Evidence of psychological or 
physical harm may, however, be relevant in determining whether a 
hostile environment existed and, if so, the amount of damages to which 
an aggrieved person may be entitled.
    (C) Whether unwelcome conduct is sufficiently severe or pervasive 
as to create a hostile environment is evaluated from the perspective of 
a reasonable person in the aggrieved person's position.
    (ii) Title VII affirmative defense. The affirmative defense to an 
employer's vicarious liability for hostile environment harassment by a 
supervisor under Title VII of the Civil Rights Act of 1964 does not 
apply to cases brought pursuant to the Fair Housing Act.
    (b) Type of conduct. Harassment can be written, verbal, or other 
conduct, and does not require physical contact.
    (c) Number of incidents. A single incident of harassment because of 
race, color, religion, sex, familial status, national origin, or 
handicap may constitute a discriminatory housing practice, where the 
incident is sufficiently severe to create a hostile environment, or 
evidences a quid pro quo.

    Dated: August 18, 2016.
Gustavo Velasquez,
Assistant Secretary for Fair Housing and Equal Opportunity.
[FR Doc. 2016-21868 Filed 9-13-16; 8:45 am]
 BILLING CODE 4210-67-P