One common question we get asked is:  “If one of my staff members violates the Fair Housing Act (“FHA”) by discriminating against a member of a protected class, can I be held personally liable as the owner or officer of my company?”  The general answer is no as the FHA does not impose vicarious liability directly upon a corporation’s officers or owners.  The FHA, however, does impose vicarious liability directly upon the corporation, regardless of fault. The Supreme Court addressed this issue in Meyer v. Holley, 537 US 280 (2003).

In that case, the Supreme Court held that the FHA imposed vicarious liability directly upon the corporation without regard to culpability, but that it does not impose liability directly upon the corporation’s officers or owners.  The Court reasoned that Congress legislates against a legal backdrop, in this instance, the backdrop of traditional common law tort principles, which traditionally impose vicarious liability upon principals or employers when the agent or employee commits a tort while acting in the scope of their authority or employment. Typically, a corporate employee acts on behalf of the corporation that employs him, not on behalf of the officers, owners or shareholders of the corporation.  As such, the Court reasoned that Congress could not have “intended to apply any unusual modification of those rules” in the FHA because the FHA is completely silent on the issue. This notion was further strengthened through statements by HUD that ordinary vicarious liability rules apply in this area.

So what does this mean for you as an owner or officer of a business involved in the rental or sale of real estate?  First, make sure you are protected by having your business in the appropriate corporate form.  Second, draft and follow policies regarding the rental and sale of real estate.  Pay particular attention to the rules and requirements contained in the FHA and in HUD regulations.  Train your employees to follow the law and your policies.