MEMORANDUM

To: Advocates interested in the anti-prostitution policy requirement

From: Laura Abel and Rebekah Diller, Brennan Center for Justice at NYU School of Law

Re: HHS’ final regulation

Date: April 13, 2010

I. Background

HHS today published a final regulation implementing the anti-prostitution policy

requirement in the U.S. Leadership Against HIV/AIDS, Tuberculosis and Malaria Act
(“Leadership Act”).1 The final regulation can be found at
http://edocket.access.gpo.gov/2010/pdf/2010-8378.pdf.2

The final rule follows a notice and comment rulemaking process. HHS published a
proposed rule on November 23, 2009.3 Today’s final rule modifies an earlier, final regulation
issued by the Bush Administration and made effective on January 20, 2009. 45 C.F.R. pt. 89.
This memorandum describes the new, final HHS regulation.

Currently, a preliminary injunction issued by a federal district judge in New York

prohibits HHS and USAID from enforcing the policy requirement against U.S. organizations that
are members of Global Health Council and InterAction. Alliance for Open Society International
v. USAID, 570 F. Supp.2d 533 (S.D.N.Y. 2008). HHS and USAID have appealed that
preliminary injunction and are due to submit their opening brief at the appellate court on May 11,
2010. If that injunction were to be lifted in the course of the ongoing litigation, those
organizations would be subject to the HHS regulation.

II. The Final Regulation

A. Policy Requirement

The final regulation requires organizations receiving Leadership Act HIV/AIDS funds
from HHS (including the Centers for Disease Control, which is part of HHS) to agree, as a
condition of receiving that funding, “that they are opposed to the practices of prostitution and sex
trafficking because of the psychological and physical risks they pose for women, men, and

1
The anti-prostitution policy requirement states:
No funds made available to carry out this Act … may be used to provide assistance to any group or
organization that does not have a policy explicitly opposing prostitution and sex trafficking … .
22 U.S.C. § 7631(f).
2
75 Fed. Reg. 18,760 (April 13, 2010) (to be codified at 45 C.F.R. pt. 89).
3
74 Fed. Reg. 61,096 (Nov. 23, 2009) (Notice of Proposed Rulemaking).

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children.” 75 Fed. Reg. 18,760, 18,763 (to be codified at 45 C.F.R. § 89.1). The regulation does
this in two ways and is unchanged in this respect from the proposed regulation. First, HHS is
required to state in public announcements of the availability of Leadership Act HIV/AIDS funds
that recipients must agree with this statement. Second, HHS will include the statement in “the
award documents for any grant, cooperative agreement or other funding instrument involving
Leadership Act HIV/AIDS funds ...” Id. There is no requirement of a separate certification, as
there had been under the prior final regulation. See 45 C.F.R. § 89.3.

B. Separation Requirements

In addition to agreeing “that they are opposed to the practices of prostitution and sex
trafficking because of the psychological and physical risks they pose for women, men, and
children,” recipients of HHS Leadership Act HIV/AIDS funds must maintain a substantial
degree of separation from any “affiliated organization that engages in activities inconsistent with
the recipient’s opposition to prostitution and sex trafficking . . . .” 75 Fed. Reg. at 18,763 (to be
codified at 45 C.F.R. § 89.3).

1. Recipients must be sufficiently separate from “affiliated organizations”

that engage in “restricted activities.”

The final regulation continues to lack a definition for affiliate organization. Thus, it
remains unclear when an organization is sufficiently involved with another organization so as to
have the latter’s prostitution-related speech imputed to the former. In its Response to Comments,
HHS notes that several commenters had objected to this lack of definition and states:

In common usage, "affiliate" means "to bring into close connection as a member or
branch." Merriam-Webster's Collegiate Dictionary at 21 (11th ed. 2007). Legal
affiliation is only one aspect of this relationship. The use of separate personnel,
accounting, timekeeping, space and identifying signage are also factors, among others. In
determining whether there is sufficient separation, the Department will not base its
decision solely on whether an entity is a legally separate "affiliate," but instead will
consider the likelihood that the degree of separation between a recipient of Leadership
Act HIV/AIDS funds and other connected organizations that are not required to have a
policy opposing prostitution and sex trafficking will not undermine or confuse the
Government's position in opposition to prostitution and sex trafficking.

75 Fed. Reg. 18,761-62.

Nor does the final regulation define which activities are prohibited by the policy
requirement. Instead, the rule continues to state that recipient organizations must be sufficiently
separate from organizations that engage in “activities inconsistent with . . . opposition to the
practices of prostitution and sex trafficking because of the psychological and physical risks they
pose for women, men and children” such that they must be carried out through an organization
with the requisite amount of separation (in other words, “restricted activities”). 75 Fed. Reg. at
18,763 (to be codified 45 C.F.R. § 89.3).

2
 HHS notes that many commenters had objected to the failure to say which activities are
restricted. In its Response to Comments, HHS states that while several comments sought
approval of particular hypothetical activities, “[t]he Department does not believe it should
provide opinions on hypothetical scenarios because information may be incomplete.” HHS also
stated that “working with other agencies implementing the Leadership Act, the U.S. Government
intends to provide broad information on types of activities that illustrate what would be
covered.” 75 Fed. Reg. at 18,762.

2. No transfer of Leadership Act funds; must maintain separation “to the

extent practicable”

As to the amount of separation required between the funding recipient and affiliated
organizations engaging in restricted activities, the regulation states that it must amount to
“objective integrity and independence.” 75 Fed. Reg. at 18,764 (to be codified 45 C.F.R. §
89.3(b)). “[O]bjective integrity and independence” exists if two conditions are met. First, the
“affiliated organization” cannot receive any “transfer of Leadership Act HIV/AIDS funds,” and
Leadership Act HIV/AIDS funds cannot “subsidize restricted activities.” Id.

Second, the recipient must be, “to the extent practicable in the circumstances, separate
from the affiliated organization.” Id. The final regulation differs slightly from the proposed
regulation in its description of the separation requirement. Instead of requiring the recipient to
be “to the extent practicable in the circumstances, legally, physically, and financially separate”
from the affiliate, the final regulation states that the recipient must be “to the extent practicable,
separate” from the affiliate. Compare 74 Fed. Reg. at 61099 (proposed rule) with 75 Fed. Reg. at
18,764 (to be codified at 45 C.F.R. § 89.3(b)).

The final regulation asserts that the only hard and fast rule in determining whether there
exists sufficient separation is that “[m]ere bookkeeping separation of Leadership Act HIV/AIDS
funds from other funds is not sufficient.” 75 Fed. Reg. at 18,764 (to be codified at 45 C.F.R. §
89.3(b). Other than this requirement, “HHS will determine, on a case-by-case basis and based on
the totality of the facts,” with no single factor being determinative, whether sufficient separation
exists. Id. HHS states that in making this determination, it will take into account the following
five factors, although it may also consider other, unspecified factors, as well. Except where
indicated, the final rule did not change the factors listed in the proposed rule.

a. Legal Separation
HHS will consider “[w]hether the organization is a legally separate entity.” Id.

b. Separate Personnel
HHS will consider “[t]he existence of separate personnel or other allocation of personnel
that maintains adequate separation of the activities of the affiliated organization from the
recipient.” Id. The proposed regulation does not define “adequate separation.”

c. Separate recordkeeping
HHS will consider “[t]he existence of separate accounting and timekeeping records.” Id.

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 d. Physical Separation
HHS will consider “[t]he degree of separation of the recipient’s facilities from facilities
in which restricted activities occur.” Id. The final regulation deleted from this factor an
additional clause that had permitted HHS to consider “the extent of such restricted activities by
the affiliated organization.”

e. Signage
HHS will consider “[t]he extent to which signs and other forms of identification that
distinguish the recipient from the affiliated organization are present.” Id.

C. Definitions Section

The final regulation revises the regulation’s definition of “recipient” and deletes the
separate definition of “sub-recipient” that had existed under the prior final regulation. Recipients
are defined as “contractors, grantees, applicants or awardees who receive Leadership Act funds
for HIV/AIDS programs directly or indirectly from HHS.” 75 Fed. Reg. at 18,763 (to be
codified C.F.R. § 89.2). HHS explains the change as follows:

As proposed, former section 89.3 requiring annual certification of compliance with the
anti-prostitution provision by both recipients and sub-recipients has been deleted. The
Department does not believe such procedures are necessary for compliance under the
Leadership Act. Recipients are still required to follow the dictates of the Leadership Act
and maintain the required separation from affiliates that engage in activities inconsistent
with an opposition to prostitution and sex trafficking. The required notice in the public
announcement and awarding instrument will provide notice to funding recipients of the
Leadership Act's anti-prostitution requirements and allow an opportunity to engage the
Department in further dialogue on the issue if an applicant desires.

D. Effective Date: The final rule is effective May 13, 2010.

III. Impact of the Regulation on Recipients

The regulation applies only to organizations receiving Leadership Act funds from HHS.
HHS states that it will “work with the Department of State and with other agencies implementing
the Leadership Act to ensure consistent application of its requirements.” 75 Fed. Reg. 18,761