When a SALESPERSON departs from a brokerage (whether voluntary, terminated, or for cause), the broker has specific responsibilities under license law. PROCEDURE typically: (1) NOTIFY STATE COMMISSION: Most states require the broker to notify the commission within a specific timeframe (often 5-30 days) when a license affiliation ends. Forms or online portal submissions are typical. (2) TRANSFER OR FINALIZE LISTINGS: The listing agreement is between the SELLER and the BROKERAGE, not the salesperson. Most states say the listings stay with the brokerage when the salesperson leaves. The brokerage typically: (a) reassigns the listing to another agent within the brokerage, (b) finalizes the listing if it's near closing, (c) the seller has the option to terminate the listing and re-engage with a new brokerage. (3) HANDLE PENDING TRANSACTIONS: For pending transactions (under contract): the brokerage is still responsible for the transaction; another agent or the broker themselves typically takes over. Commissions are typically paid per the original agreement upon closing. (4) FINAL COMMISSION SETTLEMENT: The broker must settle any owed commissions to the departed salesperson. The independent contractor or employment agreement typically governs: when commissions are paid (often after closing of pending transactions), any forfeitures, any expenses owed by the salesperson. Common provisions: 'tail commissions' for some period after departure; or no commissions paid after departure depending on agreement. (5) BUYER AGENCY: Buyer representation agreements may have similar provisions to listings — they are between the buyer and the brokerage. (6) CLIENT NOTIFICATION: Many brokerages notify clients (sellers, buyers) of the change in agent and offer transition options. (7) DOCUMENT RETENTION: The brokerage retains transaction documents even after the salesperson departs; the salesperson may receive copies. (8) NON-COMPETE / NON-SOLICITATION: The departing agent's agreement may include non-compete or non-solicitation clauses; these are enforceable in some states, limited in others. (9) LICENSE RETURN: In some states, the broker must return the salesperson's license to the commission; in others, the license is transferred online.
Some states: (1) Specifically require the broker to notify the commission within X days; (2) Some require notification to clients with active transactions; (3) Some have specific listings-on-departure rules.
Industry practices: (1) Many brokerages have a clean break — the salesperson can re-engage with a new brokerage, take their unrepresented clients with them; (2) Some require all clients to remain with the brokerage; (3) Most middle-ground positions allow the seller to choose to continue with the new agent or stay with the brokerage.
Cases: Disputes between departing agents and brokerages are common and typically center on (1) commissions for pending transactions, (2) client retention, (3) non-compete enforceability, (4) listings still active. CLEAR WRITTEN AGREEMENTS prevent most disputes.