A representative’s ability to change firms without liability has become more difficult with a recent court decision from the Court of Appeals of Georgia that held that the Broker Protocol does invalidate an employment agreement that calls for the representative to provide notice of resignation. When faced with evidence that the former representatives failed to provide 90 day notice of resignation as required by their employment agreements to their former employer, the court found that the employment agreements were not overridden by the Protocol because it does not categorically invalidate notice provisions in the employment agreement.
In the particular case HA & W Capital was a firm associated with an accounting firm, and their former representative had joined Morgan Stanley. Morgan Stanley took the position that the Protocol superseded the employment agreements thus relieving the representatives from the 90-day resignation notice requirement.
This decision appears to be the only decision that addressed the issued whether the Protocol that preference of an employment agreement, and it is uncertain what significance it will have in other litigation. However, Morgan Stanley may face a positional argument from its former representatives should Morgan Stanley adopt the reasoning in the HA & W decision to enforce its employment agreements in other states.