Every state has different employment laws, and Texas’ employee separation process is no exception. When you have Texas employees, it’s important to understand employee termination laws, employer obligations and employee rights.
This helpful employee separation checklist and guide is an overview of Texas’ state-specific laws, including final paycheck requirements, separation notices, severance agreements, reporting employee termination, and withdrawing registration to do business in the state.
Texas Employee Separation Checklist
- Provide final paycheck
- Issue separation notice
- Execute severance agreement
- Report termination
- Withdraw registration to do business
1. Final Paycheck Requirements in Texas
Texas state law has specific guidelines for paying employees after separation. If an employee is terminated, the final payment must be made within six calendar days. For those who resign, the payment is due on the next scheduled payday. All wages earned—whether based on time, task, commission, or other criteria—must be included in the final paycheck.
However, employers are not obligated to pay for unused vacation, holiday, sick leave, or other benefits, unless a written policy or agreement specifies otherwise. While Texas law does not dictate the method for delivering final wages, it’s best practice to use regular pay channels.
Employers who fail to comply with these regulations may face penalties. Penalties typically include the payment of overdue wages and administrative fines of up to $1,000, if the employer is found to have acted in bad faith.
2. Firing Employees in Texas
Firing employees in Texas is subject to at-will employment considerations. However, it’s important to remember that Texas has a simple notice requirement. All employers must notify separated employees of the availability of unemployment benefits at the time of separation. Texas employers can satisfy this requirement by providing the separated employee with an individual copy of Texas’ Unemployment Benefits Poster.
3. Severance Agreements in Texas
If you plan to ask a Texas employee to sign a severance agreement, be aware that you’re obligated to specifically list any federal or state law claims the employee is waiving. In Texas, the state law claims that may be released are those under the Texas Commission on Human Rights Act (Chapter 21 of the Texas Labor Code), Texas Payday Law, Texas’ leave laws, and Texas’ minimum wage and overtime laws. It’s also important that the claims release only waives claims that arose prior to the agreement’s effective date.
Finally, remember to review applicable federal employee termination laws and guidelines. For example, the NLRB’s 2023 McLaren decision restricts the use of non-disparagement and confidentiality provisions in severance agreements.
4. Reporting Employee Termination in Texas
If your separated employee has an Income Withholding for Support Order (“IWO”), you’re your duty to promptly report the employee’s termination to the child support agency, court, or attorney that issued the IWO. You may report online with the Federal Office of Child Support Enforcement by registering here.
You also may report an employee’s termination by completing the Notification of Employment Termination or Income Status section of the IWO. Then fax or mail it to the child support agency that issued it. You will need the following information:
- Employee Name
- Employee Case Identifier
- Last Known Home Address
- New Employer Address (if known)
- Date of Employee Separation
5. Withdraw Registration to do Business in Texas
If separating from your last Texas employee ends your business dealings within the state, you can formally withdraw your registration to do business there. Depending on your organization’s legal structure, the forms you’ll need to submit to the Texas Secretary of State differ. For-Profit Corporations, Non-Profit Corporations, and Limited Liability Companies (LLCs) all must file this Certificate of Withdrawal.
However, note that For-Profit Corporations and LLCs must also submit a certificate of account status from the Texas Comptroller of Public Accounts. The certificate must show that all state taxes have been paid. Instructions for obtaining the necessary tax certificate are available on the form itself.
Stay Compliant with Texas Employee Separation Requirements
Understanding Texas Employee Separation Agreement laws helps employers ensure regulatory compliance and mitigate legal risk to their organization.
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