Texas Payday Law and final paychecks

I often receive questions regarding Texas employees and when they should receive their final paycheck from their employer. In Texas, the law governing the timing of your final paycheck is the Texas Payday Law, which is similar to the federal Fair Labor Standards Act but includes some additional, state-specific rules for employee wages. Under the Texas Payday Law, you must receive your final paycheck under specific deadlines based upon who terminated your employment.

If you voluntarily ended your employment (and that includes constructive discharge) then your employer must pay your final wages by the next regular pay day. That means even if paid on a monthly cycle your employer can delay paying wages until the next month’s pay date. If your employer ended your employment (you were fired, wrongfully terminated, etc.) then your employer must pay your final wages no later than six days of your discharge.

In cases of “mutual separation” where ending employment was an agreed decision, it is usually treated as an involuntary termination. (A wise employer in these cases would pay final wages within six days just to cover itself.)

Bonuses and commissions in Texas

If you receive bonuses or commissions your employer does not have to accelerate these payments. Instead, your employer can pay you on the normal pay date even if that is years down the road.

The exception is that if your employer has an acceleration clause in your employment contract, in the bonus or commission agreement, or other employment document governing the bonus or commission structure, then the employer must accelerate payment after you leave the company in whatever way it has agreed or explained it will follow. If you receive other fringe benefits, such as 401k match or health benefits, these will follow the same rule.

How Texas employers screw this up

There are three common ways employer violate the Texas Payday Law by delaying payment of the final wages:

1. The employer cannot afford to pay the wages. This doesn’t happen as frequently as the other two reasons but in smaller companies this happens on occasion where the employer discharges one or more employees because business is bad and can’t afford to timely pay wages. Not having the money to pay wages is no justification under the law. The employee already performed the work so the employer owes timely payment of the wages.

The problem here is that if the employer does not have the money to pay wages it will require a lengthy process of getting a lien (either through an administrative process or a lawsuit) on the employer’s property and ordering a sale through the sheriff’s office. In addition to the long delay in receiving wages the problem is that if the employer goes all that time and cannot pay the wages then the employer is probably going to declare bankruptcy and that will make it even more difficult to get paid.

2. The employer refuses to pay wages in retribution for something the employee did. Sometimes employers withhold the last paycheck to retaliate against the employee because the employee did something employer disliked. The employer may be hostile towards the employee for filing an employment discrimination charge with the EEOC or TWC or the employer might be mad that the employee is leaving for a competitor. This is no excuse for the employer to withhold payment of wages.

3. The employer is using the final paycheck as collateral to get the employee to do something. This is the most common reason why employers withhold timely payment of the last paycheck. They may want company equipment returned, a waiver of liability signed, a waiver of claims against the employer signed, password access to business accounts, etc. and to get you to do what they want they will make you act first before you are paid. This is never legal.

Your employer can have you sign a document before termination that you agree to take certain steps to receive your final paycheck. That is enforceable; but it does not allow your employer to delay payment. If you violate that agreement your employer must pay at least minimum wage for the hours on that last paycheck; but it does not have to pay you more than whatever you agreed to in that agreement.

What to do if your employer does not pay your last paycheck on time

If your employer fails to pay your check on time you should request it directly to the employer. It’s best to do this in writing if you can. Fax or email works best because it is immediate, rather than sending a letter by mail. If your employer does not make prompt payment then you can file a wage claim with the Texas Workforce Commission. Your employer may also receive civil and criminal penalties for failure to pay wages on time.

However, if you find yourself in this situation then contact my office to discuss your situation first. If your employer has issues with your wages there may be other claims against your employer. Talk to a Texas employment lawyer about your situation before taking further action. Some acts, like filing a claim with the TWC. can limit your future remedies–even for other employment law claims.

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