Texas Payday Law

Texas Payday Law: The Final Paycheck

The Texas Payday Law establishes the procedures an employer must follow in paying its employees.  It covers all private (i.e. non-government) Texas business entities, regardless of size.  The Texas Payday Law addresses the final paycheck issued to an employee, which is often an area of concern for employers and employees alike.

The Timing of the Final Paycheck 

The Texas Payday law sets out clear dates for the issuance of a final paycheck.  If an employee is laid off, discharged, fired, or otherwise involuntarily separated from employment, the final paycheck is due within six (6) calendar days of discharge. This procedure differs if the employee quits, retires, resigns, or otherwise leaves employment voluntarily. In such situations, the final paycheck is due on the next regularly scheduled payday following the effective date of resignation.

Will the Final Paycheck Include Wages for Unused Benefits?

The Texas Payday Law does not create any automatic right to unused benefit wages. An employee may be entitled to wages for unused fringe benefits (vacation, holiday, sick leave, parental leave or severance pay). However, this is only if the employer provides for these benefits in a written policy or agreement.

Deductions from the Final Paycheck

The employer may not make deductions from the final paycheck unless:

  • Ordered to do so by a court of competent jurisdiction, such as in court-ordered child support payments,
  • Authorized to do so by state or federal law, such as IRS withholding, or
  • Authorized in writing by the employee, and then only for a lawful purpose. 

With regard to the final paycheck, the issue of deductions typically involves the last category of an authorized and lawful deduction.  The best practice is to include a separate, specific and clear wage deduction acknowledgement signed by the employee. However, even when lawful and authorized, the employer must not reduce the employee’s salary to below the minimum wage. 

Additionally, the employer is responsible for ensuring properly withheld wages are applied toward their authorized purpose. Otherwise, they are considered unlawful deductions.

Get Legal Advice Early

Questions regarding the final paycheck can, and should, be addressed early.  Indeed, wage deductions are ideally covered at the beginning of an employment relationship.  Employers should seek the advice of an experienced employment lawyer early to gain advice on necessary paperwork and guidelines to fit the company’s needs and comply with the Texas Payday Law. If you are an employer or employee with additional questions regarding the Texas Payday Law or other employment matters, contact us here.

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