Carrington, Coleman, Sloman & Blumenthal, L.L.P.

1

GENERAL PRINCIPLES

Forums For Adjudicating Employment Disputes

The State of Texas does not have specialized labour courts. Instead, employment disputes can be litigated in state and federal courts and arbitration tribunals located in Texas.


The Main Sources Of Employment Law

Relevant Texas statutes are located in the Texas Labor Code and include the following: Chapter 21 of the Texas Labor Code (commonly referred to as the Texas Commission on Human Rights Act (“TCHRA”)), the Texas Workers’ Compensation Act, the Texas Payday Law, and the Texas Unemployment Compensation Act. In many instances, federal law will govern an employment matter on which Texas law remains silent.

The TCHRA prohibits employers with 15 or more employees from discriminating against individuals on the basis of race, color, disability, religion, sex, national origin, or age, and further prohibits employers from retaliating against individuals for engaging in protected activity. The TCHRA also prohibits discrimination or retaliation by employment agencies and labor organizations. The TCHRA is enforced by the Texas Workforce Commission’s civil rights division, and persons who believe a violation of the Act has occurred must file a complaint with the Commission no later than 180 days after the date the alleged unlawful practice occurred.

The Texas Workers’ Compensation Act provides a statutory framework for employers to elect to provide workers’ compensation coverage or risk being subject to civil suit in the event of an employee’s injury. Under the Act, workers’ compensation insurance may be provided through a licensed insurance company or employers may choose to self-insure. An employer who opts out of the statutory framework cannot obtain an enforceable pre-injury waiver of the right to sue the employer for on-the-job injuries.

The Texas Payday Law provides that, unless an employee agrees in writing to accept payment of wages in kind or another form, wages must be paid to an employee who renders services for the employer. An employee who feels that she has not been paid all wages earned may file a complaint with the Texas Workforce Commission no later than 180 days after the date the claimed wages became due for payment.

The Texas Unemployment Compensation Act provides a fund to provide monetary assistance for unemployed or partially unemployed individuals who qualify for assistance.

United States federal law, however, remains a principal source of employment law in Texas, as do general principles of common law and contract law.


National Law And Employees Working For Foreign Companies

Federal law and treaties govern whether United States federal law will apply to employees of foreign companies. Employees who work in the United States or its territories are protected by the United States civil rights laws whether they work for a domestic or foreign employer. One exception to the rule occurs when the employer is not a United States employer and is subject to a treaty or other binding international agreement that permits the company to prefer its own nationals for certain positions. See, e.g., Convention of Establishment between United States and France, 11 U.S.T. 2398, T.I.A.S. No. 4625, Article VI (1959) (France); Treaty of Friendship, Commerce, and Navigation, 8 U.S.T. 2217, T.I.A.S. No. 3947 (1956) (Korea); Treaty of Friendship, Commerce and Navigation, 4 U.S.T. 2063, T.I.A.S. No. 2863, Article VIII (1953) (Japan).


National Law And Employees Of National Companies Working In Another Jurisdiction

A national company with a presence in multiple states often must analyze which state’s law governs a particular employment matter. Texas law provides that the law of the state/union with the most significant relationship to the particular substantive issue will be applied to resolve that issue. In most instances, parties may contractually agree as to what law will apply to employment-related disputes.


Data privacy

Under federal law, the Freedom of Information Act protects from public disclosure certain employee information furnished by employers to federal government agencies, such as payroll information. Texas has a similar law, the Public Information Act, which protects from disclosure sensitive employee information furnished by employers to the Texas Workforce Commission (“TWC”). Since January 1, 2006, Texas employers are generally prohibited from including social security numbers (“SSNs”) on any materials sent in the mail. Tex. Bus. & Comm. Code § 501.001. An exception exists for the mailing of any official government forms that require the employer to include SSNs, such as W-2s and quarterly wage reports from the IRS and TWC. Additionally, Texas law requires a business that loses sensitive personal information of customers, employees, or others through hacking or other means of unauthorized acquisition by others to promptly notify the victims of such a breach of security, so that the victims can take steps to protect themselves from identity theft. Tex. Bus. & Comm. Code § 521.053.

2

HIRING THE EMPLOYEE

Legal Requirements As To The Form Of Agreement

Texas has no formal legal requirements as to the form of agreement upon the commencement of employment, and many Texas employees do not have a written employment agreement.

A Texas employee who is hired for an indefinite period of time is known as an “at-will” employee.


Mandatory Requirements
  • Trial Period

    • Texas has no mandatory requirements relating to trial or probationary periods of employment.

  • Hours Of Work

    • Texas has no mandatory requirements relating to hours of work, except there are laws regarding the number of work hours that employees of the State of Texas must work. Full-time employees of the State of Texas must work forty (40) hours per week. Tex. Gov’t Code Ann. § 658.001-.002. Employees of the State of Texas who are not subject to the Fair Labor Standards Act must receive compensatory time for hours worked in excess of forty (40) per week. Id. § 659.016. A private employer should refer to the federal Fair Labor Standards Act for requirements concerning overtime, minimum wage requirements, and other wage issues including employees who are exempted from overtime pay requirements.

  • Special Rules For Part-time Work

    • There are no special Texas rules governing a private employer’s use of part-time workers. Private employers should refer to the federal Affordable Care Act to determine requirements for payment of health benefits to part-time employees. Part-time public employees who work for the State of Texas do have special rules governing pay issues. Tex. Gov’t Code §§ 658.009; 659.019.

  • Earnings

    • The Texas Minimum Wage Act applies to employees who are not covered by federal minimum wage rules. Employers must follow the law that grants the greatest benefit to the employee. The Texas Minimum Wage Act mandates that employers pay employees the federal minimum wage provided for in section 6 of the Fair Labor Standards Act (“FLSA”). Tex. Lab. Code § 62.051. Exempt from this requirement are persons covered by the FLSA, as well as certain (i) employees of religious or charitable organizations, (ii) domestic servants, (iii) inmates, (iv) youth and students, (v) professional or executive employees, (vi) public officials, (vii) family members, (viii) dairy farmers, and (ix) employees of seasonal recreational establishments. Tex. Lab. Code § 62.151-.160.

  • Holidays/Rest Periods

    • The Texas Payday Law requires that if an employer enters into a written agreement with the employee regarding vacation pay, or has a written policy regarding the same, the employer must adhere to that agreement or policy. Further, accrued, unused vacation pay may have to be paid at termination if required by the employer’s policy.

  • Minimum/Maximum Age

    • Texas law provides for a minimum age of 14 (subject to certain, limited exceptions). Tex. Lab. Code § 51.011. The Texas Labor Code includes child labor laws that – in most cases – reflect the federal child labor laws. Where federal and state child labor laws differ, the more restrictive regulation is applicable. There are no statutory rules relating to maximum age, except that Texas law explicitly allows compulsory retirement programs for certain classes of employees who are over 65, when a number of additional requirements are met.

  • Illness/Disability

    • The Texas Payday Law requires that if an employer enters into a written agreement with the employee regarding sick leave pay, or has a written policy regarding the same, the employer must adhere to that agreement or policy. As with federal law, Texas law (Texas Labor Code Chapter 21) states that if an employee with a disability can perform the essential functions of the job position with or without a reasonable accommodation, the employer cannot refuse to hire the employee because of the underlying disability. In addition, the employer may be required to provide a reasonable accommodation to assist an employee in completing the hiring process. By way of example, an employer may be required to provide a sign language interpreter for a deaf applicant during an interview.

  • Location Of Work/Mobility

    • Texas has no mandatory requirements relating to location of work/mobility.

  • Pension Plans

    • Texas has no mandatory requirements relating to pension plans.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)

    • Texas has no mandatory requirements relating to parental rights (pregnancy/ maternity/ paternity/ adoption). An employer with 50 or more employees may be subject to the federal Family and Medical Leave Act, which may provide for up to 12 weeks of unpaid leave if an eligible employee adopts or gives birth.

  • Compulsory Terms

    • There are no other compulsory terms which must be included in an employment agreement.

  • Non-Compulsory Terms

    • The parties are free to agree to other non-compulsory provisions in an employment agreement.


Types Of Agreement

The following agreements may be entered between an employer and employee in Texas.

Non-Competition Agreement – Pursuant to Section 15.50 of the Texas Business and Commerce Code, an employer may require that its employees sign agreements that will limit their post-termination ability to compete with the employer. These agreements can become complicated, and employers should retain Texas counsel to make certain that the agreement is enforceable and reasonable.

Non-Solicitation Agreement – An employer may enter into an agreement that limits an employee’s post-termination ability to solicit co-workers and/or customers to benefit competitors. These non-solicitation agreements should comply with the Texas Business and Commerce Code.

Confidentiality Agreement – An employer may enter into an agreement that restricts an employee’s ability to use or disclose confidential information/trade secrets both during and after employment.

NOTE: The Texas Uniform Trade Secrets Act also creates employee obligations to maintain an employer/former employer’s confidential information.

Arbitration Agreement – Under the federal Arbitration Act and/or the Texas Arbitration Act, an employer may require employees to resolve disputes via arbitration rather than via litigation. There is a substantial body of case law concerning enforcement of employer/employee arbitration agreements.


Secrecy/Confidentiality

Texas common law was the primary source of protection for business trade secrets until Texas enacted the Texas Uniform Trade Secrets Act (“TUTSA”) (effective September 1, 2013). TUTSA is patterned on the Uniform Trade Secrets Act, which has been adopted by at least 46 other states. TUTSA provides a statutory definition for “trade secrets” and creates the legal standards for pursuing claims of misappropriation of trade secrets. In addition, TUTSA determines the equitable and legal relief available to litigants including damages, attorneys’ fees, exemplary damages, and injunctive relief.


Ownership of Inventions/Other Intellectual Property (IP) Rights

Federal law generally governs the ownership of inventions and other intellectual property rights, but the Texas Trademark Act and Texas common law provide additional protections. Generally, the Texas Trademark Act permits registration of trademarks with the Texas Secretary of State which is similar to United States federal law under the Lanham Act. In fact, the Texas Act was recently revised with the intention of making the Texas Act substantially consistent the Lanham Act. In addition, Texas common law recognizes various causes of action that provide protection to intellectual property rights, including claims for misappropriation, “palming off” (i.e., common law trademark infringement), and unfair competition.


Pre-Employment Considerations

Texas employers should consider the following during the pre-employment process:

Federal and Texas law prohibits employers from discriminating against job applicants on the basis of race, color, gender, age, national origin, religion, or disability status. See Title VII of the Civil Rights Act; Texas Commission on Human Rights Act. Federal law further prohibits discrimination against job applicants on the basis of sexual orientation or gender identity. Bostock v. Clayton County , 590 U.S. __, 140 S.Ct. 1731 (2020).

Employers operating under government contracts or receiving subsidies from Texas state or local government agencies cannot knowingly employ undocumented workers. These employers must use the federal E-Verify system to determine employees’ and subcontractors’ work eligibility. Tex. Gov’t Code § 2264.001, et seq. Note that federal E-Verify rules prohibit all employers from using E-Verify to determine new employees’ work eligibility until after they accept a job offer and complete federal Form I-9.

Employers can obtain credit and character reports, also known as consumer and investigative consumer reports, from consumer reporting agencies for job applicants as authorized by the federal Fair Credit Reporting Act and Texas Business & Commerce Code §§ 20.02; 20.05. However, employers must follow the procedural and notification requirements created by this statute.

Texas employers can request criminal background checks or criminal history records for job applicants from the Texas Department of Public Safety and other Texas criminal justice agencies. Employers cannot obtain expunged arrest records, criminal proceedings covered by court nondisclosure orders, or juvenile records for job applicants, and job applicants are not required to provide such information on their job applications. Employers cannot be sued for negligently hiring or inadequately supervising employees solely based on evidence that they were convicted of an offense, but note that the definition of employees does not include independent contractors. Tex. Lab. Code § 91.001. However, employers can still be subject to lawsuits when the employer knew or should have known about employees’ convictions for (1) offenses committed while performing duties or under conditions that are substantially similar to their reasonably expected job duties or conditions; (2) offenses listed in Texas Code of Criminal Procedure art. 42.12, § 3g; or (3) sexually violent offenses. Additionally, employers can be subject to lawsuits regarding employees’ misuse of non-employer funds or property if, at the time of hire, (1) they had been convicted of crimes involving fraud or misuse of funds or property; and it was foreseeable that their position would involve fiduciary duties related to managing funds or property. Tex. Civ. Prac. & Rem. Code § 142.002.


Hiring Non-Nationals

Texas has no laws regarding the hiring of non-nationals. Federal immigration law governs the hiring of non-nationals.

 

Hiring Specified Categories Of Individuals

Texas child labor laws set out in the Texas Labor Code provide certain rules regarding the employment of individuals 15 years old and under. Specifically, the Labor Code makes it unlawful for any person to employ a child less than 14 years of age. Generally, children aged 14 or 15 may be employed, but they are restricted from working more than 8 hours in one day or 48 hours in one week. Tex. Lab. Code § 51.013. Moreover, a person cannot employ a child aged 14 or 15 who is enrolled in school to work between the hours of 10 p.m. and 5 a.m. on days followed by a school day or between the hours of midnight and 5 a.m. on days not followed by a school day.


Outsourcing And/Or Sub-Contracting

Generally, Texas has no specific rules regarding outsourcing and/or sub-contracting. However, the Texas Labor Code has certain requirements for “staff leasing” companies, and dictates that staff leasing companies share certain employment obligations with the client company. See Chapter 91 of the Texas Labor Code.

3

MAINTAINING THE EMPLOYEE RELATIONSHIP

Changes To The Contract

When an employee is an employee-at-will, an employer can change the terms of employment at any time, and if the employer provides the employee unequivocal notice of the change and the employee continues employment, he/she is deemed to have accepted the change in conditions of employment. If, however, the employee is not an at-will employee, the parties typically must consent to any changes to the employment agreement.


Change In Ownership Of The Business

There are no specific rules which apply when there is a change in ownership of the business.


Social Security Contributions

Federal law governs social security contributions.


Accidents At Work

The Texas Workers’ Compensation Act applies to employees who are injured while on the job. The Act provides a statutory framework for employers to elect to provide workers’ compensation coverage or risk being subject to civil suit in the event of an employee’s injury. Under the Act, workers’ compensation insurance may be provided through a private insurance carrier or employers may choose to self-insure. Employees entitled to workers’ compensation benefits are entitled to full medical benefits with no time or monetary limitations. In addition, employers are prohibited from retaliating against employees who have filed for workers’ compensation benefits.


Discipline And Grievance

Texas has no specific rules governing the discipline of employees and/or employee grievances.


Harassment/Discrimination/Equal pay

The TCHRA prohibits discrimination, harassment, and unequal pay in employment based on race, color, disability, religion, sex, national origin, or age, and further prohibits employers from retaliating against individuals for engaging in protected activity. “Employer” is defined in the TCHRA as an entity employing 15 or more employees. Tex. Lab. Code § 21.002(8). The TCHRA also prohibits discrimination or retaliation by employment agencies and labor organizations. The TCHRA is enforced by the Texas Workforce Commission’s civil rights division, and persons who believe a violation of the Act has occurred must file a complaint with the Commission no later than 180 days after the date the alleged unlawful practice occurred. Federal law further prohibits discrimination in employment on the basis of sexual orientation or gender identity. Title VII of the Civil Rights Act.


Compulsory Training Obligations

In general, Texas has no compulsory training obligations.


Offsetting Earnings

The Texas Payday Law permits employers to offset earnings against an employee’s debts if authorized by the employee in writing. Tex. Lab. Code § 61.018.


Payments For Maternity And Disability Leave

Texas law does not provide for paid maternity or disability leave.


Compulsory Insurance

Texas law does not mandate that employers provide insurance for their employees.


Absence For Military Or Public Service Duties

Absences for federal military duty are governed by federal law (USERRA), and Texas law extends the same protections to state military duty. Tex. Gov’t Code § 437.213. In addition, Texas law provides some protections for employees who engage in other public service duties. For example, under the Texas Civil Practice and Remedies Code, employees must be provided time off to serve as jurors, and it is unlawful for an employer to terminate an employee because the employee serves as a juror. Also, under the Texas Election Code, employees must be given time to vote without any penalty if voting polls are not open for two consecutive hours outside the employee’s workday.


Works Councils or Trade Unions

Texas is a right-to-work state. Therefore, denial of employment on the basis of membership or non-membership of a union is prohibited. The Texas Labor Code provides some rules regarding basic labor union activities. Most labor disputes, however, will be governed by federal law.


Employees’ Right To Strike

Labor disputes are generally governed by federal law.


Employees On Strike

Labor disputes are generally governed by federal law.


Employers’ Responsibility For Actions Of Their Employees

This area of employment practice is governed by Texas common law. Under Texas common law, an employer can generally be held liable for the acts of its employees under a theory of vicarious liability, respondent superior, negligent hiring, supervision, and/or retention, or vice-principal liability. Employers are generally not liable for the acts of an off-duty employee. There are, however, exceptions to this general rule. Exceptions include when the employee commits a tort on the employer’s premises, or with the employer’s property. In certain circumstances, an employer may also be liable for the actions of an independent contractor.

4

FIRING THE EMPLOYEE

Procedures For Terminating the Agreement

There are no rules or specific procedures relating to the specific form for terminating an at-will employee. If an employee is not an employee-at-will, however, the employer should review any contract for special procedures and any limitations on termination. Likewise, if an employee is covered by a collective bargaining agreement, the employer should review the CBA.


Instant Dismissal

An employer can terminate an agreement by instant dismissal. As Texas is an “at-will” employment state, an employer may terminate the employment relationship for a good reason, bad reason, or no reason at all, so long as that reason is not discriminatory or otherwise unlawful. If an employee is not an employee-at-will, however, the terms of the employment agreement will govern termination of employment.


Employee's Resignation

An agreement can be terminated by the employee’s resignation.


Termination On Notice

The parties can terminate an agreement on notice. There is no minimum period of notice required under Texas law.


Termination By Reason Of The Employee's Age

An agreement generally cannot be terminated by reason of the employee’s age because age discrimination is prohibited by the Texas Commission on Human Rights Act (as well as the federal Age Discrimination in Employment Act). Except for limited exceptions, Texas law prohibits compulsory retirement programs.


Automatic Termination In Cases Of Force Majeure

Under Texas law, an employment agreement can automatically be terminated in cases of force majeure.


Collective Dismissals

Texas has no law preventing an employer from conducting layoffs or closing a plant or jobsite. However, companies that have more than 100 employees are supposed to follow the Worker Adjustment and Retraining Notification (“WARN”) Act in connection with mass layoffs or a plant closure. The definition of “mass layoff” and “plant closure” require careful analysis, and employers should consult the WARN Act and its regulations for further details. 29 U.S.C. §§ 2101–09; 20 CFR § 639.


Termination By Parties’ Agreement

Employment can be terminated by the parties’ agreement.


Directors Or Other Senior Officers

There are no separate rules for firing directors or other senior officers.


Special Rules For Categories Of Employee

Unless pursuant to a collective bargaining agreement, there are no other categories of employee for whom special rules apply on termination.


Whistleblower Laws

Texas does not have a general whistleblower law applicable to private employers, but other statutes prohibit private employers from retaliating against employees who see and report misconduct or engage in protected activity. See Texas Commission on Human Rights Act, Tex. Labor Code § 21.055 (protecting employees who report conduct prohibited by the anti-discrimination laws); Tex. Labor Code § 451.001 (protecting employees who make good faith claims for workers’ compensation).


Specific Rules For Companies in Financial Difficulties

The federal Bankruptcy Code governs, and, in certain circumstances, the federal Worker Adjustment and Retraining Notification Act may require advance notice prior to a mass layoff or plant closure.


Special Rules For Garden Leave

Texas has no laws concerning garden leave.


Restricting Future Activities

Under Texas common law and the Texas Business and Commerce Code, there are rules about clauses that restrict future activities. Specifically, the Texas Business and Commerce Code provides that provisions in employment contracts restricting an employee’s right to compete after termination are enforceable, provided they are ancillary to or part of an otherwise enforceable agreement at the time the agreement is made and contain reasonable limitations that do not impose a greater restraint than necessary to protect the goodwill or other business interest of the promise. Thus, any restrictions preventing competition must be reasonable as to duration, geographic scope, and scope of activity restrained. Additionally, based on a recent Texas Supreme Court case, it appears that it will now be easier to enforce certain non-compete agreements in Texas. However, this continues to be a developing area of Texas law, and employers may want to consult Texas counsel when determining whether a non-compete agreement is enforceable and/or reasonable.


Severance Payments

Unless specified under company policy or contract, no rules apply in relation to severance payments. The Texas Payday Law provides that, if company policy or contract provides for a particular severance payment, employers must comply with that policy or contract. However, to obtain a release of potential claims under the federal Age Discrimination in Employment Act, the employer needs to comply with the Older Workers’ Benefit Protection Act.


Special Tax Provisions And Severance Payments

Federal tax law governs the treatment of severance payments.


Allowances Payable To Employees After Termination

Employers are not required to contribute toward any allowances payable to employees after termination.


Time Limits For Claims Following Termination

There are time limits for certain claims following termination. Claims under the TCHRA must be brought within two years of filing a complaint with the Texas Workforce Commission – Civil Rights Division (a complaint must be made to the Texas Workforce Commission – Civil Rights Division within 180 days of the alleged discriminatory act). It should be noted, however, that a claim must be brought within 60 days of the employee’s receipt of a right-to-sue letter from the Commission. A workers’ compensation retaliation claim under the Texas Workers’ Compensation Act must be brought within two years. A claim for unpaid wages under the Texas Payday Law must be brought within 180 days of the date that the wages claimed became due for payment. Any claim for breach of an employment contract must generally be brought within four years of the breach.

5

GENERAL

Specific Matters Which Are Important Or Unique To This Jurisdiction

Employers should note that Texas has its own “COBRA” law which supplements federal law on this subject. The Small Employer Health Insurance Availability Act requires health benefit continuation rights for employees (and their beneficiaries) of company health plans if the company has two to 50 employees. The state law is similar to the federal COBRA law, but with a shorter continuation period of only six months following the employee’s separation from employment.

If the employee is covered by COBRA, the employee’s six months of entitlement to coverage begins after the federal period expires.



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Mike Birrer
Carrington, Coleman, Sloman & Blumenthal, L.L.P.
United States


Chelsea Glover
Carrington, Coleman, Sloman & Blumenthal, L.L.P.
United States


Disclaimer:

© 2021, Carrington Coleman Sloman & Blumenthal LLP. All rights reserved by Carrington Coleman Sloman & Blumenthal LLP as author and the owner of the copyright in this chapter. Carrington Coleman Sloman & Blumenthal LLP has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021