A Texas termination checklist has to move fast: the final paycheck is due within six calendar days of a discharge, unemployment and health-coverage notices go out at separation, and company access should be cut the same day. What follows is the sequence of legal obligations Texas employers owe a departing worker, from the paperwork you build before the meeting to the records you keep for years after.
Confirm the Termination Is Lawful
Texas is an at-will state. Either side can end the employment relationship at any time, for any lawful reason, with no advance notice. The limits on that flexibility are the ones that produce lawsuits, so confirm none of them apply before you proceed.
Title VII of the Civil Rights Act prohibits termination based on race, color, religion, sex, or national origin.1U.S. Equal Employment Opportunity Commission. Title VII of the Civil Rights Act of 1964 The Americans with Disabilities Act covers disability discrimination at employers with 15 or more employees.2U.S. Department of Labor. Employers and the ADA: Myths and Facts Texas Labor Code Chapter 21 mirrors those protections and bars retaliation against a worker for opposing a discriminatory practice, filing a complaint, or participating in a discrimination investigation.3State of Texas. Texas Labor Code 21.055 – Retaliation Firing a worker for reporting a workplace safety hazard or filing an OSHA complaint is separately illegal under federal law.
Build the File Before the Meeting
The termination meeting is short. The work happens beforehand. Pull the employee’s performance reviews, prior disciplinary warnings, and any written records of policy violations into a single file. If the firing is performance-based, that paper trail is the defense if a discrimination or retaliation claim comes later. Consistency matters: if your handbook promises three warnings before termination, this employee should have received three.
Then run the pay math. Review compensation agreements to determine exactly what is owed as of the separation date. Under Texas law, accrued vacation or PTO must be paid out only if a written company policy or agreement promises the payout; if your handbook is silent or says unused PTO is forfeited, you owe nothing on that line.4Texas Workforce Commission. Accrued Leave Payouts Commissions and bonuses follow the same logic: they are owed when every condition in the applicable agreement is met as of separation, and unless the agreement says otherwise, they pay on the schedule that was in place during employment.5Texas Workforce Commission. Texas Administrative Code 40 TAC 821.26 – Commissions or Bonuses Reconcile any outstanding advances or draws now.
Meet the Final Paycheck Deadline
Texas sets hard deadlines that depend on who ended the relationship. If you fire or lay the employee off, full payment is due no later than six calendar days after the discharge date. If the employee quits, payment is due on the next regularly scheduled payday.6State of Texas. Texas Labor Code 61.014 – Payment After Termination of Employment “Full payment” means regular wages, overtime, and any earned commissions or bonuses that have vested.
You can deliver the check by hand, by previously authorized direct deposit, or by mail to the employee’s last known address. Missing the deadline opens the door to a wage claim at the Texas Workforce Commission, which does investigate. An employer who intentionally refuses to pay wages after a demand commits a third-degree felony under Texas law.7State of Texas. Texas Labor Code 61.019 – Failure to Pay Wages; Criminal Penalty Six days goes quickly. Cut the check before the termination meeting whenever the schedule allows.
Know What You Can Deduct
Employers often want to dock the final check for an unreturned laptop, damaged equipment, or a uniform. Federal law limits that. Under the Fair Labor Standards Act, deductions for items that primarily benefit the employer are prohibited if they would push the employee’s effective pay below minimum wage or reduce required overtime compensation.8U.S. Department of Labor. Deductions From Wages for Uniforms and Other Facilities Under the Fair Labor Standards Act The rule applies even when the employee’s own negligence caused the loss, and you cannot avoid it by asking for cash reimbursement instead of a payroll deduction. Texas has no separate wage-deduction statute above the FLSA floor, so federal rules control. To recover the cost of company property, use a separate agreement or civil claim.
Deliver the Required Notices
Unemployment Notice
Texas employers must give departing employees written notice of their right to file an unemployment claim. The Texas Workforce Commission publishes an official sample notice covering both unemployment insurance and the Texas Payday Law.9Texas Workforce Commission. Exit Interviews – Notice of Discharge Hand it over at the exit meeting or mail it promptly. When the TWC later sends a Notice of Application or Request for Work Separation Information, respond on time through the employer portal; missing the response window forfeits your chance to contest the claim.10Texas Workforce Commission. Employer Response to Notice of Application for Unemployment Benefits
COBRA or Texas State Continuation
Which health-coverage notice you owe depends on headcount. At employers with 20 or more employees, federal COBRA applies. After a qualifying event such as termination, the employer has 30 days to notify the plan administrator, which then has 14 days to send the election notice to the former employee. When the employer is also the plan administrator, common at smaller companies, a combined 44-day window applies.11Centers for Medicare & Medicaid Services. COBRA Continuation Coverage Questions and Answers The employee then has 60 days to elect. Coverage lasts 18 months after a termination or reduction in hours, or 29 months if the employee qualifies as disabled under Social Security during the first 60 days of COBRA coverage. The former employee pays the full premium plus up to a 2% administrative fee.12U.S. Department of Labor. An Employer’s Guide to Group Health Continuation Coverage Under COBRA
Employers with fewer than 20 employees are not subject to federal COBRA but are covered by Texas state continuation. Under the state rules, the departing employee and covered dependents can stay on the group plan for up to nine months.13Texas Department of Insurance. COBRA and State Continuation Employees who exhaust federal COBRA can also qualify for an additional six months of state continuation.
Health Savings Account
An HSA belongs to the employee. Funds are fully portable and remain the employee’s property after separation. Tell the employee two things at exit: your company may stop covering administrative fees on the account, and new contributions require ongoing enrollment in an HSA-eligible health plan (which can include COBRA coverage).
Handle Severance and Releases Correctly
If you’re offering severance in exchange for a signed release of claims, the release is generally enforceable in Texas. When the employee is 40 or older, though, the Older Workers Benefit Protection Act imposes specific conditions on any waiver of age discrimination claims:
- Written in plain language the average eligible signer can understand.
- Specific reference to rights under the Age Discrimination in Employment Act.
- New consideration beyond what the employee was already entitled to, typically severance pay.
- Written advice to consult a lawyer before signing.
- At least 21 days for the employee to review the agreement, or 45 days if the release is part of a group layoff or exit incentive program.
- A 7-day revocation window after signing that cannot be shortened.14eCFR. 29 CFR 1625.22 – Waivers of Rights and Claims Under the ADEA
Miss any condition and the release is voidable: the employee keeps the severance and can still sue. For group terminations, the employer must also disclose the job titles and ages of everyone eligible and not eligible for the program. Even for employees under 40, giving reasonable review time, providing new consideration, and recommending attorney consultation makes the release harder to challenge later.
Withhold Taxes on Final Pay and Severance
Regular final wages go on a W-2 with normal income tax and FICA withholding, like any other pay period. Severance pay is classified by the IRS as supplemental wages, which gives you two withholding options: a flat 22% federal income tax rate, or aggregation with the employee’s most recent regular paycheck and withholding on the combined total. Supplemental wages above $1 million in a calendar year must be withheld at 37%.15Internal Revenue Service. Publication 15 (Circular E), Employer’s Tax Guide Severance is also subject to Social Security and Medicare taxes unless the employee has already hit the Social Security wage base for the year. Report all final wages and severance on the W-2 for the year of payment, even if the termination happened earlier.16Internal Revenue Service. Form W-2 and Form 1099-MISC Filed for the Same Year
Retrieve Property and Cut Access the Same Day
Property collection happens during or immediately after the termination meeting. Build a checklist of what the employee was issued: building access badges, parking passes, laptops, phones, keys, and any proprietary documents or client files. Use a return-of-property form and get a signature so there is a record of what came back.
IT changes happen at the same time. Disable email, internal servers, cloud platforms, and any remote-access tools before the employee leaves the building. A delay of a few hours creates real exposure for client data and sensitive business information. For remote workers, arrange a shipping method and set a return deadline in writing.
If the departing employee signed a non-compete or non-solicitation agreement, hand them a copy at the meeting and note the delivery in your termination records. Under Texas law, a non-compete is enforceable only if it was part of an otherwise enforceable agreement and has reasonable limits on time, geography, and scope.17State of Texas. Texas Business and Commerce Code 15.50 – Criteria for Enforceability of Covenants Not to Compete If you plan to enforce, talk to counsel before the meeting so you can communicate clearly about what the restrictions are and when they expire.
Give WARN Act Notice for Mass Layoffs
Large layoffs trigger a separate obligation. The federal Worker Adjustment and Retraining Notification Act covers employers with 100 or more full-time employees and requires at least 60 calendar days of advance written notice before a plant closing or mass layoff.18Office of the Law Revision Counsel. 29 USC 2101 – Definitions; Exclusions From Definition of Loss of Employment A plant closing means shutting down a site and losing 50 or more employees within a 30-day period. A mass layoff means cutting at least 500 workers at one site, or cutting 50 to 499 workers if that group is at least a third of the active workforce.
Two narrow exceptions allow shorter notice. Unforeseeable business circumstances covers sudden events outside the employer’s control, such as a major client abruptly canceling a contract; even then, you must give as much notice as practical and explain in writing why 60 days was not possible.19eCFR. 20 CFR 639.9 – When May Notice Be Given Less Than 60 Days in Advance The faltering-company exception applies only to plant closings, where the employer was actively seeking financing that would have prevented the shutdown and reasonably believed that notice would scare off the deal.
Violating the WARN Act costs each affected employee back pay and benefits for every day of the violation, up to 60 days.20Office of the Law Revision Counsel. 29 USC 2104 – Administration and Enforcement of Requirements of This Chapter Texas has no state-level WARN law, so the federal statute is the only notice obligation.
Keep the Records
Federal regulations require payroll records (earnings, hours, and deductions) to be retained for at least three years from the last date of entry. Supporting time records such as daily clock-in and clock-out sheets must be kept for at least two years.21eCFR. 29 CFR Part 516 – Records to Be Kept by Employers The IRS separately requires four years of employment tax records, and ERISA benefits records must be kept for six years. Holding everything for at least four years covers most audit windows and aligns with the statute of limitations on many employment claims. Keep the personnel file, performance documentation, and termination paperwork itself for the same period. If a former employee files a discrimination charge, a complete record of the events leading to the termination is your single most important defense.