I get lots of questions about final paychecks in Texas, so I thought I would give you a quick review of the Texas Payday Law.
Your employees must receive their final paychecks on the sixth calendar day after they are laid off, discharged, fired or otherwise terminated involuntarily, or on the next regular payday if they voluntarily quit. So if you mail the final paychecks, you must mail them early enough that they are available to your former employees by the deadline.
Do you have to include pay for accrued but unused vacation and/or sick leave in the employee’s final paycheck? Not in Texas. The employer can have a written policy or a standard practice of not paying unused vacation, sick leave or paid time off, or paying them only for employees who leave in good standing (two weeks notice and no disciplinary problems), or paying them to everyone who leaves. Just be consistent and put your policy in writing with distribution to every employee and the Texas Workforce Commission will back you up if a complaint is made.
Can you “hold” an employee’s final paycheck past the sixth day or the next regular payday because he still hasn’t turned in his uniforms, his keys or other company property? In a word, “NO”. Texas law does not allow any holding of paychecks. As an employer, you have an obligation to pay every time, on time.
So what do you as an employer do to make sure that equipment, uniforms, or store inventory don’t disappear when the employee leaves your company? And what if the employee still owes you money for a salary advance?
Long before the employee is terminated, you must get his written permission to make deductions from his final paycheck for items that can be lawfully withheld, such as uniforms, salary advance repayment, personal charges on company accounts, damaged or lost equipment, etc. If you have a wage deduction authorization agreement signed by the employee ahead of time, you may withhold the items enumerated in the agreement from that final paycheck. The Texas Workforce Commission has even drafted a form for you to use, which you can access by clicking here.
If you don’t have a written authorization or if the final paycheck won’t cover all of the amounts owed to you by the employee, you cannot hold his paycheck hostage until you receive repayment. You must send him his final paycheck on time and then turn around and sue him in small claims court to get the amounts owed to you repaid.
If you pay an employee bonuses or commissions, you must have a written agreement with the employee outlining how those bonuses or commissions will be paid if they are collected and due after the employee leaves your employment. A simple written agreement regarding commissions can help you avoid fighting a Payday Law claim with the Texas Workforce Commission which will ensue if your terminated salesperson disagrees with your interpretation of how much he is owed in commissions after he leaves your company.