Forums For Adjudicating Employment Disputes

The State of Texas does not have specialised 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 Labour Code and include the following: Chapter 21 of the Texas Labour 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 (including on the basis of hair texture), colour, disability, religion, sex, national origin, or age, and further prohibits employers from retaliating against individuals for engaging in protected activity.

However, recent TCHRA amendments have made the law more favourable to those alleging sexual harassment, expanding the protections beyond the current federal law (Title VII). Unlike the federal law, the TCHRA now provides for individual liability (i.e., those engaging in the conduct can be sued as well as those who fail to take action in response to complaints). And, an employer is defined as having one or more employees, which is different than federal law which defines an employer has having fifteen or more employees. Additionally, the amendments require an immediate response and appropriate remedial action, which is different than federal law which requires “prompt” remediation action.

The TCHRA also prohibits discrimination or retaliation by employment agencies and labour organisations. 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 (or 300 days for sexual harassment claims).

The Texas Workers’ Compensation Act provides a statutory framework for employers with five or more employees to elect to provide workers’ compensation coverage or risk being subject to civil suit in the event of an employee’s injury. The Act is administered by the Division of Workers Health & Safety of the Texas Workers' Compensation Commission. Under the Act, workers’ compensation insurance may be provided through a licensed insurance company or employers may choose to self-insure if employers comply with certain requirements. 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). Public international organizations, such as the World Bank and the International Monetary Fund, are generally not subject to United States civil rights laws unless immunity has been waived by the organization or by Presidential Order.

National Law And Employees Of National Companies Working In Another Jurisdiction

A national company with a presence in multiple states often must analyse 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 some 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 1 January 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 unauthorised acquisition by others to promptly notify any individual whose sensitive personal information is reasonably believed to have been acquired by an unauthorized person. Tex. Bus. & Comm. Code § 521.053. Texas also has statutory protections for employees’ biometric identifiers. Tex. Bus. & Comm. Code § 503.001.

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; generally, Texas employment contracts are enforceable so long as they comply with the state’s rules of contract formation. 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, meaning that their employment can be ended by the employer or employee with or without cause or notice.

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 Labour Standards Act (“FLSA”) must receive compensatory time for hours worked in excess of forty (40) per week at a rate no less than one and one-half times the regular rate of pay at which they are employed. Id. §§ 659.015-016. A private employer should refer to the federal Fair Labour 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 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 organisations; (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. Further, Texas law contains special minimum wage restrictions for certain employees, such as service employees who receive tips, stating that employers must follow FLSA guidelines. Tex. Lab. Code Ann. § 62.052.

Employers must designate set paydays and conspicuously post notices indicating the same; if they fail to do so, paydays will be the 1st and 15th of each month. Tex. Lab Code § 61.012.

• Holidays/Rest Periods

Employers must pay wages to exempt employees at least once a month and non-exempt employees at least twice a month. If wages are paid twice a month, each pay period must consist as nearly as possible of an equal number of days. Tex. Labor Code Ann. § 61.011. At the end of each pay period, an employer shall give each employee a written earnings statement covering the pay period that must be signed by the employer and must show: (1) the employee’s name; (2) rate of pay; (3) total amount of pay earned by the employee during the pay period; (4) any deduction made from the employee’s pay and the purpose of the deduction; (5) amount of pay after all deductions are made; and (6) total number of hours worked if the employee is paid by the hour or units produced if the employee’s pay is computed on a piece rate. This information may be stated on a check voucher or bank draft. Tex. Lab Code § 62.003. Moreover, Texas law governs when to pay a departing employee, and when the departing employee must receive their final payment is determined by the circumstances under which their employment ended. If an employee is discharged or otherwise involuntarily separated, their final payment must be made within six calendar days of discharge. Tex. Labor Code 61.014(a). If the employee quits or otherwise leaves voluntarily, their final payment must be made on the next regularly scheduled payday following the effective date of separation. Id. § 61.014(b).

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. An employer’s policy can state that vacation will not be paid out upon termination of employment.

• Minimum/Maximum Age

Texas law provides for a minimum age of 14 (subject to certain, limited exceptions). Tex. Lab. Code § 51.011. The Texas Labour Code includes child labour laws that – in most cases – reflect the federal child labour laws. Where federal and state child labour 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 Labour 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. However, many employers choose to adopt remote work or hybrid work policies governing remote work for their employees.

• 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 a maximum 12 of weeks of unpaid leave in a twelve-month period if an eligible employee adopts or gives birth. Note that the federal Providing Urgent Maternal Protections for Nursing Mothers Act expands the federal workplace protections for women with a need to express breast milk; the Act requires employers of all sizes to provide reasonable break time and a private space for an employee to express breast milk for their nursing child for up to one year after the birth of the child.

• 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 non-compete covenant is enforceable and reasonable. Note that a non-competition agreement cannot stand alone and must be ancillary to an otherwise enforceable agreement, meaning, employers seeking to include these provisions typically include them in the employee’s employment agreement or other non-disclosure of confidential information or invention assignment agreement, with additional consideration to support the non-compete covenant.
• 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. More often than not, a non-solicitation agreement is interpreted under the same analysis as a non-competition agreement with regards to reasonableness of duration, scope, and geographic area of the restriction. Further, a non-solicitation agreement should not stand alone for the same reasons discussed under the non-competition agreement discussion above.
• 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 and the requirements for preparing such agreements.

Secrecy/Confidentiality

Texas common law was the primary source for protection of business trade secrets in Texas. The TUTSA is patterned on the Uniform Trade Secrets Act, which has been adopted by almost all other states. The TUTSA provides a statutory definition for “trade secrets” and creates the legal standards for pursuing claims of misappropriation of trade secrets. In addition, the 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 recognises 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

Federal and Texas law prohibits employers from discriminating against job applicants on the basis of race, sex (including pregnancy), colour, gender, age (40 or older), national origin, religion, disability (including known limitations related to pregnancy, childbirth, or related medical conditions), or genetic information (including family medical history) status. See Title VII of the Civil Rights Act; Age Discrimination in Employment Act; Americans with Disabilities Act; Pregnancy Discrimination Act; Pregnant Workers Fairness Act; Texas Commission on Human Rights Act. The laws further protect applicants and employees from retaliation (punishment) for filing a charge or complaint of discrimination, participating in a discrimination or harassment investigation or lawsuit, or opposing discrimination (for example, threatening to file a charge or complaint of discrimination). Federal law further prohibits discrimination on the basis of sexual orientation or gender identity. Bostock v. Clayton County, 140 S.Ct. 1731 (2020). Though the Texas Supreme has not yet addressed the issues, at least one Texas Court of Appeals has held that Texas state law also prohibits discrimination on the basis of sexual orientation or gender identity. Tarrant Cnty. Coll. Dist. v. Sims, 621 S.W.3d 323 (Tex. App.—Dallas 2021, no pet.).

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 authorised 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, 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 places no additional employment verification procedures on private employers beyond Federal I-9 compliance. Federal immigration law governs the hiring of non-nationals.

Hiring Specified Categories Of Individuals

Texas child labour laws set out in the Texas Labour Code provide certain rules regarding the employment of individuals 15 years old and under. Specifically, the Texas Labour Code makes it unlawful for any person to employ a child less than 14 years of age except as specifically authorized by statute. 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. Texas and Federal law also prohibit children ages 14 – 17 from certain hazardous occupations, including mining and roofing operations. See 29 C.F.R. § 570.1, et seq.

Outsourcing And/Or Sub-Contracting/Temporary Agency Work

Generally, Texas has no specific rules regarding outsourcing and/or sub-contracting. However, the Texas Labour Code has certain requirements for “staff leasing” companies and dictates that staff leasing companies share certain employment obligations with the client company. The Staff Leasing Services Act governs co-employment relationships between the professional employer organization (“PEO”) (previously referred to as “staff leasing” or “employee leasing” companies) and the client; the relationship involves a contractual allocation and sharing of employer responsibilities between the PEO and its client (typically with the PEO employing the employees, providing benefits and administering payroll and the client supervising the employee and making employment decisions regarding the employee). See Chapter 91 of the Texas Labour Code.