Guide to Texas employee benefits and HR rules

Is your organization compliant with Texas employment laws?

If you have a Texas-based company, or remote employees located in Texas, you need to understand the state’s benefits and HR compliance regulations. This guide will provide a general overview of the Texas laws for small to medium size businesses.

Topics covered in this guide include:

• What are employment laws in Texas?
• What are employee rights in Texas?
• Required and non-required employee benefits in Texas
• Wage laws in Texas
• Health insurance in Texas

What are employment laws in Texas?

The federal government sets the minimum requirements for employees regarding employee benefits and HR. But some states have their own employment laws, either strengthening federal laws or adding new protections altogether—and Texas is no exception.

In Texas, there are a few state-specific laws that employers must follow in addition to federal employment laws, such as:

• At-will employment
• Since 1888, Texas has been an “at-will” employment state. This means an employer can fire an employee at any time without employer notice and for any reason, unless they have a specific contract stating otherwise. Employers aren’t legally required to provide a reason for termination.
• However, The Texas Commission on Human Rights Act prohibits employers from firing employees based on discriminatory purposes, such as for their race, national origin, sex, color, religion, sexual orientation, gender, age, medical reasons, etc.
• Texas Right-to-Work Laws
• Under the Texas Labor Code, a person can’t be denied employment because of membership or non-membership in a labor union or other labor organization.
• Additionally, Texas laws protect employees from threats, force, intimidation, or coercion for choosing to either participate or not participate in a labor union.
• Texas Legal Holiday Laws
• Texas legal holidays include Confederate Heroes Day, Texas Independence Day, San Jacinto Day, and Lyndon Baines Johnson Day.
• State employees are entitled to a paid day off for both federal and Texas state holidays. 
• Texas Whistleblower Laws
• Texas whistleblower laws protect employees from employer retaliation. Texas generally defines employer retaliation as suspending, terminating, or taking other adverse action against an employee for reporting a violation. 
• Only public employees are protected from retaliation (some states protect both public and private employees). 
• Texas Child Labor Laws
• Children who are 16 and 17 years old may work in a variety of jobs, but can’t work in jobs deemed to be too hazardous.
• Children 14 and 15 years old may work in a variety of jobs, but are limited in the number of hours per day and per week they can work, particularly during the school season. 
• Children 13 years old or younger can’t work in Texas, except in limited situations.

Now that we’ve gone over a few Texas-specific laws, we’ll review the state’s employee rights.

What are employee rights in Texas?

Texas employees have certain rights under federal and state law. If you have or plan to hire employees in Texas, you'll need to know what rights your employees have, and don’t have, at your organization.

Some state rights include:

• Fair wages
• Employers must pay at least the federal minimum wage and follow federal overtime regulations. 
• Lunch breaks
• Employers aren’t required to give unpaid or paid lunch breaks to employees. However, if employers allow them, breaks lasting less than 20 minutes must be paid. Lunch breaks of 30 minutes or more don’t have to be paid. 
• Work breaks
• Employers must allow adequate restroom breaks for workers.
• Disclosure of previous employee information
• A former employer can only give a previous employee’s potential future employer the reason why the employee left (if the employee was terminated), the reason why the employee was terminated, the employee’s job performance, and information about the employee’s attendance, attitude, and effort.
• Employer deduction from paychecks
• Employers can’t deduct money from a worker’s paycheck to offset an employee’s error if the employee genuinely made the mistake.
• Safe workplace conditions
• According to the Occupational Safety and Health Act and the Texas Occupational Safety Act and Hazard Communication Act, employers must provide a workplace free from known dangers that could harm a worker. 
• Additionally, workers have a right to refuse to work in an unsafe environment.

Required and non-required employee benefits in Texas

Some employee benefits are required under Texas labor laws, in addition to federal regulations. However, some benefits that may be required in other states don’t apply in Texas. Many benefits are left up to the individual businesses’ discretion. 

Wage laws in Texas

Wages in Texas are subject to various state laws, but most are defined in the Texas Payday Law. We've compiled the essential requirements of the law to know below.

Minimum wage laws

Texas doesn’t have state-specific or local ordinances regarding minimum wage requirements. Therefore, they use the current federal minimum wage rate of $7.25 per hour. However, the Texas Minimum Wage Act allows employees to bargain with their employers for higher pay over the federal minimum wage rate. 

If an employer has an employee that lives on the business premises, the employer doesn’t have to pay the worker for any on-call job duties performed in addition to their regular working hours. Additionally, employers may count tips and the cost of meals and lodging toward the minimum wage rate.

Pay for meetings or training

The U.S. Department of Labor considers compensable time as "all the time during which an employee is necessarily required to be on the employer's premises, on duty, or at a prescribed workplace."

Therefore, employees must be paid for all time worked, whether that time is spent in meetings, training, or doing regular work.

Overtime pay

Texas follows the federal law for overtime pay. Under the FLSA, federal employees must receive overtime pay if they work more than 40 hours in one workweek. 

For every hour of overtime work, employees can be paid in one of two ways:

• Employees can be paid at a rate of 1.5 times their regular wages
• Employee can receive 1.5 hours of paid time off

Pay periods

Each exempt employee must be paid at least once a month. Non-exempt employees and other workers must be paid at least twice a month. Semi-monthly pay periods must be as evenly spaced within the month as possible. From there, employers can choose any paydays they want.

If an employer doesn’t designate paydays, paydays will be the first and 15^th of each month.

Bonuses or wages paid on a commission basis are due according to the terms of the agreement between the employee and employer.

Pay statements

At the end of each pay period, employers must give each employee a written statement containing the following information: 

• Employee's name
• Pay rate
• Total pay earned for the pay period
• Any deductions made and the purpose of the deductions
• Net pay after the deductions 
• Total number of hours worked

Pay delivery

Unless an employee agrees in writing to accept part or all of their wages in another form, wages must be paid in cash, by a check that is negotiable for cash on demand at full-face value, or by direct deposit.

Wages must be delivered to the employee at their workplace during regular working hours, mailed, or electronically deposited no later than payday. Delivery can also be made to any person authorized by the employee in writing.

Final pay

Employees must be paid in full on the next payday if they quit, and terminated employees must be paid in full within six days. If an employee isn’t paid on a payday for any reason, the employer must pay the wages on a different business day of the employee’s choosing.

An employee may be entitled to unused wages for fringe benefits, like vacation, holiday, sick leave, parental leave, or severance pay, if the employer provides these benefits at their organization in a prior written agreement.

Severance pay

Employers aren’t required to pay severance pay to any employee unless a severance package has been promised through a written agreement during the hiring process.

Wage deductions

Under state law, wages may be withheld only when the employer:

• Is required to do so by state or federal law (i.e., IRS withholding)
• Is ordered to do so by a court (i.e., child support payments)
• The employee's written authorization for the deduction and the purpose is lawful (i.e., for health or retirement benefits). 
• Written employee authorizations must meet certain requirements.

Unpaid wages

If an employee believes they’re due unpaid wages, they can submit a wage claim with the Texas Workforce Commission (TWC) no later than 180 days after the wages were due.

TWC investigates all claims to determine whether wages are owed to employees under the Texas Payday Law. If TWC determines that the employer must pay, the employer pays the TWC, and TWC pays the employees their wages. Both the person claiming unpaid wages and the employer have a right to appeal the determination. 

If TWC determines that an employer acted in bad faith by not paying wages, the employer may be issued an administrative penalty equal to the wages claimed or $1,000—whichever is less. The same penalty can be issued against an employee who files a wage claim in bad faith.

Health insurance in Texas

Like most states, Texas companies with fewer than 50 full-time equivalent employees (FTEs) aren’t required to offer health insurance. The Affordable Care Act (ACA) only mandates applicable large employers (ALE) with 50+ workers to provide health insurance with minimum essential coverage (MEC).

However, just because you’re not required to offer health benefits at your organization doesn’t mean you shouldn’t. After all, offering health benefits to your employees is a great way to attract and retain top talent.

To qualify for traditional group health insurance in Texas, your company typically needs at least two employees, including the owner. However, rising healthcare costs and minimum contribution and participation requirements have made it challenging for small to medium size businesses to offer a group plan.

Luckily, PeopleKeep offers some alternatives for small business owners who can't or choose not to provide group coverage in Texas. Let’s briefly dive into those options below.

Health reimbursement arrangement (HRA)

A health reimbursement arrangement (HRA) is an IRS-approved, employer-funded health benefit that allows you to reimburse your employees, tax-free, for their individual health insurance premiums and qualifying medical expenses.

With an HRA, you have complete control over your benefit while giving your employees more freedom to choose how they want to use their benefit.

Some HRAs, such as the individual coverage HRA (ICHRA), can satisfy the federal regulations for applicable large employers (ALEs).

Learn more about each HRA

Health stipend

A health stipend is a fixed sum of money offered to your employees to help pay for their healthcare expenses. A health employee stipend isn't a formal group health plan, so you have complete control over which expenses are eligible for reimbursement.

This makes a health stipend an excellent option for small businesses looking to offer a health benefit that covers costs health insurance or HRAs may not cover, such as mental health expenses.

Frequently asked questions