Guide to Firing Employees in Texas for Employers

February 20th 2024

Terminating an employee is often cited as one of the most challenging aspects of being an employer. In Texas, a state with its own distinct set of employment laws that lean more towards an at-will employment doctrine, the process is governed by regulations that aim to balance the rights of employers and employees while minimizing potential legal disputes. Read on as we offer a comprehensive overview of the entire termination process in Texas state, including important legal considerations and the best practices to minimize the risk of litigation.

This Guide Covers

What Does Firing an Employee Involve?
Differentiating between Firing, Layoffs, and Resignations in Texas
Why Does the Termination Process Matters in Texas
Termination Laws in Texas: What You Need to Know
Legal Implications of Wrongful Termination in Texas
Required Documents for Employers and Terminated Employees in Texas
Who Should be Responsible for Terminating in Texas?
How Long Should the Termination Process Last in Texas?
How Can You Prepare for Termination in Texas?
Steps for a Respectful Termination Process in Texas
Post-Termination: What Happens Next?
Legal Considerations During Termination in Texas
Bonus: Best Practices for Reducing Litigation Risks in Texas

What Does Firing an Employee Involve?

Firing or terminating an employee is basically the process of permanently ending an employee’s contract of employment with your company. This decision can be driven by various factors including, but not limited to, performance issues, misconduct, redundancy, or business closure.

Differentiating between Firing, Layoffs, and Resignations in Texas

In the context of employment terminations, it’s crucial for employers, especially those in Texas, to carefully understand the differences between firing, layoffs, and resignations. Each scenario has distinct implications for both the employee and employer, and handling them appropriately is essential to maintain a fair workplace and comply with legal standards within the state.

Firing in Texas

Firing, often referred to as termination for cause, involves the dismissal of an employee due to performance issues, misconduct, or other breaches of company policy. In Texas state, which adheres to the at-will employment doctrine, employers have the right to terminate employees for any reason that is not illegal (such as discrimination or retaliation) and without prior notice. However, to mitigate legal risks, it’s advisable for employers to document the reasons for termination and follow a disciplinary process. When firing an employee, employers should:

  • Document the reasons for termination (instances of misconduct or performance issues).
  • Review the employee handbook and any employment contracts to ensure compliance.
  • Consider conducting an exit interview to discuss the reasons for termination, which can provide closure for both parties and potentially reduce the risk of any legal action.

Layoffs in Texas

Layoffs are a form of termination based on business/company needs rather than employee performance or conduct. Unlike firing, they often occur due to economic downturns, business restructuring, or other financial pressures. In the context of layoffs, Texas employers should:

  • Ensure that the layoff decision is based on non-discriminatory criteria, such as seniority or job/employment function, to completely avoid any allegations of illegal termination.
  • Provide clear communication to affected employees about the reasons for the layoff, any severance pay packages, and assistance with future job placement, if applicable.
  • Be aware of the Worker Adjustment and Retraining Notification (WARN) Act, which requires employers/companies in Texas state with 100 or more employees to provide a 60 days notice of plant closings or mass employee layoffs under certain circumstances.

Resignations in Texas

Resignations occur when an employee voluntarily decides to leave their job. While this is a straightforward concept, it’s crucially important for both employers and employees to handle resignations professionally and with due respect to maintain positive relationships and avoid burning bridges. For employers in Texas state, handling resignations should involve:

  • Requesting a written resignation letter from the employee for record-keeping purposes.
  • Discussing the resignation terms, including the notice period and transitional duties.
  • Conducting an exit interview to gain valuable insights into the employee’s reasons for leaving and any constructive feedback on the company or management practices.

For employees, it’s recommended to provide adequate notice, typically two weeks, to the employer, giving them sufficient time to plan for the departure. Additionally, they should offer to assist with the transition, whether through training a replacement or documenting processes.

Why Does the Termination Process Matters in Texas?

The termination process in Texas is particularly crucial due to the state’s stringent labor laws and the heightened focus on employee rights. Here’s why the termination process matters:

  • Legal Compliance: Adhering to Texas’s labor laws during the termination process ensures employers avoid legal repercussions. The state mandates specific procedures for different termination scenarios, such as layoffs and firings for cause. Non-compliance can result in lawsuits or penalties, making it imperative for businesses to understand and follow these regulations closely. This not only protects the company legally but also upholds its legal reputation by demonstrating a commitment to fair and lawful employment practices.
  • Protecting Employee Rights: Texas places a strong emphasis on safeguarding employee rights throughout the termination process. By following a structured and respectful termination procedure, employers honor the contributions of the departing employee while ensuring rights are protected. This approach helps prevent claims of discrimination or wrongful termination, fostering a positive work environment and maintaining morale among remaining employees.
  • Minimizing Litigation Risks: A properly executed termination process significantly reduces the potential for legal challenges from former employees. By meticulously documenting the reasons for termination and following a transparent, equitable procedure, employers can more effectively defend their actions if disputes arise. This careful, strategic approach is essential in Texas, where litigation can be both costly and damaging to an organization’s reputation.
  • Maintaining Workplace Morale: The manner in which terminations are handled can have a profound, lasting impact on the morale and productivity of the remaining workforce. A fair, respectful, and transparent process reassures employees about job security and the company’s commitment to ethical standards. In contrast, poorly managed terminations can lead to fear, uncertainty, and a significant decline in engagement and productivity of the employees.
  • Preserving Company Reputation: The termination process is not only about ending an employment relationship but also about how the company is perceived by external parties, including potential future employees and customers. Fair and respectful terminations reinforce a positive image of the company as an ethical and desirable place to work, which is crucial for attracting talent and maintaining customer loyalty in the competitive Texas landscape.

Termination Laws in Texas: What You Need to Know

Here are termination laws the Texas workforce (on-site and remote) should be familiar with:

Laws Regarding Termination of On-Site Employees in Texas

  • Texas Payday Law: The Texas Payday Law mandates how and when employees must be paid final wages upon termination. For on-site employees, the law requires that the final paycheck be issued on the next regular payday. In contrast, if an employee quits the job themselves, final wages must still be provided on the next payday. Employers who fail to comply with these timelines can face penalties and legal action from the Texas Workforce Commission (TWC). 
  • Texas Anti-Discrimination Laws: While federal anti-discrimination laws such as Title VII of the Civil Rights Act, the Americans with Disabilities Act (ADA), and the Age Discrimination in Employment Act (ADEA) are well known, Texas also enforces its own anti-discrimination statutes through the Texas Labor Code Chapter 21 (TLCC 21). These laws prohibit termination based on race, color, religion, sex, national origin, disability, age, or genetic information. Employers must ensure that termination decisions for on-site employees do not violate these protections; otherwise, it can lead to investigations and potential lawsuits against the employer.
  • Texas Whistleblower Act: The Texas Whistleblower Act in the state protects public employees who report legal violations by their employer to an appropriate law enforcement authority. It’s important for employers, especially public sector employers, to recognize that terminating an employee for whistleblowing can lead to significant legal repercussions, including reinstatement of the employee, compensation for lost wages, and other damages. This law encourages transparency and accountability by protecting those who expose wrongdoing.

Laws Regarding Termination of Remote Employees in Texas

  • Fair Labor Standards Act (FLSA): Although the FLSA is a federal law, its implications for remote employees are significant, especially regarding overtime pay and record-keeping. When terminating a remote employee, employers must ensure that all owed wages, including any overtime, are paid accurately and in accordance with the FLSA’s requirements. This is crucial for remote workers who may have flexible schedules or work outside normal business hours.
  • Texas Unemployment Compensation Act: The Texas Unemployment Compensation Act outlines eligibility for unemployment benefits and imposes specific reporting requirements on employers, including remote. When terminating a remote employee, employers must provide accurate reasons for the termination to the Texas Workforce Commission. Misclassification of the termination reason (e.g., stating a layoff was a voluntary resignation) can lead to legal disputes over unemployment benefits and potential charges against the employer’s account.
  • Remote Work Agreements: While not a law per se, many employers have formal remote work agreements with their employees. These agreements often outline specific conditions under which remote work is permitted, performance expectations, and grounds for termination. Adhering to the terms of these agreements is essential during the termination process to avoid breach of contract claims. Employers should review any remote work agreements carefully before proceeding with termination to ensure compliance with the agreed-upon terms.

Additional Considerations for Both On-Site and Remote Employees in Texas

  • Family and Medical Leave Act (FMLA): The FMLA allows eligible employees to take unpaid, job-protected leave for specified family and medical reasons. Employers must not terminate employees for FMLA rights, and any decision to terminate must be unrelated.
  • Occupational Safety and Health Administration (OSHA): OSHA provides protections for employees who report unsafe working conditions. Similar to whistleblower protections, employers cannot terminate employees for reporting safety violations within the company.
  • Worker Adjustment and Retraining Notification (WARN) Act: For larger employers planning significant layoffs or shutdowns in Texas, the WARN Act requires advance notice to employees, giving them time to prepare for employment termination. This federal requirement underscores the importance of planning and communication in the termination process.

In Texas, the legal implications of wrongful termination can be extensive and complex, given the state’s robust employment laws and protections. Here’s a detailed look at these implications:

  • Financial Compensation and Damages: One of the most direct consequences is the potential for financial compensation and damages awarded to the affected employee. This can include back pay for wages lost from the time of termination until the legal resolution, front pay (future lost earnings), and benefits the employee would have received had they not been wrongfully terminated. Also, employees may be entitled to compensatory damages for pain, suffering, emotional distress, and punitive damages intended to punish the employer.
  • Reinstatement: In cases where wrongful termination is proven, the court or a regulatory agency like the Equal Employment Opportunity Commission (EEOC) may order the reinstatement of the employee to the former position, often sought in conjunction with, or in place of, financial compensation. Reinstatement can be complex, especially if the position has been filled or the organization has undergone restructuring. It underscores the legal principle that employees should not be unjustly removed from their roles due to unlawful reasons.
  • Legal Fees and Court Costs: Beyond compensation and reinstatement, employers in Texas found guilty of wrongful termination may also be responsible for covering the legal fees and court costs incurred by the employee during the litigation process. This can add a substantial amount to the penalties and serve as a deterrent against unlawful employment practices. 
  • Impact on Employer Reputation: The repercussions of a wrongful termination case extend beyond the courtroom. Employers who are found guilty of wrongful termination can suffer significant reputational damage. This can affect their brand image, employee morale, and ability to attract and retain talent. The public nature of legal proceedings means that details of the case may become public, leading customers, clients, and employees to view the employer negatively.
  • Regulatory Scrutiny: Employers who engage in wrongful termination practices may find themselves under increased scrutiny from regulatory bodies such as the Equal Employment Opportunity Commission (EEOC), the Texas Workforce Commission, and other state and federal agencies. This scrutiny can lead to audits, investigations, and further legal actions that can consume time, resources, and focus away from the employer’s core business operations. 

Required Documents for Employers and Terminated Employees in Texas

Here’s a detailed breakdown of the essential documents required in the termination process:

Employers Requirements 

  • Final Paycheck Documentation: Texas law mandates that employers provide the final paycheck documentation to terminated employees within a specific timeframe, adhering to the Texas Payday Law. This documentation should include an itemized list of all final wages paid to the employee, any deductions made, and the time period covered by these wages. It serves as proof of compliance with state law and is essential in preventing disputes over unpaid wages.
  • Termination Letter: Issuing a termination letter, although not legally required in Texas, is considered a best practice. This document outlines the reasons for termination, the effective date, and other important details such as final paycheck information, instructions for returning company property, and information about eligibility for continued health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) only if applicable.
  • COBRA Benefits Notification: For employers who offer group health insurance and are subject to the Consolidated Omnibus Budget Reconciliation Act (COBRA), notifying terminated employees of their lawful right to elect continuation coverage is required. The COBRA benefits notification must be provided timely and include all necessary information for the employee to make an informed decision about continuing their health insurance coverage after termination.
  • Return of Company Property Acknowledgment: Employers should also prepare a document that lists all company property the employee is expected to return upon termination. This may include keys, badges, laptops, mobile phones, and any other equipment or materials. An acknowledgment form signed confirming the return of these items can help avoid disputes.
  • Performance Documentation and Disciplinary Records: Maintaining thorough documentation of the employee’s performance and any disciplinary actions taken is crucial, especially if the termination is related to performance issues or misconduct. These records support the employer’s decision to terminate and can be vital in defending against legal claims.

Terminated Employees Requirements 

  • Demand for Final Paycheck (if necessary): If an employee does not receive the final paycheck as required by Texas law, they may need to issue a written demand. This should specify the unpaid wages owed and reference the Texas Payday Law to expedite compliance and resolution.
  • COBRA Election Form: Terminated employees interested in continuing health insurance coverage must complete the COBRA election form within the designated period, ensuring there is no lapse in coverage. It requires detailed information to process the continuation of benefits.
  • Unemployment Benefits Application: Employees seeking unemployment compensation must file an application with the Texas Workforce Commission. The application must include a comprehensive employment history, reasons for termination, and any compensation received by the employer, as this information determines eligibility and unemployment benefit amounts.
  • Personal Records Update: While not a formal required document, terminated employees should ensure their contact information is updated with the employer for receiving final documents, such as the W-2 Form for tax purposes. It’s also advisable to keep personal copies of employment documents, performance reviews, and termination paperwork for their records.

Who Should be Responsible for Terminating in Texas?

In Texas, the critical and sensitive responsibility for terminating an employee is shared among Human Resources (HR), managers, and legal counsel. Each has a crucial role to play to ensure the process is conducted fairly, respectfully, and in compliance with Texas state laws. 

Role and Responsibilities of Human Resources 

HR’s role in termination involves overseeing the process to ensure it adheres to company policies and state laws. They handle the administrative aspects, such as preparing the final paycheck according to Texas Payday Law, issuing termination letters, and managing COBRA notifications for health insurance. HR also advises on best practices for documentation and supports managers in the meeting to ensure clear communication and procedural fairness.

Role and Responsibilities of Managers 

A manager’s responsibility in the termination process primarily involves direct interaction with the employee being terminated. They are typically the ones to communicate the decision to the employee, often in a meeting with HR present. Managers must handle this task with sensitivity and professionalism, providing clear reasons for the termination that are based on documented performance issues or conduct problems. They also play a key role in ensuring the transition is smooth for the team, addressing any morale issues and redistributing work as needed.

Role and Responsibilities of Legal Counsel

The role of legal counsel is to ensure the termination process complies with all applicable laws and minimizes the risk of legal repercussions. They provide guidance on the legal aspects of the termination, including reviewing the reasons for termination to ensure they are lawful and advising on the risk of potential litigation. Legal counsel may also assist in drafting or reviewing termination documents to ensure they are legally sound and protect the company’s interests.

How Long Should the Termination Process Last in Texas?

The duration of the termination process in Texas largely depends on the circumstances surrounding each case, reflecting the state’s adherence to at-will employment principles. 

In at-will employment scenarios, employers or employees can end the employment relationship without any prior notice to the employee and for any reason; that’s not basically illegal. 

Despite this flexibility, the actual process can vary in length. For instance, if an employer decides to conduct a thorough review or investigation before termination, particularly in cases of performance issues or misconduct, this can extend the process over weeks or even months.

Once the decision is made, Texas law mandates that the final paycheck be issued by the next regular payday for resignations or within six calendar days for dismissals. The process might also involve additional steps, such as consultations with human resources and legal counsel to ensure compliance with both state and federal laws, further influencing the timeframe. 

Employers may also choose to follow internal policies that require notice periods or specific procedural steps before termination can occur. Thus, while the act of termination might be executed swiftly in some cases, ensuring a fair, respectful, and legally compliant process can significantly extend the timeline, with some processes lasting from a few days to several months.

How Can You Prepare for Termination in Texas?

Preparing for termination in Texas involves a series of steps, which include:

  • Understand exceptions to at-will employment to avoid illegal termination grounds.
  • Confirm compliance with federal and state laws, including the Texas Payday Law.
  • Compile comprehensive documentation of performance and conduct issues.
  • Conduct an objective evaluation of documented issues for the termination meeting.
  • Choose an appropriate time and setting for the termination meeting for privacy.
  • Calculate and prepare the final paycheck in compliance with Texas Payday Law.
  • Prepare for a range of emotional responses and plan how to handle these sensitively.
  • Gather information on post-termination benefits/severance pay impact in Texas.
  • Develop a clear communication strategy for the team members post-termination.

Steps for a Respectful Termination Process in Texas

Here are the steps to ensure a respectful termination process in Texas:

  • Review Company Policies and Employment Agreement: Begin by reviewing the employee’s contract and your company’s termination policies. Ensure any stipulated procedures or notice periods are followed. This review helps confirm that the termination process adheres to both the specific terms of employment and the broader policies outlined by your organization.
  • Document Performance Issues and Conduct a Fair Evaluation: If the termination is due to performance issues or misconduct, ensure all incidents are well-documented, and the employee has been given feedback and opportunities to improve. This should include dates, specific issues, any corrective actions taken, and the employee’s responses. A fair evaluation process demonstrates that termination is not arbitrary but based on objective criteria.
  • Prepare for the Termination Meeting: Before the meeting takes place, prepare what you will say, focusing on clear, factual reasons for the termination itself. Decide on the logistics, such as time and place, ensuring privacy and minimizing embarrassment. Arrange for an HR representative to be present to witness the meeting and help address any procedural questions.
  • Conduct the Termination Meeting: During the meeting, be direct but empathetic in communicating the decision. Avoid unnecessary details that could lead to arguments, but provide enough information to make the reasons for the termination clear. Allow the employee to express their feelings, but steer the conversation gently back if it becomes unproductive.
  • Discuss the Next Steps: Inform the employee about the final paycheck, benefits, and any severance package in compliance with Texas law and company policy. Explain the process for returning company property and how employment references will be handled moving forward.
  • Provide Written Documentation: Give the employee a termination letter summarizing the key points discussed, including the reason for termination, final paycheck details, and any benefits or severance information. This document serves as an official record of the termination.
  • Manage the Transition: After the termination, address the transition with the remaining team members in a way that respects the terminated employee’s privacy while also reassuring your team. Communicate any changes in responsibilities or structure promptly and clearly.
  • Review and Reflect on the Process: Finally, review the process with HR managers and relevant team members to identify any areas for improvement in future terminations.

Post-Termination: What Happens Next?

After a termination, several steps must be taken to ensure a smooth transition for both the departing employee and the remaining workforce. Initially, the employer must fulfill any legal obligations regarding the final paycheck, ensuring it complies with the Texas Payday Law, which stipulates the timing for the final wage disbursement. For the terminated employee, this period involves applying for any entitled benefits, such as unemployment insurance through the Texas Workforce Commission, and possibly electing COBRA if they wish to continue health insurance.

The employer also needs to manage the return of company property, securely handling the retrieval of items like ID badges, keys, electronic devices, and access cards. Simultaneously, the employer should systematically revoke the former employee’s access to company systems, email, and databases to safeguard confidential information and the integrity of company resources.

For the remaining team, clear communication is vital. Without divulging confidential details, the employer should inform the team about the termination in a way that minimizes uncertainty, aiming to maintain morale. This may also be a time to redistribute tasks and responsibilities among current employees or to discuss the process for hiring a replacement if necessary.

Lastly, the termination process often includes a period of reflection for the employer, reviewing the circumstances that led to the termination and evaluating the process to identify any areas for improvement. This can help enhance future HR practices, improve employee relations, and potentially reduce the risk of future terminations. For the terminated individual, this post-termination phase is a time for self-reflection, adjustment, and planning the next steps.

Legal Considerations During Termination in Texas

  • Texas Payday Law: The Texas Payday Law mandates how and when an employer must issue a final paycheck to a terminated employee. For employees who are fired or laid off, employers are required to provide the final paycheck within six calendar days. For those who resign, the final paycheck must be delivered by the next regular payday. This law ensures that employees receive earned wages in a timely manner, and non-compliance can result in penalties for the employer.
  • Title VII of the Civil Rights Act of 1964: Although a federal law, Title VII of the Civil Rights Act of 1964 is critical in Texas terminations. It prohibits employers from terminating employees based on race, color, religion, sex, or national origin. Employers must ensure that the reasons for termination do not violate these protections, as doing so could lead to discrimination claims. This requires a review of the termination reasons and consulting with HR or legal counsel.
  • Americans with Disabilities Act (ADA): The Americans with Disabilities Act (ADA), another federal law, prohibits discrimination against employees with disabilities. In Texas, employers must consider whether reasonable accommodations were provided to an employee with a disability before proceeding with termination. Failure to comply with the ADA can result in significant legal challenges, emphasizing the need for employers to document accommodation efforts and to ensure that termination is not anywhere related to the employee’s disability.
  • Age Discrimination in Employment Act (ADEA): The Age Discrimination in Employment Act (ADEA) protects employees who are 40 years of age or older from discrimination based on age. Employers in Texas should be cautious when terminating older employees above 40 years, ensuring that the decision is not based on age or stereotypes related to aging. Similar to other discrimination claims, adherence to the ADEA is critical to avoid legal repercussions.
  • Texas Whistleblower Act: The Texas Whistleblower Act protects public employees who make good faith reports of legal violations by employers to an appropriate law enforcement authority. Employers must not terminate employees in retaliation for whistleblowing, as doing so could lead to claims under this act. This law underscores the importance of documenting the reasons for termination and ensuring they are unrelated to any whistleblowing activities.
  • Worker Adjustment and Retraining Notification Act (WARN Act):  For larger employers contemplating layoffs, the Worker Adjustment and Retraining Notification (WARN) Act requires advance notice of plant closings or mass layoffs. While this is a federal requirement, it applies to all the eligible employers in Texas, requiring 60 days’ notice to affected employees and certain government entities. The WARN Act aims to give workers enough time to prepare for the transition, and non-compliance can lead to penalties and compensation claims.

Bonus: Best Practices for Reducing Litigation Risks in Texas

  • Document Everything: Thorough documentation is the cornerstone of reducing litigation risks. This includes keeping detailed records of employee performance, disciplinary actions taken, and the reasons for termination. Everything should be factual, unbiased, comprehensive, and consistent across all employees. This meticulous practice can provide critical, undeniable evidence in defending against legal claims of wrongful termination or employee discrimination.
  • Conduct Regular Training: Regular training sessions for managers and HR personnel on employment laws and company policies are essential. These training sessions should cover topics such as anti-discrimination laws, the importance of documentation, how to handle disciplinary actions and the process of conducting fair and legal terminations. Education empowers management to make informed decisions that comply with Texas and federal laws.
  • Implement Fair Employment Practices: Developing and enforcing clear, fair employment practices across the company that comply with both Texas state and federal laws can significantly reduce litigation risks. This includes creating an employee handbook that outlines company policies on performance expectations, disciplinary procedures, and the termination process. Ensuring these policies are applied consistently and fairly to all employees is crucial.
  • Offer a Dispute Resolution Mechanism: Providing a mechanism for employees to raise concerns or disputes about workplace issues, including potential wrongful termination, can help resolve conflicts before they escalate to litigation. This might include an internal review process, mediation, or arbitration. Offering an open-door policy where employees genuinely feel heard, respected, and valued can effectively prevent many disputes from advancing to legal claims.
  • Review Terminations with HR and Legal Counsel: Before proceeding with termination, it’s prudent to review the decision with HR representatives and, when necessary, legal counsel. This review can help identify any potential legal issues with the termination and provide an opportunity to correct them before taking final action. Additionally, legal counsel can offer advice on complex cases, such as those involving potential discrimination or retaliation claims.
  • Provide Clear Reasons for Termination: When terminating an employee, clearly communicate the reasons for the decision in a respectful manner. Avoid vague or ambiguous explanations that could lead to misunderstandings or speculation about unlawful motives. Providing clear reasons supported by documentation can help the employee understand the decision and reduce the likelihood of disputes or misunderstandings during the process.
  • Consider Severance Agreements: Offering a severance package in exchange for a release of claims can be an effective way to reduce litigation risks. Such agreements should be drafted carefully, in compliance, and presented in a manner that does not pressure the employee. While not suitable for all situations, severance agreements can provide a clean break for both parties.

Final Thoughts

Ending an employment relationship in Texas while navigating its legal landscape demands a thoughtful and informed approach. Employers who emphasize clarity, documentation, and fairness safeguard their businesses against legal challenges and contribute to a positive work environment. It’s crucial that terminations are handled with respect and dignity, showcasing an employer’s commitment to ethical practices. This approach not only protects the organization but also respects the individual, ensuring a respectful transition for all parties involved.

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