Texas Severance Pay Laws (2026): Is Severance Required?

Texas law does not require an employer to pay severance. Our review of every chapter of the Texas Labor Code found no provision that requires severance pay or sets a severance formula. What Texas law does is enforce severance an employer has promised in writing: the Texas Payday Law defines wages to include "severance pay owed to an employee under a written agreement with the employer or under a written policy of the employer" (Tex. Lab. Code § 61.001(7)(B)).

Texas also treats severance differently from many states when you apply for unemployment. Under Labor Code § 207.049, severance pay can delay benefits for the period it covers. For how other states handle severance, see our severance pay laws by state hub.

Information last verified on 2026-10-07. This article has not been reviewed by a licensed lawyer.

Jurisdiction scope: This article covers Texas law on severance pay: the Texas Payday Law (Tex. Lab. Code ch. 61) and its wage-claim process, and the unemployment disqualification for severance in Tex. Lab. Code § 207.049. It notes the federal rules that apply alongside them (WARN Act, ERISA, OWBPA, NLRA, federal tax), which our 50-state hub covers in full. It does not cover the general deadline for a final paycheck; see Texas final paycheck laws. For benefit amounts and how to apply, see Texas unemployment benefits.

Is severance pay required in Texas?

No. We searched the full text of every Texas Labor Code chapter on the legislature's file server for severance, plant closing, mass layoff, layoff, separation agreement, dismissal pay, termination pay and wages in lieu of notice. The only severance provisions are the Payday Law's definition of wages, a staff-leasing definition, and the unemployment disqualification. None requires an employer to pay severance. That review covered the Labor Code only, and we could not open a Texas Workforce Commission page that states the rule in its own words.

Federal law does not require severance either: the U.S. Department of Labor says "There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay."

Texas employment is at-will by default, so an employer can generally end the job without owing anything beyond earned wages and what it has promised. Our Texas at-will employment guide covers the doctrine and its exceptions.

Does Texas have a mini-WARN Act for layoffs?

Our search of the Texas Labor Code found no state plant-closing or mass-layoff notice statute. We could not open the Texas Workforce Commission's WARN pages to confirm the state's own position, so the safest statement is this: the federal WARN Act is the layoff-notice law we could confirm applies in Texas.

Under that federal law, employers with 100 or more employees, not counting part-time employees, or 100 or more employees, counting part-time employees, who together work at least 4,000 hours a week, not counting overtime, must give 60 days' written notice before a plant closing or mass layoff (29 U.S.C. §§ 2101(a)(1), 2102(a)), either of which requires, at a minimum, employment losses for 50 or more employees at one site within 30 days (§ 2101(a)(2)-(3)). An employer that skips the notice owes each affected employee back pay and benefits for up to 60 days, never more than half the days the employee was employed (§ 2104(a)), and only a federal court enforces the Act. The definitions, exceptions and penalties are on our severance pay laws by state guide.

Promised severance is wages under the Texas Payday Law

When an employer promises severance and then does not pay, the Payday Law gives you a state claim, but only if the promise was in writing. Section 61.001(7)(B) lists "vacation pay, holiday pay, sick leave pay, parental leave pay, or severance pay owed to an employee under a written agreement with the employer or under a written policy of the employer" as wages.

The Texas Workforce Commission's Employer Tutorial explains how the agency applies that rule:

• "Severance pay that is promised in a written policy or other form of agreement is an enforceable part of the wage agreement under the Texas Payday Law."
• A payment the employer never promised before the termination, which TWC calls "wages in lieu of notice," "is not enforceable under the Texas Payday Law."
• TWC's Wage and Hour Department "will enforce whatever severance payment interval and conditions are set forth in the written policy or agreement."

An oral severance promise falls outside § 61.001(7)(B), so TWC cannot collect it as wages. Whether some other claim might be available in court for an oral promise is outside what our research covered, so it is a question for a lawyer.

TWC's Payday rule also narrows what counts. As quoted in its Employer Tutorial, 40 Tex. Admin. Code § 821.25(b) defines severance pay for a wage claim as payment beyond your wages at termination "based on the employee's prior service," and says it "does not include payments for liquidated damages, payments in exchange for a release of claims, or payments made because of a lack of notice of separation." Severance promised in a written policy or offer letter before you were let go can qualify. Money first offered at separation in exchange for signing a release generally falls outside a TWC wage claim, so ask a lawyer how to enforce an unpaid payment of that kind.

When severance is an ERISA plan

TWC's tutorial says severance arrangements that require a continuing plan of administration will likely be ERISA welfare benefit plans, and it suggests consulting an attorney who handles ERISA. ERISA covers plans that provide benefits in the event of unemployment and supersedes state laws that relate to them (29 U.S.C. §§ 1002(1), 1144(a)), so if your employer runs a formal severance plan, the plan's claims process and federal law may govern rather than a Payday Law claim. The U.S. Department of Labor's Employee Benefits Security Administration may assist an employee who did not receive severance benefits under an employer-sponsored plan.

When must severance be paid in Texas?

The Payday Law sets the general final-pay deadlines. "An employer shall pay in full an employee who is discharged from employment not later than the sixth day after the date the employee is discharged" (§ 61.014(a)). An employee who leaves other than by discharge must be paid by the next regularly scheduled payday (§ 61.014(b)).

For severance, TWC says it enforces the payment schedule written into the policy or agreement, and gives the example of a severance paid in three installments at 30, 60 and 90 days. Its tutorial also says an employer may pay severance in installments or as a lump sum. The statute itself does not say whether the six-day rule speeds up a severance that a written policy schedules in installments; TWC's statement is the only guidance we found. If you are under a child-support withholding order, the employer must withhold from severance as if it were your usual earnings, up to the legal maximum (Tex. Fam. Code § 158.214). The full final-pay rules are in our Texas final paycheck guide.

How to file a Texas wage claim for unpaid severance

The Texas Workforce Commission administers the Payday Law (§ 61.002). Under §§ 61.051-61.066, you file a verified wage claim, a wage claim examiner issues a preliminary wage determination order, and either side can appeal by requesting a hearing in writing within 21 days after TWC mails the preliminary order (§ 61.054(b)). If TWC finds the employer acted in bad faith in not paying, it may assess an administrative penalty capped at the lesser of the wages in question or $1,000 (§ 61.053).

The deadline is strict: "A wage claim must be filed not later than the 180th day after the date the wages claimed became due for payment. The 180-day deadline is a matter of jurisdiction" (§ 61.051(c)). A claim filed late must be dismissed for lack of jurisdiction (§ 61.052(b-1)). If your severance is paid in installments, note the date each installment was due.

HB 1676 (89th Legislature, 2025) would have extended the deadline to one year. Its last action was a referral to the House subcommittee on Workforce on March 12, 2025, and it did not pass. The deadline remains 180 days.

The Payday Law "does not apply to the United States, this state, or a political subdivision of this state" (§ 61.003). Public employees cannot use a TWC wage claim for severance.

We did not research the deadline for a breach-of-contract lawsuit in a Texas court, so check that with a lawyer if the TWC deadline has passed or the promise is not covered by the Payday Law.

Does severance affect unemployment in Texas?

Yes, it can. Labor Code § 207.049(a) provides that "An individual is disqualified for benefits for a benefit period for which the individual is receiving or has received remuneration in the form of: (1) wages in lieu of notice; (2) severance pay," or workers' compensation.

Section 207.049(b) defines severance pay as dismissal or separation income paid on termination in addition to the employee's usual earnings at the time of termination. It excludes two kinds of payments:

• Money paid under a release of claims or settlement agreement based on an alleged violation of the Civil Rights Act of 1991, or under a claim or cause of action filed in connection with the employment relationship.
• Money paid under a written contract, including a collective bargaining agreement, negotiated with the employer before the separation date.

HB 14 (82nd Legislature) added severance pay to § 207.049 effective September 1, 2011. The House committee analysis describes the purpose as closing a loophole that let a person receive severance and unemployment benefits at the same time.

TWC's Employer Tutorial says severance pay or wages in lieu of notice "will not stop receipt of unemployment benefits, but payments will be delayed until the payment's period of coverage has expired." It says severance offered unilaterally, such as through a policy or offer letter, would generally be disqualifying, while a negotiated severance payment would likely not affect eligibility. TWC adds that each case is decided on its own facts and only the claim investigator can rule.

How TWC counts the weeks a lump sum covers is set in agency rules we could not open, so this page does not state a formula. Report any severance when you apply and let TWC decide. For eligibility and benefit amounts, see Texas unemployment benefits.

What a Texas severance agreement can ask you to give up

Apart from the unemployment rule below, we found no statute in the Texas Labor Code that limits release or nondisparagement terms in a private severance agreement, and none that requires a review period or notice of the right to consult a lawyer.

A release in a severance agreement cannot take away your right to unemployment benefits. Under Labor Code § 207.071(a), an agreement by an individual to waive, release, or commute the individual's right to benefits "is not valid," and § 207.072 provides that "An employer may not require or accept a waiver of a right of an individual employed by the employer" under the unemployment law.

One limit sits outside the Labor Code. Since September 1, 2025, Trey's Law (SB 835, Civ. Prac. & Rem. Code ch. 129C) makes a confidentiality or nondisclosure provision in an employment agreement, settlement agreement or other agreement void to the extent it bars a person from disclosing an act of sexual abuse, defined by listed Penal Code and Family Code offenses such as sexual assault (§ 129C.002). It applies to agreements signed before that date too, and the parties may still keep the settlement amount and payment terms confidential.

We also found no Payday Law section on whether a severance release can waive a wage claim, so we cannot say how Texas treats a release of unpaid wages. Keep any wages you are already owed separate from the severance offer, and ask TWC or a lawyer before signing a release that covers them.

A non-compete in a severance agreement is enforceable in Texas only if it is ancillary to or part of an otherwise enforceable agreement and reasonable in time, geographic area and scope of activity (Bus. & Com. Code § 15.50(a)). For covenants entered into or renewed on or after September 1, 2025 (SB 1318), one against a physician, dentist, nurse or physician assistant must offer a buyout of no more than one year's salary and wages, end within one year and cover no more than a five-mile radius (§§ 15.50(b), 15.501), and a physician's is void if the physician is involuntarily discharged without good cause (§ 15.50(d)).

If you think the layoff was discriminatory, note the Texas deadline before you sign a release: a complaint under Texas Labor Code chapter 21 must be filed with the Texas Workforce Commission within 180 days of the unlawful employment practice, or 300 days for sexual harassment, and a late complaint is dismissed (§ 21.202).

Federal rules also apply. If you are 40 or older, a release of federal age-discrimination claims must give you at least 21 days to consider it (45 in a group program) and 7 days to revoke after signing (29 U.S.C. § 626(f)). Under the NLRB's decision in McLaren Macomb, 372 NLRB No. 58 (2023), offering a severance agreement that requires employees to broadly waive their Section 7 rights, including through broad confidentiality and nondisparagement terms, violates the National Labor Relations Act; the NLRB General Counsel is arguing to overrule it in Valley Radiology, P.A. (10-CA-324512) (memo GC 26-04, August 26, 2026), but it remains Board law until the Board itself overrules it.

The federal Speak Out Act (Pub. L. 117-224) also makes a pre-dispute nondisclosure or nondisparagement clause unenforceable in a sexual assault or sexual harassment dispute. The full federal rules are on our severance pay laws by state guide.

Is severance taxed?

Yes, federally. The IRS says "Severance payments are wages subject to social security and Medicare taxes, federal income tax withholding, and FUTA tax," and treats severance as a supplemental wage (IRS Publication 15, 2026).

Reading a Texas severance offer

Nothing requires an employer to improve an offer. In Texas the details that matter most are whether the promise is in writing, since only severance owed under a written agreement or policy is Payday Law wages TWC can collect, and how the payment is described, since § 207.049 excludes from the unemployment disqualification only payments under a release or settlement of a Civil Rights Act of 1991 claim or of a claim already filed, and payments under a written contract negotiated before the separation date. A general release in an ordinary severance agreement does not by itself take the payment outside the rule. Note each payment date, because the 180-day wage-claim deadline runs from the date wages became due. General points on negotiating, including health coverage, are on our severance pay laws by state guide.

Recent and pending changes

• HB 1676 (89th Legislature, 2025): would have extended the Payday Law wage-claim deadline from 180 days to one year. Last action: referred to the House subcommittee on Workforce on March 12, 2025. It did not pass; the deadline is still 180 days.
• SB 835, Trey's Law (89th Legislature, 2025): effective September 1, 2025. It voids confidentiality terms that bar disclosing an act of sexual abuse, including in agreements signed earlier.
• SB 1318 (89th Legislature, 2025): effective September 1, 2025, for non-competes entered into or renewed on or after that date. It added buyout, one-year and five-mile limits for health care practitioners' non-competes and voids a physician's non-compete after an involuntary discharge without good cause.
• 2027 session: bills for the 90th Legislature were not yet checkable when this page was verified.
• McLaren Macomb: the NLRB General Counsel is asking the Board to overrule it in Valley Radiology, P.A., where reply briefs were filed on May 19, 2026 and the case remained open.

Common misconceptions

• "Texas requires severance." No Labor Code chapter does.
• "Any promised severance can be collected through TWC." Only severance owed under a written agreement or written policy is Payday Law wages; TWC says wages in lieu of notice are not enforceable there.
• "Severance never affects unemployment." In Texas, § 207.049 disqualifies you for the benefit period severance or wages in lieu of notice covers, subject to its exclusions.
• "You have a year to file a TWC wage claim." A bill to allow that died in committee. The deadline is 180 days and jurisdictional.

Related

• Severance pay laws by state
• Texas final paycheck laws
• Texas unemployment benefits
• Texas at-will employment laws

Disclaimer: This article provides general legal information about Texas severance pay law, including the Texas Payday Law (Tex. Lab. Code ch. 61) and Tex. Lab. Code § 207.049, and related federal law. It is not legal advice and does not create an attorney-client relationship. The information was verified on 2026-10-07. For advice about your own situation, contact the Texas Workforce Commission, a legal aid office, or a lawyer licensed in Texas.

Last updated: 2026-10-07.

Frequently Asked Questions

Is severance pay required by law in Texas?

No. The Texas Labor Code has no provision requiring severance pay. Severance owed under a written agreement or written policy is enforceable as wages under the Texas Payday Law (Tex. Lab. Code § 61.001(7)(B)).

Can I file a claim with the Texas Workforce Commission for unpaid severance?

Yes, if the severance was promised in a written agreement or written policy and is based on your prior service. TWC's rule excludes payments made in exchange for a release of claims. The claim must be filed within 180 days after the wages became due, and that deadline is jurisdictional (Tex. Lab. Code § 61.051(c)).

Does severance pay affect unemployment benefits in Texas?

It can. Tex. Lab. Code § 207.049 disqualifies you for the benefit period covered by severance pay or wages in lieu of notice, but excludes payments under a release or settlement of a Civil Rights Act of 1991 claim or a claim already filed, and severance under a written contract negotiated before separation.

Is an oral promise of severance enforceable through TWC?

No. The Payday Law counts severance as wages only when it is owed under a written agreement or written policy (§ 61.001(7)(B)), and TWC says wages in lieu of notice are not enforceable under the Payday Law.

When does my employer have to pay severance in Texas?

TWC says it enforces the payment schedule in the written policy or agreement, including installments. The general Payday Law rule for a discharged employee is full pay within six days (Tex. Lab. Code § 61.014(a)).

Does Texas have a state WARN Act?

We found no plant-closing or mass-layoff notice statute in the Texas Labor Code. The federal WARN Act generally applies to employers with 100 or more full-time employees and requires 60 days' notice of a covered plant closing or mass layoff.

How long do I have to consider a severance agreement in Texas?

We found no Texas statute setting a review period. If you are 40 or older, federal law (29 U.S.C. § 626(f)) requires at least 21 days to consider, or 45 in a group program, and 7 days to revoke after signing.