Texas Resignation Law: Payday Law, Final Paycheck, Non-Compete

Final paycheck: Texas Payday Law

The Texas Payday Law lives in Labor Code Chapter 61. Section 61.014 governs final paycheck timing:

• Employee initiates separation (resignation): employer must pay final wages no later than the next regularly scheduled payday.
• Employer initiates separation (termination): employer must pay final wages within 6 calendar days of the discharge.

If the employer does not pay on time, file a wage claim with the Texas Workforce Commission (TWC) within 180 days of the unpaid wage date. TWC can issue a determination and order back pay plus administrative penalties. TWC determinations are appealable to state district court.

PTO payout: policy-based

Texas does not require PTO or vacation payout by statute. Whether accrued vacation is paid out depends on the employer's written policy or employment agreement. If the policy or handbook says PTO pays out at separation, it is treated as wages under the Payday Law and is enforceable through the TWC wage claim process. If the policy says PTO is forfeited at separation, that is enforceable too.

Read the policy before you resign. Time your last day, if possible, to follow your normal payday so accrued PTO is captured before the forfeit.

Non-compete: BCC section 15.50

Texas non-competes are enforceable but only if they meet the three-part test in Texas Business and Commerce Code section 15.50: they must be ancillary to an otherwise enforceable agreement, must be limited to reasonable scope as to time, geographic area, and activity, and the limits cannot impose a greater restraint than necessary to protect the employer's legitimate business interest.

The Texas Supreme Court (Marsh USA Inc v Cook, 2011) confirmed that the "ancillary" requirement is satisfied by an exchange of consideration like stock awards, training, or confidential information. Marsh substantially relaxed the pre-2011 stricter reading.

A typical enforced Texas non-compete is 1 to 2 years, geographic scope tied to the territory the employee actually worked, and activity limited to the same line of business. Broader clauses are commonly modified by Texas courts (the statute allows reformation, unlike California which voids the entire clause).

Unemployment after voluntary quit

Texas Unemployment Compensation Act (Labor Code Chapter 207) disqualifies most voluntary quits from unemployment benefits unless the resignation was for "good cause connected with the work." TWC has historically interpreted good cause relatively narrowly: substantial change to working conditions, unsafe environment, employer breach of agreement. Personal reasons (relocating with a spouse, going back to school) usually do not qualify, with limited exceptions for accompanying a military spouse and a few other statutory carve-outs.

Practical Texas exit checklist

• Final paycheck is due on the next regular payday. If it is late, file a TWC wage claim within 180 days.
• Read the handbook for PTO payout policy. Texas does not require payout unless the policy says so.
• If you signed a non-compete, expect it to be enforced if it is reasonable in scope. Have an employment attorney review the clause before you start at a competitor.
• Voluntary quit generally disqualifies you from TWC unemployment benefits.