Summary of Texas Payday Law

• Timely Payment: Employers must pay exempt employees at least once a month and non-exempt employees at least twice a month.
• Wage Disputes: Employees have 180 days to file a wage claim with the Texas Workforce Commission (TWC) if wages are not paid on time.
• Recordkeeping Requirements: Employers must maintain records of wages and hours worked for at least three years.
• Final Pay: Employers must provide final wages within six days for discharged employees and by the next scheduled payday for those who resign.

Understanding Texas Payday Law

Texas Payday Law is a critical regulation that governs how employers in Texas must compensate their employees. It aims to ensure that employees receive their wages on time and have access to recourse if wages are not paid as required. Employers who fail to comply can face significant penalties, including fines and legal action. Here’s an in-depth look at the key aspects of Texas Payday Law to help Texas employers stay compliant.

Timely Payment of Wages

Under Texas Payday Law, employers must pay their employees on designated paydays. The payment frequency is determined by the employee’s classification:

• Exempt Employees: Those exempt from overtime pay must be paid at least once a month.
• Non-Exempt Employees: Those eligible for overtime must be paid at least twice a month.

Employers must establish a regular payday and communicate it to employees. Paydays should not be less frequent than the statutory requirement, and wages must be paid in full on the scheduled date. Timely payments foster trust and financial stability, promoting a positive work environment.

Final Pay Requirements

Final pay is a critical area where Texas Payday Law sets specific requirements for employers:

• Discharged Employees: If an employee is terminated or discharged, the employer must provide their final wages within six days of termination.
• Voluntary Resignations: For employees who resign voluntarily, final wages must be paid on the next scheduled payday.

Ensuring final pay is delivered promptly helps employers avoid potential disputes and maintain a positive reputation. Employers should keep detailed records of final pay calculations and payments to mitigate any legal risks.

Wage Disputes and Claims

If an employee does not receive their wages as required by law, they have the right to file a wage claim with the Texas Workforce Commission (TWC). The process includes:

• Filing a Claim: Employees must file their claim within 180 days from the date the wages were due.
• Investigation and Resolution: The TWC will investigate claims, review payroll records, and determine the validity of the claim.
• Penalties for Non-Compliance: Employers found in violation may be ordered to pay back wages along with fines. Repeated offenses could lead to severe penalties and legal actions.

Employers can avoid wage disputes by maintaining transparent payroll practices and ensuring compliance with the law.

Recordkeeping Requirements

Texas Payday Law mandates that employers keep accurate records of wages and hours worked for at least three years. Required records include:

• Employee Information: Name, address, and Social Security number.
• Wage Details: Amount paid, date of payment, and method of payment.
• Hours Worked: Detailed tracking of hours worked by non-exempt employees, including overtime.

Proper recordkeeping not only helps businesses stay compliant but also serves as a safeguard against disputes. Regular audits of payroll records are recommended to ensure they are accurate and up-to-date.

Industry-Specific Regulations: Construction and Hospitality

Construction Industry Payment Regulations

In Texas, the construction industry has additional payment requirements that employers must adhere to beyond the standard payday laws. The Texas Labor Code and specific federal laws, such as the Fair Labor Standards Act (FLSA), outline the following key points:

• Payment Frequency: Construction workers must be paid at least once per week, ensuring that they receive their wages in a timely manner. This rule helps provide financial stability to workers who are often engaged in physically demanding and time-sensitive projects.
• Prevailing Wage Requirements: Employers on public works or government-funded projects must comply with prevailing wage rates as set by the Texas Workforce Commission (TWC) or the U.S. Department of Labor (DOL). These rates ensure that employees are paid fairly for their work according to industry standards, particularly when working on federally funded projects.
• Recordkeeping and Compliance: Construction employers must maintain accurate records of hours worked, wages paid, and compliance with prevailing wage standards for at least three years. Failure to meet these requirements can result in significant fines and penalties.
• Overtime Pay: Construction workers are entitled to overtime pay (1.5 times their regular hourly rate) for hours worked over 40 in a workweek, as mandated by FLSA regulations. Employers must be vigilant in tracking work hours to ensure compliance with overtime rules and avoid potential disputes or penalties.

Hospitality and Service Industry: Tipped Employee Regulations

Tipped employees in the hospitality and service industry, such as waitstaff, bartenders, and hotel workers, have specific wage rules under Texas Payday Law and federal regulations:

• Tip Credit and Minimum Wage: Employers in the hospitality sector can take a tip credit, meaning they can pay tipped employees a base rate of $2.13 per hour, provided that the tips received bring the employee’s total hourly earnings to at least the federal minimum wage of $7.25. If the tips do not meet this threshold, the employer is required to make up the difference.
• Tip Pooling and Distribution: Employers can establish a tip pool, where all tips collected are shared among eligible employees, such as waitstaff, bussers, and bartenders. However, managers and supervisors are not allowed to participate in the tip pool. Tip pooling arrangements must be communicated clearly to employees, and employers must keep accurate records of all tip distributions.
• Service Charges vs. Tips: Service charges added to customer bills (such as automatic gratuities for large parties) are not considered tips and are the property of the employer. Employers must clearly differentiate between service charges and tips on pay stubs and in communications with employees.
• Reporting Tips to the IRS: Employees are required to report their tips to the employer, and employers must include these tips in payroll records. Employers must also withhold federal income tax, Social Security, and Medicare taxes from reported tips.
• Overtime and Tip Credit Calculations: When calculating overtime pay for tipped employees, the employer must factor in the full minimum wage, not the reduced tipped wage, when determining the overtime rate.

Understanding these specific industry regulations is crucial for employers in the construction and hospitality sectors to remain compliant with both state and federal wage laws. Employers should regularly review their payroll practices and consult with HR professionals or legal advisors to ensure they meet all regulatory requirements.

E-Verify and Reporting Requirements

While not mandatory for private employers in Texas, E-Verify is recommended for verifying the employment eligibility of new hires. Additionally, Texas employers are required to report any new employee to the Office of the Attorney General within 20 days of hire. First-time employers must report all employees hired within the last 90 days.

How The Unit Consulting Can Help Your Business Stay In Compliance With Texas Payday Law

Navigating Texas Payday Law can be complex, but compliance is crucial for protecting your business and employees. At The Unit Consulting, we offer comprehensive HR solutions, including payroll management, compliance audits, and expert guidance tailored to Texas businesses. Let us help you avoid costly mistakes and keep your business on the right track. Contact us today to learn how our HR consulting services can support your organization.