Quick Article Summary

• Texas employers can reduce employee pay or hours, but must do so prospectively and with clear notice, not retroactively.
• Employers must comply with FLSA minimum wage laws, exempt status rules, and any existing written agreements before making changes.
• Poorly handled reductions can trigger wage claims, TWC disputes, or even wrongful termination complaints.

Understanding At-Will Employment in Texas

Texas is an at-will employment state, which means employers may change the terms of employment — including pay or hours — at any time, for any lawful reason. However, “lawful” does not mean “without limits.”

According to the Texas Workforce Commission (TWC), changes in wages must always be prospective — you cannot cut pay retroactively for work already performed. Employers must also notify employees of wage changes in writing before they go into effect, per Texas Labor Code §62.0515.

Reducing Hours: Legal but Not Without Risk

You can legally reduce an employee’s hours in Texas. However, doing so can raise several legal and morale-related issues, especially if:

• The reduction appears to be retaliatory (e.g., after a complaint).
• It’s applied inconsistently, potentially violating anti-discrimination laws.
• It violates an implied or written agreement, such as a guaranteed minimum number of hours.

If an employee qualifies for unemployment benefits, they may file for partial unemployment when hours are cut. You must be prepared to respond to any TWC claim and explain the business reason for the reduction.

Cutting Pay: What You Can and Can’t Do

For Hourly Employees (Non-Exempt)

You can reduce an hourly employee’s wage to any rate, as long as it does not fall below the federal minimum wage
($7.25/hour). You must:

• Provide written notice before the pay period begins.
• Maintain accurate time records and continue to pay for all hours worked.
• Avoid retroactive reductions — you can’t lower the wage after work is done.

For Salaried Employees (Exempt)

Cutting the salary of exempt employees is riskier. Under the Fair Labor Standards Act (FLSA), exempt employees must be paid on a salary basis of at least $684/week. Reducing their salary below that threshold can disqualify them from exempt status, triggering overtime pay requirements.

To reduce salary while keeping exempt status:

• Keep the salary at or above $684/week.
• Ensure the employee’s job duties still meet the executive, administrative, or professional exemption tests.
• Do not reduce pay so frequently that it undermines the idea of a “salary.”

When Reductions Can Become a Legal Problem

Even legal reductions can backfire if not handled properly. Watch out for these scenarios:

Discrimination and Retaliation Claims

If you reduce hours or pay selectively—especially after a complaint about harassment, unpaid wages, or leave—you may face a retaliation claim under the Texas Labor Code §21 or Title VII. Be prepared to show legitimate, business-related reasons for the change and consistent application across similar employees.

Constructive Discharge Risk

If the pay or hour reduction is substantial and leaves the employee with no real option but to quit, it may be considered constructive discharge—potentially opening the door for unemployment benefits or legal action. While Texas law does not strictly define this, significant changes without cause or warning can raise red flags.

Best Practices for Employers

Communicate Clearly

• Give written notice of any pay or schedule changes before they take effect.
• Be transparent about the business reasons (economic downturn, seasonal changes, etc.).
• Allow employees to ask questions or raise concerns.

Document Everything

Keep records of:

• Notices given
• Employee acknowledgments
• Reasoning behind reductions (for future TWC or EEOC disputes)

Stay Consistent

Apply reductions consistently across similarly situated employees to avoid discrimination claims.

Final Thoughts: Proceed with Caution

Yes, you can cut pay or hours in Texas. But if done the wrong way, it may violate wage laws, harm morale, or open the door to legal claims.

A good rule of thumb: If you wouldn’t want to explain your decision to a TWC hearing officer, the EEOC, or a judge, rethink your process.

Need Help Navigating a Pay or Hour Reduction?

At The Unit Consulting, we guide Texas employers through compliant, strategic workforce decisions — including how to handle pay cuts, hour changes, and difficult conversations with staff. Our HR packages provide on-demand guidance, written notices, and TWC claim support so you stay protected.

👉 Let us help you reduce risk — not just payroll. Contact the Texas HR outsourcing firm today or call 956-230-6866 to learn more.