Texas Labor Laws 2026: Employer's Complete Compliance Guide

A comprehensive guide to Texas labor laws for employers: covering minimum wage, overtime, at-will employment, hiring rules, termination procedures, workplace safety, and the key legislative changes that took effect in 2025–2026.

Labor Laws Texas: Key Takeaways for Employers (2026)

• Texas minimum wage remains $7.25 per hour (federal rate). No state increase is pending.
• Tipped employees must receive a direct cash wage of at least $2.13/hr. Employers must cover any gap if tips don't bring total pay to $7.25/hr.
• Overtime follows federal FLSA rules: 1.5× the regular rate for all hours over 40 in a workweek. The exempt salary threshold is $684/week ($35,568/year).
• Texas is an at-will, right-to-work state — among the most employer-friendly in the U.S.
• Texas has no state income tax and no mandatory meal or rest break requirements.
• New in 2026: AI hiring tools must not discriminate against protected classes (HB 149). Criminal history boxes are banned from job applications (HB 2466). NDAs covering sexual assault claims are void and unenforceable (SB 835).
• Terminated employees must receive final pay within 6 calendar days. Employees who resign must be paid by the next scheduled payday.

What's New for Texas Employers in 2026

The Texas Legislature passed several significant employment laws in 2025 that took effect in late 2025 or on January 1, 2026. 

Employers who have not yet updated their HR policies, job applications, and hiring procedures should act immediately.

2026 Compliance Alert: New Texas laws now impact hiring (Ban the Box), AI use in employment decisions, NDA restrictions for sexual misconduct cases, and unemployment claim rules. 

1. AI in Hiring and Employment Decisions — HB 149 (Effective January 1, 2026)

Texas now regulates the use of artificial intelligence in employment decisions. Employers using AI tools for screening, recruiting, or performance evaluation are prohibited from developing or deploying systems that intentionally discriminate against any protected class under state or federal law.

Employers are not required to disclose AI use to applicants. The Texas Attorney General has enforcement authority. Private lawsuits by individuals are not permitted under this law.

Employer action items:

• Audit any AI-driven ATS, screening tools, or performance management platforms for disparate-impact risks.
• Document how AI recommendations are reviewed by human decision-makers before final decisions are made.
• Request bias-testing reports from AI vendors before deployment.

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2. Ban the Box — HB 2466 (Effective September 1, 2025)

Texas employers may no longer include criminal history questions on initial job applications. Background checks and criminal history inquiries must be deferred to a later stage of the hiring process — typically after a conditional offer is extended. Texas joins more than 30 states with similar "ban the box" requirements.

Employer action items:

• Remove all criminal history checkboxes and conviction questions from your job applications immediately.
• Update your hiring workflow so background checks are only initiated after a conditional offer or during final-stage screening.
• Train hiring managers on when it is permissible to inquire about prior convictions.

3. NDA Restrictions on Sexual Assault Cases — SB 835 (Effective September 1, 2025)

Confidentiality and nondisclosure agreements related to sexual assault or aggravated sexual assault — including employee settlement agreements — are now void and unenforceable in Texas. This applies retroactively to most agreements signed before September 1, 2025. Other confidentiality provisions (such as settlement amounts) remain enforceable.

Employer action items:

• Review all existing settlement agreements and NDAs that reference sexual misconduct. Consult employment counsel on enforceability.
• Update your NDA and settlement agreement templates to remove any clauses that attempt to silence sexual assault disclosures.
• Brief your legal team and HR leadership on the retroactive application risks.

4. Revised Unemployment "Last Work" Rule — HB 3699 (Effective January 1, 2026)

Texas updated the definition of "last work" for initial unemployment insurance claims filed with the Texas Workforce Commission. The prior 30-hour threshold has been removed, meaning an employer may now be considered the "last employer" liable for a claim even for very short-term or low-hour engagements. This change particularly affects employers who use casual, part-time, or short-term labor.

Employer action items:

• Clearly document all separation dates, last days worked, and reasons for separation — regardless of how few hours the employee worked.
• For gig, temp, or casual workers, ensure your records would support a TWC protest if a claim is filed.
• Review multistate payroll scenarios, as the prior "other state" employer language has also been updated.

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5. DEI Hiring Programs Under Increased Scrutiny

In January 2026, Texas Attorney General Ken Paxton issued a formal opinion stating that certain DEI-informed hiring and workplace programs may constitute unlawful race-based discrimination. The opinion covers recruiting, promotion, training, and affinity groups. While it does not change existing statutes, it signals elevated enforcement attention.

Employer action items:

• Conduct a legal review of any DEI programs that factor protected characteristics into hiring or promotion decisions.
• Ensure all diversity efforts are grounded in equal opportunity principles, not outcome-based quotas.
• Consult employment counsel before making material changes to diversity initiatives.

Minimum Wage in Texas (2026)

Texas does not set its own state minimum wage. Under the Texas Minimum Wage Act, the state adopts the federal minimum wage of $7.25 per hour, which has been in effect since 2009. 

Local governments in Texas cannot set higher minimum wages for private-sector employees, as the Texas Regulatory Consistency Act (2023) prohibits cities and counties from enacting wage rules that exceed state standards.

Minimum Wage Comparison: Texas vs. Other States

Regular Employees

Employees covered by the FLSA must be paid at least $7.25 per hour. Employers may credit the value of certain meals and lodging toward minimum wage compliance, subject to Texas Workforce Commission restrictions.

While the statutory minimum has not changed since 2009, market wages in Texas have risen substantially — average hourly earnings across private-sector employees now exceed $34/hour, driven by strong competition for talent in hospitality, technology, healthcare, and energy.

Tipped Employees

Employers may pay tipped employees a direct cash wage of $2.13 per hour, provided the employee regularly earns enough tips to bring total hourly compensation to at least $7.25. The tip credit of up to $5.12 per hour requires:

• The employee must be informed of the tip credit arrangement in writing before it is applied.
• All tips must be retained by the employee (tip pooling must comply with FLSA rules).
• If tips in any workweek do not bring the employee to $7.25/hr, the employer must make up the difference and include it in that week's pay.
• Records of tip credit claims must be maintained for at least three years.

No State Income Tax

Texas is one of only nine states with no state income tax. Payroll for Texas employees does not include state income tax withholding — only federal income tax, Social Security (6.2%), and Medicare (1.45%) apply. 

This is a meaningful recruiting advantage for employers competing against offers from higher-tax states.

Overtime Rules for Texas Employers (2026)

Texas follows federal FLSA overtime rules. Employers must pay 1.5 times the regular rate of pay for all hours worked beyond 40 in a single workweek. 

There is no daily overtime threshold in Texas — overtime is calculated on a weekly basis only. Employers cannot average hours across multiple weeks to avoid overtime obligations.

Non-Exempt Employees

Non-exempt employees are entitled to overtime regardless of whether they are paid hourly or on a salary basis. The calculation:

• Regular rate = Total compensation in the workweek ÷ Total hours worked
• Overtime rate = Regular rate × 1.5
• Overtime pay = Overtime rate × hours worked over 40

Non-discretionary bonuses, commissions, and shift differentials must typically be factored into the regular rate calculation.

Exempt Employees

To qualify as exempt from overtime, an employee must satisfy all three of the following tests:

2026 Note: The U.S. DOL's 2024 attempt to raise the exempt salary threshold to $1,128/week was vacated by a Texas federal court in November 2024 and formally unwound by the DOL in May 2026. The current threshold remains $684/week. Texas employers who temporarily raised salaries to meet the anticipated higher threshold should consult counsel before reducing them.

Common Overtime Exemption Categories

Common Misclassification Risks in Texas

Misclassification exposes employers to up to three years of back wages, plus liquidated damages and attorney's fees.

• Oil and gas day-rate workers: A flat daily rate is not automatically exempt. If the rate doesn't guarantee a fixed weekly salary, overtime may be owed.
• "Manager" job titles: A title alone does not create an exemption — the duties test must be satisfied.
• Salaried non-exempt workers: Employees paid a salary below $684/week are non-exempt and entitled to overtime.

At-Will Employment in Texas

Texas has recognized employment at-will since 1888. Under this doctrine, either the employer or employee may end the employment relationship at any time, for any reason or no reason — without legal liability, provided the reason is not unlawful.

What At-Will Means for Employers

• No advance notice is required to terminate an employee (though providing it is best practice).
• Employers do not need to demonstrate cause for termination.
• Employees can resign without notice and without legal consequences.

Exceptions That Limit At-Will Termination

Best practice for employers: Always document performance issues with written warnings before termination. Review your offer letters and employee handbook to ensure they preserve — rather than inadvertently waive — at-will status.

Right-to-Work Laws in Texas

Texas is a right-to-work state. No employee can be required to join a union or pay union dues as a condition of employment. 

Employers also cannot deny employment based on an applicant's union membership — or lack thereof — and cannot obstruct an employee's right to organize or engage in collective bargaining.

Union membership rates in Texas have consistently run below the national average — approximately 5–6% of workers, compared to roughly 10% nationally. 

For most private employers in hospitality, technology, and energy, labor union activity is minimal.

Meal and Rest Breaks in Texas

Texas law does not require employers to provide meal or rest breaks to employees of any age, for any shift length. The Texas Regulatory Consistency Act (2023) also prohibits cities and counties from enacting stricter local break mandates.

Federal rules on short breaks still apply:

• Short breaks of 5–20 minutes are compensable work time and must be paid if offered.
• Bona fide meal periods of 30+ minutes need not be paid, provided the employee is fully relieved of all duties. Employees who work through an "unpaid" meal break are a common source of wage claims.

Best practice: Document your break policy clearly in your employee handbook, even if breaks are voluntary.

Family, Medical, and Other Leave Laws in Texas

Texas does not have its own state family and medical leave law. Private employers are governed by the federal Family and Medical Leave Act (FMLA).

FMLA Coverage

The FMLA applies to private employers with 50 or more employees within 75 miles of the worksite for at least 20 workweeks in the current or prior calendar year. Eligible employees (12+ months of employment, 1,250+ hours worked) may take up to 12 weeks of unpaid, job-protected leave per year for:

• Birth, adoption, or foster placement of a child
• The employee's own serious health condition
• Care for a spouse, child, or parent with a serious health condition
• Qualifying military exigencies

An additional 26 weeks is available to care for a covered servicemember with a serious injury or illness.

FMLA employer obligations:

• Post the required FMLA notice in a conspicuous location at all worksites.
• Provide written notice of eligibility and rights within 5 business days of a leave request.
• Maintain health insurance coverage on the same terms as active employees during leave.
• Restore employees to the same or an equivalent position upon return.
• Retain FMLA documentation for at least 3 years.

Other Leave Laws Texas Employers Must Follow

Workplace Safety and OSHA Compliance in Texas

Texas does not have its own OSHA state plan. All private-sector employers in Texas fall under federal OSHA jurisdiction. OSHA standards apply to any employer with at least one employee.

Core Employer Obligations Under Federal OSHA

• Provide a workplace free from recognized hazards likely to cause death or serious injury (the General Duty Clause).
• Comply with all applicable OSHA standards for your industry.
• Provide required PPE and safety training at no cost to employees.
• Post the OSHA "Job Safety and Health — It's the Law" poster in the workplace.
• Report any work-related fatality within 8 hours; any in-patient hospitalization, amputation, or eye loss within 24 hours.
• Maintain OSHA 300 injury and illness logs (required for employers with 11+ employees).
• Never retaliate against employees who report safety concerns — this is a separate violation under OSHA Section 11(c).

Texas recorded 533 fatal occupational injuries in a recent reporting year — the highest total among all U.S. states, heavily driven by transportation, oil and gas, and construction. 

Employers in high-risk industries face heightened OSHA scrutiny and should maintain written safety programs, regular training, and documented incident response plans.

Anti-Discrimination Laws for Texas Employers

Texas employers are subject to both federal and state anti-discrimination law. The Texas Commission on Human Rights Act (TCHRA), enforced by the Texas Workforce Commission Civil Rights Division, mirrors federal law and applies to employers with 15 or more employees.

Protected Characteristics

Employees must file a charge with the TWC Civil Rights Division or EEOC before filing a lawsuit. The deadline is generally 180 days from the discriminatory act under state law (300 days under federal law).

Employer compliance essentials:

• Maintain a written anti-harassment and anti-discrimination policy distributed to all employees at hire.
• Provide supervisor training on recognizing and responding to complaints.
• Document all disciplinary decisions consistently across all employee groups.
• Respond promptly and thoroughly to all internal complaints, and document the investigation process.

Child Labor Laws for Texas Employers

The minimum working age in Texas is 14 years old. Work permits are not required, but minors may obtain a Certificate of Age through their school district. Texas employers must comply with both state and federal (FLSA) child labor rules — whichever is stricter applies.

Hour Restrictions for Minors Ages 14–15

For employees ages 16 and 17, there are no hour restrictions under Texas or federal law, though hazardous occupation restrictions still apply. Minors under 18 cannot work in jobs declared hazardous by the U.S. Department of Labor.

Employer action items:

• Keep proof of age on file for all employees under 18.
• Train managers on scheduling limits for 14–15-year-old employees.
• Never schedule 14–15-year-olds during prohibited hours, even with parental consent.

Independent Contractor Classification in Texas

Correctly classifying workers as employees vs. independent contractors is one of the most consequential compliance decisions Texas employers face. Misclassification can result in unpaid overtime, back taxes, penalties, and liability for workers' compensation and unemployment insurance.

The Texas Unemployment Compensation Act and the FLSA both examine the degree of control the employer exercises over the worker.

Employee vs. Independent Contractor: Key Factors

Important: Do not rely on a written contract alone to establish contractor status. Courts look at the economic reality of the relationship. Workers who perform the same core functions as employees, work exclusively for one employer, and follow a set schedule are likely employees under the law. Review contractor relationships annually, especially for long-tenure or full-time-equivalent engagements.

Termination and Final Paychecks in Texas

Texas employers must comply with the Texas Payday Law on final paycheck timing. Errors in final pay are one of the most common wage complaints filed with the TWC.

What the Final Paycheck Must Include

• All earned wages through the last day worked
• Accrued, unused vacation and PTO — if your written policy or employment contract provides for payout (Texas does not mandate PTO payout unless it was promised)
• Any earned but unpaid commissions or bonuses per your written compensation plan
• Severance pay if stipulated by a contract or written policy

Prohibited deductions from final pay: Employers may not withhold final wages to recover unreturned equipment, alleged damages, or cash register shortages. These must be pursued separately through civil means. Deductions that reduce pay below minimum wage are also unlawful without specific written authorization.

Federal WARN Act (Mass Layoffs)

Texas employers with 100 or more full-time employees who conduct a mass layoff (500+ workers, or 50+ workers constituting 33%+ of the workforce) or plant closing must provide 60 days' advance written notice to affected employees, the Texas Workforce Commission, and local government. 

Failure to comply can result in back pay and benefits liability for the notice period.

Payroll and Pay Period Requirements

Under the Texas Payday Law, employers must pay employees on regularly scheduled paydays:

• Payday frequency must be at least twice per month for most employees; once per month is permissible for exempt employees.
• Employees must be notified of their pay rate and designated paydays at the time of hire.
• Employers must provide a written earnings statement (pay stub) on each payday showing gross wages, itemized deductions, and net pay.
• Wage deductions require specific written authorization and cannot reduce pay below minimum wage.

Permissible payroll deductions:

• Required tax withholdings (federal income tax, Social Security, Medicare)
• Court-ordered garnishments
• Employee-authorized deductions (health insurance premiums, retirement contributions, etc.)
• Deductions specifically authorized by law (e.g., child support withholding orders)

Official Texas Holidays (2026)

Texas employers are not required by law to provide paid time off or premium pay for holidays. The following are the official Texas state holidays for 2026:

Source: Texas State Library and Archives Commission

If you offer holiday pay for hourly employees, document which holidays are covered, whether holiday pay counts toward the 40-hour overtime threshold, and how part-time employees are treated.

Summary of Texas Labor Laws for Employers (2026)

DISCLAIMER

Disclaimer: This guide is intended as a general educational reference for Texas labor laws as of June 2026. It does not constitute legal advice. Labor laws change frequently — always verify current requirements with the Texas Workforce Commission, relevant federal agencies, or a licensed employment attorney before making compliance decisions.

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