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Final Pay

 

Finally, the Texas Payday Law regulates the timing of the final paycheck in section 61.014. If an employee is laid off, discharged, fired, or otherwise involuntarily separated from employment, the final pay is due within six (6) calendar days of discharge. If the employee quits, retires, resigns, or otherwise leaves employment voluntarily, the final pay is due on the next regularly-scheduled payday following the effective date of resignation. "Mutual agreement" separations are generally regarded as involuntary, although that result is not inevitable and ultimately depends upon a close look at all the events and circumstances leading to the work separation. Whether a work separation is voluntary or involuntary is determined according to existing rules for deciding the nature of the work separation in unemployment compensation cases. Basically, if the employee initiates the work separation and leaves while continued work is still available, the work separation is voluntary. If the employer initiates the work separation, i.e., the employee has no choice but to leave at a certain time, the work separation will be considered involuntary.

 

Since the "final pay" includes regular wages, fringe benefits payable under a written policy, and any other component of the pay, it is important to know what part of the pay must be paid at what time. Regular wages are due no later than the regularly-scheduled payday for an employee who resigned, and by the sixth calendar day for an employee who was laid off or discharged. The deadline for payouts of fringe benefits and other components of the pay, such as commissions and bonuses, is the same, unless a different payout schedule is provided in the wage agreement or policy relating to that particular component of the pay. In that case, the payment schedule outlined in the agreement or policy will determine the deadline for payment.

 

It is not legal to hold a final paycheck past the deadline for reasons such as failure to return company property, failure to sign timesheets, or similar problems. If the company knows or should know what the pay should be, it must deliver the final pay no later than the deadline, as noted above. Failure to return company property can in many instances be handled via a wage deduction or a property return security deposit. Failure to sign timesheets, or other kinds of rule violations, can be handled via a wage agreement that provides for payment of a lower wage during the final pay period unless certain conditions are satisfied. Such an agreement could, for example, provide something like the following:

WAGE AGREEMENT
[The bulk of the wage agreement goes here]
[Final paragraph:] I understand and agree that my pay rate for the final pay period of my employment will be [specify the amount - it must be at least minimum wage], unless I satisfy the following three conditions: 1) give at least two weeks' advance written notice of resignation to the Company if I leave voluntarily; 2) return all Company property that has been issued to me within "x" days of my final day of work; and, 3) no later than "x" days after my final day of work, give my supervisor any keys, passwords, or other means of access control to enable the Company to access its property, including computer files, that I used while employed. If I satisfy all three of those conditions, the rate of pay for the final pay period will be my usual pay rate.
/s/ Employee
/s/ [Company Representative]
[Date]

The above sample agreement is not an official form or policy of TWC. Such agreements can be extremely tricky and should be reviewed by an experienced employment law attorney prior to having employees sign them.

 

If an employee gives notice of resignation, and the employer accepts the notice early (before its effective date), the company does not owe any pay for the part of the notice period that was not worked, unless a contract applies that otherwise obligates the employer to pay for time not worked.

 

Final Pay for Commissions and Bonuses

 

A common problem is that of what happens with an employer's duty to pay commissions and bonuses once an employee has left the company. The answer depends upon the terms of the commission or bonus agreement. Commission pay agreements are enforceable whether they are oral or in writing, and agreements can be established with a showing of a pattern or practice of paying commissions in a certain way. Thus, the advice to have a clear, signed written wage agreement applies with particular force to commissions. Changes to written agreements must be in writing. A good agreement will avoid the risks of ambiguity by clearly setting out how commissions are earned, when and under what circumstances they are paid, whether "chargebacks" are made and under what circumstances, and what happens to commissions from sales in progress at the time of work separation. Similarly, a bonus agreement should specify exactly how a bonus is earned, how it is calculated, when it is paid, whether it is discretionary in any way (as to the amount, timing, or ability of the company to cancel the bonus altogether under certain conditions), and what happens to a bonus that is not determined or paid out until after an employee has left the company. If the commission or bonus agreement provides for payment of commissions and bonuses in any way after an employee has separated from employment, the deadline for such a payment would be based upon the wording of the agreement. Prior draws against commissions may be offset against the final pay; under 40 T.A.C. § 821.26(d), "[d]raws against commissions or bonuses may be recovered from the current or any subsequent pay period until fully reconciled." The key to protecting the company's interests is to spell out in a clear, written agreement exactly how, when, and under what circumstances commissions and bonuses will be paid, and then follow the written agreement to the letter, because that is how TWC will enforce the agreement in the event of a wage claim concerning such payments.

 

The Texas Family Code provides that garnishment for support obligations apply to certain post-termination lump-sum payments such as a bonus, commission, or payout of accrued leave (see Texas Family Code § 158.215): if such a lump-sum payment is $500 or more, the employer must notify the Attorney General's office (do it in writing or electronically - see https://portal.cs.oag.state.tx.us/wps/portal/WageWithholdingResponsibilities#lumpsum) before making the payment so that that agency can determine whether a support deduction should be made. The agency then has ten days after that date to notify the employer about its duty to make the support deduction; if no such notification occurs, the employer may make the payment without the deduction. If, however, the agency informs the employer that the support order would apply to the lump-sum payment, the employer would need to make the deduction. Since such a garnishment would be pursuant to a court order, it would not have to be authorized in writing by the employee.

 

See also Severance Pay and Accrued Leave Payouts.

 

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