Employment 10 min read

What every Texas business owner should know before firing an employee.

Texas is at-will — but at-will doesn't mean consequence-free. Seven specific things that turn a routine termination into an employment lawsuit, and exactly what to do about each one before you have the conversation.

Practice areas this article routes to

Employment Litigation

If you read nothing else

The most expensive terminations aren't the contested ones — they're the ones that seemed routine. Before you have the conversation: confirm the stated reason is documented and pre-dates any protected activity; verify the six-day final paycheck deadline under the Texas Payday Law; and check whether the employee has an open FMLA, ADA accommodation request, or workers' comp claim. Any one of those, without documentation of an independent reason for termination, converts a clean at-will separation into a viable lawsuit.

Seven specific risks are listed below, each with what to do and what not to do. The checklist at the end is designed to be answered before you schedule the conversation.

Call Chuck Kraus: (682) 529-7177

I've advised on executive terminations, structured severance packages, and been in the room when a board had to let a founding team member go. I've also seen what happens when a termination that felt straightforward — underperforming employee, clear business reason, no drama — turns into a two-year EEOC proceeding because of something that happened two weeks before the decision was made.

Texas is an at-will state. That's real. You don't need cause to fire someone. But the at-will doctrine doesn't protect you from illegal reasons — and what makes a reason "illegal" is broader than most business owners realize. It's not just firing someone because of their race or gender. It's firing someone within 90 days of a workers' comp claim. It's firing someone the week they return from FMLA leave. It's firing someone after a verbal conversation where you said "this job is yours for as long as you want it."

The seven risks below are the ones I see most consistently in Texas business terminations. Each one has a "what to do" and a "what not to do." Read them before you make a decision, not after.

The seven risks

Risk 01
Discrimination claims — even unintentional ones
High

The scenario: You fire an employee who is underperforming. The employee happens to be over 40, or pregnant, or a member of a protected class. You had a legitimate reason. But it's the only termination in your department this quarter, and the employee's protected characteristic is obvious.

Federal and Texas law prohibit termination based on race, color, sex, national origin, religion, age (40 and over), disability, pregnancy, or genetic information. The critical word is "based on" — not "only because of." A court doesn't require proof that discrimination was the sole reason. Under the mixed-motive framework, if a protected characteristic was a motivating factor — even alongside a legitimate reason — the employer has exposure. The most common version of this isn't overt bias. It's the performance-based termination where the documentation is thin, the reason is vague, and a comparator employee who is not in the protected class was treated differently for similar conduct.

What to do

Document the reason in writing before the termination, with specificity. Identify whether any similarly situated employee outside the protected class was treated differently for the same conduct — if so, understand why. Have someone not involved in the decision review the termination rationale before it happens.

Risk 02
Retaliation timing
High

The scenario: An employee filed a workers' comp claim six weeks ago. Their performance has been declining. You've been meaning to address it. You finally do — and the termination happens eight weeks after the claim.

Texas Labor Code §451 prohibits terminating an employee in retaliation for filing a workers' compensation claim. Retaliation claims also arise under Title VII (for reporting discrimination), the FLSA (for wage complaints), OSHA (for safety reporting), and the Texas Whistleblower Act. The plaintiff's lawyers don't need to prove you were motivated by retaliation. They need to show temporal proximity — that the termination followed protected activity closely enough that a jury could infer a connection — and that your stated reason doesn't hold up under scrutiny. A performance-based termination that was already underway when the protected activity occurred is defensible. A performance-based termination that started after the protected activity is not.

What to do

Before any termination, check the employee's file for any protected activity in the past six months: complaints, claims, requests, or reports. If any exist, the stated reason for termination must be documented with evidence that predates the protected activity — performance reviews, warnings, or emails. Timing alone doesn't prevent you from terminating for a legitimate reason. But timing without documentation is a problem.

Risk 03
FMLA and ADA intersection
High

The scenario: An employee has been out on FMLA leave for three weeks for a serious health condition. Their 12-week entitlement is running. You need to fill the role. You decide to eliminate the position while they're out.

The Family and Medical Leave Act prohibits interference with FMLA rights and retaliation for taking FMLA leave. Terminating an employee during or immediately after FMLA leave creates a presumption of retaliation that is difficult to overcome without a documented, independent business reason that pre-dates the leave request. The ADA adds another layer: if the condition that caused the FMLA leave is also a disability under the ADA, the employer may have an obligation to provide reasonable accommodation — including additional unpaid leave — before termination. The employer's obligations under the ADA are broader than most business owners realize: even a brief condition can qualify as an ADA disability, and the interactive process requirement (a good-faith dialogue about accommodations) must happen before a termination decision is finalized.

What to do

If an employee is on FMLA leave or has recently requested leave, involve employment counsel before making any termination decision. The elimination of a position during FMLA leave is permissible if it's a genuine business restructuring — not if the timing is coincidental to the leave. The interactive process documentation under the ADA must exist regardless of what you ultimately decide.

Risk 04
Verbal promises that create implied contracts
Medium

The scenario: When you hired the employee two years ago, you said "this is a long-term role — we see you being here for years." Or: "As long as you perform, this job is yours." Neither statement was in writing. You didn't think of it as a promise. The employee did.

Texas courts have recognized that verbal statements by employers — during hiring, in performance reviews, or in conversations about the future — can create implied contracts that modify the at-will relationship. "You'll have a job here as long as you do good work" has been interpreted by courts as a promise of termination only for cause. Employee handbooks can also create contractual obligations if they contain specific termination procedures and the employer fails to follow them. Most Texas employers protect themselves with an at-will disclaimer in offer letters and handbooks. But that disclaimer can be undermined by specific oral promises made after the disclaimer was signed.

What to do

Before terminating a long-tenured employee or anyone hired with assurances about job security, review the offer letter, the employee handbook, and any written communications about the role. If there are verbal promises you're aware of, that context matters. Train managers and executives to avoid specific language about job security — "as long as," "you'll always have a place here," "we'd never let someone like you go" — that could be interpreted as contractual commitments.

Risk 05
Final paycheck timing under Texas Payday Law
High

The scenario: You terminate an employee on a Thursday afternoon. The next payroll run is in 12 days. You plan to include their final check in that run. That is a violation of Texas law.

The Texas Payday Law (Texas Labor Code Chapter 61) requires that an involuntarily terminated employee receive their final paycheck within six calendar days of the termination date. This is not the next pay period. This is not when it's convenient. It is six days. The final check must include all earned wages — base pay through the last day, any commissions or bonuses that are earned and determinable, and any accrued PTO that your written policy defines as earned wages. Late final pay exposes the employer to TWC administrative proceedings and penalty assessments. Officers and owners can face personal liability. This is one of the most routinely violated provisions in Texas employment law, and it's enforced.

What to do

Before the termination conversation, confirm the final paycheck amount with payroll. Have the check (or the direct deposit) ready to issue within six days. Review your PTO policy to determine what is owed. If your payroll system can't move that fast, have a manual process ready. The six-day clock starts the moment the termination is communicated — not when the paperwork is processed.

Risk 06
Non-compete enforceability after termination
Medium

The scenario: You terminate an employee who has a non-compete in their employment agreement. You assume the non-compete is enforceable because they signed it. Three months later, they're working for your largest competitor.

Texas non-competes are enforceable under the Covenants Not to Compete Act — but only if they meet specific requirements, and only if the circumstances of termination don't undermine enforceability. The CNCA requires that the non-compete be ancillary to an otherwise enforceable agreement (usually an employment agreement with confidentiality provisions) and reasonable in scope, duration, and geographic area. The enforceability question after termination turns on two things: whether the agreement was properly drafted to begin with (many aren't — LegalZoom-style agreements frequently don't meet CNCA requirements), and whether the manner of termination affects the employee's ability to earn the consideration they were promised. If you terminate without cause in a way that deprives the employee of what they were promised, a court may decline to enforce the restriction. The FTC rule remains enjoined as of this writing, but that status is subject to change — employers relying on non-competes should have current counsel review them.

What to do

Before a termination where non-compete enforcement matters, have the agreement reviewed. Determine whether it meets CNCA requirements and whether the circumstances of termination affect enforceability. If the non-compete is valid and enforcement is important to the business, the method of separation — including whether severance is offered — may affect your ability to enforce it.

Risk 07
Documentation gaps
High

The scenario: The employee has been underperforming for 18 months. Everyone on the team knows it. There have been conversations. But there's nothing in writing — no performance reviews, no warnings, no emails with specific feedback. When the termination is challenged, the only record is the employee's account of what happened.

Documentation is not bureaucracy. It is the only contemporaneous evidence of what actually happened. In employment litigation, the question is almost never whether the employer had a good reason — it's whether the employer can prove the reason was real, pre-existing, and consistently applied. A termination without documentation requires the employer to rely entirely on testimony, which is subject to credibility challenges and contradicted by whatever the employee says. The most common documentation failures: performance reviews that don't address actual problems, verbal warnings with no written record, inconsistency in how the policy was applied across different employees, and the complete absence of any paper trail before the final conversation.

What to do

If the performance history isn't documented, take the time to document it before the termination — not as a retroactive paper trail, but as an accurate record of what has actually occurred. A written performance improvement plan, even if issued shortly before termination, is better than nothing. If the termination needs to happen immediately (safety issue, policy violation, misconduct), document the specific incident in detail within 24 hours. The contemporaneous written record is your evidence.

Before you have the conversation

The termination conversation itself is not where the risk is created. The risk is created in the weeks before it — by the lack of documentation, the unreviewed protected activity, the payroll system that can't produce a check in six days. The checklist below is designed to be answered before you schedule the meeting. If you can't answer all five questions affirmatively, that's the signal to pause and address what you can't answer.

Pre-termination checklist

Five questions to answer before you schedule the conversation

Is the reason for termination documented in writing, with specificity?
Not "performance issues" — specific incidents, dates, standards missed. If it isn't written, write it now, dated accurately.
Has the employee engaged in any protected activity in the past 90 days?
Workers' comp claims, FMLA requests, ADA accommodation requests, discrimination complaints, OSHA reports, wage complaints. If yes, consult employment counsel before proceeding.
Have similarly situated employees been treated consistently for the same conduct?
Identify the two or three most comparable employees. If any were treated more leniently for the same issue, document the distinguishing factors or address the inconsistency before terminating.
Is payroll ready to issue the final check within six calendar days?
Confirm the amount including any accrued PTO owed under your written policy. The clock starts at termination, not at the next payroll run.
If you're offering severance, is the release agreement compliant — including OWBPA requirements for employees over 40?
A non-compliant release is unenforceable. For employees 40 and over: the ADEA must be specifically mentioned, the employee gets 21 days to consider, and 7 days to revoke after signing.

If you can't answer all five affirmatively, that's the signal to pause — not cancel, but pause. Fix what you can fix. Document what isn't documented. Then have the conversation.

The role of the termination conversation itself

The conversation is brief. It is not a negotiation, a performance review, or a therapy session. The structure I recommend to every client: state the decision clearly ("We're ending your employment today"), give the specific stated reason in one or two sentences, provide the logistics (final pay, benefits continuation, return of equipment), and stop talking. Do not elaborate. Do not argue. Do not apologize in ways that suggest the decision is reversible.

The termination conversation should last twelve minutes. The legal exposure from that conversation is almost always created in the minutes after it ends.

Have a witness present — typically an HR representative or a manager who was not the decision-maker. Take contemporaneous notes immediately after. If the employee says anything significant — makes a claim, references a protected complaint, disputes the stated reason — document it verbatim within the hour.

The paperwork that follows matters: the separation agreement (if any), the COBRA notice (required within specific deadlines), the final paycheck documentation, and the termination record in the employee's file. Each of these has its own timeline and format requirements. Employment counsel can walk through the checklist for your specific situation in a single call.

How I help

Employment law intersects with my corporate work constantly.

I'm not an employment litigator — but I've been the GC who got the call when a termination went wrong, and I understand what the exposure looks like from the inside. When my clients face employment law questions, I bring in Scale LLP's employment attorneys, who handle Texas workplace law from wrongful termination and discrimination claims through executive separation agreements and WARN Act compliance.

I stay involved on the business and governance side. You get an employment attorney who knows the law and a GC who knows your business and how this situation fits into the broader picture.

One call starts the process. You'll talk to me directly — and we'll determine in the first fifteen minutes whether this needs employment counsel, whether it's something I can handle in the context of your existing business counsel relationship, or both.

Schedule a Call

Going deeper

Questions I hear from business owners before and after a termination.

Yes — Texas follows the at-will employment doctrine, which means either party can end the employment relationship at any time, for any reason or no reason, without notice — as long as the reason isn't an illegal one. The "any reason" part is real: you can fire someone because they underperform, because the role is being eliminated, or because you simply want to. What at-will doesn't protect: terminations based on a protected characteristic (race, sex, age, national origin, disability, religion, pregnancy, genetic information), terminations that retaliate against protected activity (a workers' comp claim, a safety report, a discrimination complaint, FMLA leave), and terminations that breach a specific contract or verbal promise. The mistake most employers make is assuming at-will makes them bulletproof. It doesn't. It means the employee has to prove an illegal reason — not just an unfair one.

In Texas, "wrongful termination" has a specific legal meaning — not unfair or unreasonable, but a violation of a specific law or contract. The most common grounds: (1) Discrimination under Title VII, the Texas Commission on Human Rights Act, the ADEA, or the ADA — a protected characteristic was a motivating factor. (2) Retaliation — the termination followed protected activity like filing a discrimination complaint, reporting an OSHA violation, taking FMLA leave, or filing for workers' compensation. (3) Breach of contract — the employer made a specific promise about employment terms, in writing or verbally, and then violated it. (4) Violations of specific statutes — the WARN Act for large layoffs, the Texas Payday Law for final pay. Wrongful termination does not mean the employer was harsh, inconsistent, or dishonest about the reason. It means the reason — or a contributing reason — was an illegal one.

You can terminate an employee on FMLA leave, but the timing creates a legal presumption of retaliation that is very difficult to overcome. The defensible path requires two things: the reason for termination must be completely independent of the FMLA leave — a genuine business reason that would have resulted in termination regardless — and that reason must be documented with contemporaneous evidence that predates the FMLA request. "We were planning to eliminate this position before they requested leave" is defensible if you have emails, org charts, or financial records that support it. It is not defensible if those records were created after the fact. If the condition that caused the leave is also a disability under the ADA, the employer may have an obligation to provide reasonable accommodation — including additional unpaid leave — before termination.

Under the Texas Payday Law, an involuntarily terminated employee must receive their final paycheck within six calendar days of the termination date — not the next pay period. The final check must include all earned wages, including any accrued vacation or PTO that your written policy defines as earned wages. Late final pay exposes the employer to TWC administrative proceedings, penalty assessments, and personal liability for owners and managers. This is routinely enforced and routinely violated. Before the termination conversation, confirm with payroll that the check can be issued within six days.

No employee is required to sign a severance agreement — and you cannot condition the final paycheck on signing one. The final paycheck is owed regardless of whether the employee signs anything. Severance — any payment beyond what is legally required — is voluntary consideration you can condition on a signed release of claims. For the release to be enforceable, it must be supported by consideration, knowing and voluntary, and must specifically mention the claims being released. For employees over 40, the Older Workers Benefit Protection Act requires specific disclosures, a 21-day consideration period, and a 7-day revocation window — none of which can be waived. A release that doesn't comply with OWBPA for an employee over 40 is unenforceable as to the ADEA claims, which are often the most valuable ones.

In Texas, non-competes are enforceable after termination if they meet CNCA requirements — ancillary to an otherwise enforceable agreement, reasonable in scope, duration, and geography. The enforceability question after termination turns on whether the agreement was properly drafted and whether the circumstances of termination affect the employee's ability to earn what they were promised. If you terminate without cause in a way that deprives the employee of their promised consideration, a court may decline to enforce the restriction. The FTC's non-compete rule remains enjoined as of this writing, but that status is subject to change. Every employer relying on non-competes should have current counsel review them.

Before the termination conversation, you should have: the employee's signed offer letter or employment agreement; performance reviews, documented verbal warnings, and written warning notices; the specific policy or performance standard the employee violated and evidence of the violation; documentation showing other employees were treated consistently for similar conduct; any communications about protected activity in the past six months — these must be reviewed carefully; and documentation of any promises made about job security or severance. The standard is not perfection — employers are allowed to make business decisions. But without documentation, the employee's account of what happened fills the vacuum, and their account will be less favorable than yours.

For most terminations, no — Texas at-will means you can terminate without advance notice. Exceptions: the federal WARN Act requires 60 days' notice for mass layoffs affecting 50 or more employees at a single site. The Texas mini-WARN statute (Labor Code Chapter 204) applies to employers with 100 or more employees and requires 60 days' notice for closings or layoffs affecting 50 or more workers. Individual employment contracts may specify notice requirements — if your agreement requires 30 days' notice, you are bound by it. For executive terminations or long-tenured employees whose cooperation matters during transition, some form of negotiated separation timeline is often worth the cost.

Employment Law at Scale LLP Explore Texas Business Law Explore Selling Your Business in Texas: The Owner's Roadmap Read Business Litigation at Scale LLP Explore

Better to call before
the conversation than after.

A fifteen-minute call with Chuck can tell you whether the termination you're planning is clean — and what to address if it isn't.

Schedule a Call (682) 529-7177

This article provides general information about Texas employment law and is not legal advice for your specific situation. Every termination involves unique facts, governing documents, and circumstances. If you are considering terminating an employee — particularly one who has engaged in protected activity or is in a protected class — consult an attorney licensed in your jurisdiction before taking action. Chuck Kraus is licensed in Texas, Minnesota, Washington State, and Canada.