Wage and hour compliance in Texas: what the FLSA actually requires.

The single most consequential development in wage and hour law in recent years was a court ruling in Sherman, Texas, on November 15, 2024. The U.S. District Court for the Eastern District of Texas, in State of Texas v. U.S. Department of Labor, vacated the Department of Labor's 2024 final rule that had raised the salary threshold for exempt employees in two stages — to $43,888 per year effective July 1, 2024, and to $58,656 per year scheduled for January 1, 2025. The court ruled the DOL had exceeded its statutory authority. The decision applied nationwide.

The practical effect: the salary threshold reverted to $35,568 per year — the level established by the DOL's 2019 rule. Many Texas employers had already restructured compensation to comply with the higher 2024 threshold; legally those increases are no longer required, though most employers maintained them for retention reasons. The Highly Compensated Employee threshold reverted to $107,432.

Most articles and guidance materials online still reflect the higher salary thresholds. They are out of date. The current framework — and the framework Texas employers must operate under — is the 2019 baseline. The rest of this article walks through that framework: federal FLSA, the Texas Payday Law, the four-step worker classification cascade, and the financial reality of what compliance failures actually cost.

The federal framework: what the FLSA requires

The Fair Labor Standards Act establishes the federal floor for wage and hour requirements: minimum wage, overtime, recordkeeping, and youth employment standards. It is enforced by the Department of Labor's Wage and Hour Division. The FLSA applies to most Texas businesses, either through enterprise coverage (annual gross sales of $500,000 or more) or individual coverage (employees engaged in interstate commerce, which courts interpret broadly).

The core obligations are straightforward in concept and complicated in application. Minimum wage: $7.25 per hour federally, unchanged since 2009; Texas does not have a higher state minimum wage. Overtime: 1.5 times the regular rate for hours worked over 40 in a workweek, for non-exempt employees. Recordkeeping: contemporaneous records of hours worked, wages paid, deductions, and pay periods, retained for two to three years depending on the record type. Equal pay: prohibitions on sex-based wage discrimination for equal work.

The complication is in the classification analysis. The FLSA's protections apply to non-exempt employees. Several categories of workers — exempt employees, independent contractors, certain agricultural workers, and a handful of other narrowly defined categories — are not covered or are covered differently. Determining which category a worker belongs to is the analysis where most Texas employers either get it right or get it wrong, often for years before the question is tested.

The four-step classification cascade

The cascade below is the analytical framework I use when reviewing a Texas employer's wage and hour posture. It walks the analysis in the order that determines the answer most efficiently, with each step's outcome controlling whether the next step matters.

The Texas Payday Law

The Texas Payday Law, Chapter 61 of the Texas Labor Code, governs the payment of wages already earned. It does not address minimum wage or overtime — those remain governed by the FLSA. What the Texas Payday Law does is establish state-level rules for the timing, method, and recordkeeping of wage payments, with a state administrative remedy enforced by the Texas Workforce Commission.

The provisions Texas employers most often miss are the timing rules. Non-exempt employees must be paid at least twice per month, on regularly scheduled paydays. Exempt employees must be paid at least once per month. Terminated employees must receive their final wages within six calendar days of termination. Employees who resign must receive their final wages on the next regularly scheduled payday. The six-day rule is one of the most violated provisions in Texas employment law and one of the most expensive to violate, given that it triggers Texas Payday Law penalties of up to $1,000 per claim plus the unpaid wages.

Wage deductions require specific written authorization, with limited exceptions for taxes, court-ordered withholdings, and other narrow categories. Deductions for cash register shortages, customer walkouts, broken equipment, or uniforms — common in retail and hospitality — are generally not permissible without specific written authorization that meets statutory requirements, and even then are subject to limits.

Wage claims under the Texas Payday Law must be filed with the Texas Workforce Commission within 180 days of when the wages were due. The TWC investigates the claim, issues a determination, and can order the employer to pay the unpaid wages plus penalties. The same conduct that violates the Texas Payday Law typically violates the FLSA as well — and an employee whose wage claim is denied by the TWC can still pursue an FLSA claim in federal court. The two regimes operate independently.

What a violation actually costs

The cost of a wage and hour violation is not the unpaid wages alone. The FLSA's remedy structure is designed to make violations economically punitive — to incentivize compliance and to permit private enforcement at scale. The components are predictable and they compound.

The patterns that produce most violations

Wage and hour audits and litigation tend to surface the same patterns repeatedly. Identifying these patterns in advance is the most cost-effective compliance work an employer can do.

The first pattern: title-driven classification. Calling a position "manager," "supervisor," or "coordinator" and assuming exempt status without analyzing the actual duties. The DOL and plaintiff's attorneys look past titles to actual duties — and the duties test is more rigorous than employers often appreciate. A "manager" who does not regularly direct the work of two or more full-time employees and does not have meaningful hire/fire authority is not an executive exempt employee, regardless of what the offer letter says.

The second pattern: misclassified independent contractors, particularly in industries that have historically used contractor relationships — construction, transportation, professional services, technology, gig-economy operations. The economic realities test is fact-intensive and the analysis varies under federal and Texas tests. Workers classified as contractors who in fact function as employees create exposure under the FLSA, federal employment tax, Texas unemployment insurance, workers' compensation, and benefits regulation simultaneously.

The third pattern: off-the-clock work. Non-exempt employees who answer email after hours, perform pre-shift or post-shift activities (donning equipment, opening procedures, closing procedures), travel between worksites during the workday, or attend training. If the activity is for the benefit of the employer, the time is generally compensable — and the employer is responsible for tracking and paying it.

The fourth pattern: improper deductions from exempt salaries. The salary basis test is destroyed if an employer makes deductions for partial-day absences, deductions based on quality or quantity of work, or other improper deductions. A pattern of improper deductions can destroy exempt status not only for the affected employee but for similarly situated employees in the same job category.

The fifth pattern: final paycheck timing. The Texas Payday Law's six-calendar-day rule for terminated employees is more aggressive than many employers realize, and it does not contemplate exceptions for "we need to calculate final commissions" or "we need to process expense reimbursements." The wages owed are due within the window. Holding back the final paycheck pending other calculations is a Texas Payday Law violation regardless of the rationale.

The single most useful compliance discipline is the periodic classification review. The cost of running it is hours of attorney time. The cost of skipping it can be a multiple of the entire payroll for the affected category.

What a Texas employer should be doing now

Three things, in priority order. First, confirm current classification posture against the operative thresholds — $35,568 salary level, $107,432 HCE level, the duties tests for each exemption category, and the worker classification tests for any independent contractor relationships. Document the analysis. The documentation is the basis for the good-faith defense to liquidated damages if a claim arises.

Second, audit recordkeeping practices. Time records for non-exempt employees. Pay records for all employees. Deduction authorizations. Final paycheck timing for departing employees. The records that demonstrate compliance are the cheapest part of compliance and the most expensive thing to be missing in an audit or claim.

Third, address the patterns identified above. Title-driven classifications get the duties analysis done. Independent contractor relationships get reviewed under the relevant tests. Off-the-clock practices get identified and corrected. Salary basis gets confirmed against actual deduction practices. Final paycheck procedures get aligned with the six-day rule.

None of this is exotic. It is operational discipline. The Texas employers who hold up under wage and hour scrutiny are not the ones who got lucky — they are the ones who built compliance into their operations and reviewed it periodically. The employers who do not are the ones whose misclassifications accumulate quietly until something — an employee complaint, a DOL audit, a competitor's collective action — surfaces them all at once.