How to Close a Business Legally in Texas
No state WARN Act, no mandatory severance, and a 6-day final pay window — Texas makes closing straightforward, but there are still rules to follow.
Texas takes the most streamlined approach to workplace shutdowns of any major state. There is no state WARN Act. No mandatory severance. No required vacation payout (unless your own policy promises it). The regulatory floor is the federal WARN Act, and below that threshold, there is essentially no advance notice requirement.
Texas Has No State WARN Act: What That Means for Employers
| Regulation | What it means for employers |
|---|---|
| No state WARN Act | Texas is one of the states with no mini-WARN law. Federal WARN is the only advance notice requirement, and it only applies to employers with 100+ employees. |
| No mandatory severance | Unless you have a written policy or contract promising severance, you owe nothing beyond earned wages. |
| No mandatory vacation payout | Texas does not require payout of accrued vacation by statute. Payout is only required if your written policy says so. |
| Optional workers’ compensation | Texas is the only state where workers’ comp is optional for most private employers. During a shutdown, work-related injuries can still happen. |
| Strong at-will employment | Texas at-will doctrine means no notice is required for termination of individual employees. Combined with no state WARN, smaller employers can close with very little lead time. |
| 6-day final pay rule | When an employer terminates an employee, final wages are due within 6 calendar days — faster than most states’ “next regular payday” rule. |
Federal WARN Act Requirements for Texas Employers
Since Texas has no state WARN law, the federal Worker Adjustment and Retraining Notification Act is the sole advance notice statute. Here’s when it applies:
How Many Employees Trigger the WARN Act in Texas?
Federal WARN covers employers with:
- 100 or more full-time employees, or
- 100 or more employees (including part-time) who work a combined 4,000+ hours per week, excluding overtime
What Triggers a WARN Act Notice in Texas?
| Event | Threshold | Federal WARN triggered? |
|---|---|---|
| Plant closure | 50+ employees lose jobs within 30 days | Yes |
| Mass layoff (large) | 500+ employees within 30 days | Yes, regardless of percentage |
| Mass layoff (medium) | 50–499 employees, if one-third of workforce | Yes, if one-third test met |
| Mass layoff (small) | Under 50 employees | No |
Federal WARN 60-Day Notice Requirements in Texas
60 days of advance written notice to:
- Each affected employee (or union representative)
- The state dislocated worker unit (in Texas: the Texas Workforce Commission)
- The chief elected official of the local government
Exceptions to the 60-Day WARN Notice in Texas
| Exception | When it applies |
|---|---|
| Faltering company | Employer was actively seeking capital or business to avoid shutdown, and notice would have jeopardized the effort |
| Unforeseeable business circumstances | Sudden, dramatic, unexpected change not reasonably foreseeable |
| Natural disaster | Directly caused by a natural disaster |
Even with an exception, the employer must give as much notice as practicable.
Can a Texas Employer Close a Business Without Notice?
For employers below the federal WARN thresholds (fewer than 100 employees, or layoffs under 50), there is no statutory notice requirement. However, check employment contracts and collective bargaining agreements — those may impose notice obligations even when WARN does not apply.
Texas Final Pay Rules: 6 Days After Termination
The Texas Payday Law governs final wage payments:
How Quickly Must Texas Employers Pay Final Wages? (6 Calendar Days)
- Employer-initiated termination (including shutdowns): Final wages due within 6 calendar days of the date of discharge
- Employee-initiated resignation: Final wages due by the next regular payday
The 6-day rule for terminations is actually faster than many states’ “next regular payday” standard. Plan accordingly — if you’re shutting down on a Friday, final checks need to go out by the following Thursday.
What Must Be Included in a Texas Final Paycheck?
| Component | Details |
|---|---|
| Earned wages | All earned wages through the final day of work |
| Overtime | Accrued overtime |
| Commissions/bonuses | Any commissions or bonuses that are determinable and earned |
| Vacation payout | Only if your written policy promises it |
| Severance | Only if contractually obligated |
Does Texas Require Vacation Payout at Termination?
Texas does not require vacation payout by statute. But the Texas Payday Law makes written employer policies enforceable as contract terms. If your employee handbook says:
| Your handbook says | Result |
|---|---|
| ”Accrued vacation is paid out at termination” | You must pay it |
| ”Accrued vacation is forfeited at termination” | No payout required |
| Nothing about vacation payout | Ambiguous; courts may look at past practice |
Review your written policies before announcing a shutdown. If there’s ambiguity, clarify it now — during a shutdown is not the time to discover you have an unintended payout obligation for 50 employees.
Common Texas Vacation Policy Mistakes During Shutdowns
The most expensive mistake: having no written vacation policy at all. Without a written policy, courts look at past practice — if you’ve ever paid out vacation to a departing employee before, that becomes the expectation for everyone during the shutdown.
The second most expensive: a policy that says ‘accrued vacation is paid out at termination’ when the business owner intended it only for voluntary resignations. Shutdowns count as employer-initiated terminations. Review your exact policy language with an employment attorney before announcing any closure.
Texas Penalties for Late Final Pay
If final wages are late, employees can file a wage claim with the Texas Workforce Commission. The TWC can order payment of the wages owed. There’s no statutory penalty multiplier like California’s waiting time penalties, but the employer bears the cost of the administrative process and any legal fees.
Is Workers’ Compensation Required During a Texas Shutdown?
Texas employers who have opted out of workers’ compensation should be particularly careful during the shutdown period. Decommissioning operations, moving equipment, and cleaning up a facility all carry injury risks. A nonsubscriber employer faces direct personal injury lawsuits without the protections that the workers’ comp system provides (limited damages, no jury trials, defined benefits).
If you’re a nonsubscriber and planning a shutdown:
- Maintain any existing occupational accident insurance through the last day
- Ensure safety protocols are followed during decommissioning
- Document all final-day activities and track hours carefully for anyone working during the wind-down
Texas Workforce Commission (TWC) Resources
Federal WARN notices in Texas go to the TWC as the state dislocated worker unit. Request a Rapid Response visit early — the TWC team can visit before the shutdown to conduct on-site orientations for affected employees.
How to Plan a Workplace Shutdown in Texas
Even without state-level mandates, a well-executed shutdown protects your business interests:
Texas Employer Shutdown Communication Timeline
| Timeline | Action |
|---|---|
| 60+ days before (if WARN applies) | File federal WARN notice with TWC, affected employees, and local officials |
| 30 days before | Announce shutdown to all employees; begin one-on-one meetings |
| 14 days before | Request TWC Rapid Response visit; distribute information on unemployment benefits |
| 7 days before | Finalize time tracking records; prepare final paychecks |
| Last day | Complete final work; distribute final checks (or deliver within 6 days) |
| Within 6 days | All final wages paid |
Texas Employer Shutdown Compliance Checklist
- Federal WARN assessed (100+ employees, 50+ affected) — only notice requirement in Texas
- Final pay within 6 calendar days of termination (faster than most states’ “next payday” rule)
- Vacation and severance payout reviewed against written company policy (neither required by TX statute)
- Workers’ comp or occupational accident insurance maintained through last day (TX is optional — nonsubscribers face direct liability)
- Multi-location WARN assessed per site (50-employee trigger applies per location, but DOL may aggregate)
- Time tracking records finalized and archived
Shutdown laws vary by state. See our guides for California, Illinois, New Jersey, and New York, or read the complete workplace shutdown guide.
More Texas employer guides: Weather closure rules in Texas | Hiring as a TX sole proprietor
Frequently Asked Questions
Is Workers’ Comp Required in Texas? What Happens Without It
Workers’ compensation is optional for most private Texas employers — the only state with this rule. During shutdown activities like equipment removal, cleaning, and decommissioning, injuries can still occur. Nonsubscriber employers face personal injury lawsuits without standard legal defenses. Maintain coverage through the final day, and keep any occupational accident insurance active until all shutdown-related work is complete.
Does the WARN Act Apply Separately to Each Texas Location?
Federal WARN is assessed per site — the 50-employee trigger applies per location. A company with 300 total employees across three sites might not trigger WARN at any individual location if each layoff is under 50. However, if all closures are part of a single plan, the DOL may aggregate them. File separate TWC notices for each location and coordinate communication so employees at all sites receive consistent information through your scheduling platform.
