Q. We are in the process of reducing our staff and will need to lay off several employees. Are we required to provide severance pay to those selected for layoff? How about pay for accrued, unused vacation time?
A. There is no law in Texas requiring severance pay for laid-off employees. When it comes to vacation pay, your obligation will depend on your written policies.
Under the Texas Payday Act, an employer is required to pay all wages due to a laid-off employee no later than the next regularly scheduled payday. The term “wages” is defined as including vacation pay only if it is owed under a written agreement with the employee or pursuant to a written policy of the employer.
Thus, if you do not have a written agreement or policy stating that workers are entitled to pro rata vacation pay, then you don’t have to pay for unused time.
If you have a written policy on vacations, review it carefully to determine whether the policy provides for the payment of vacation pay upon layoff.