{ "type": "practice-guide", "canonical": "https://openagreements.org/practice-guides/stay-or-pay/us/texas", "links": [ { "rel": "self", "href": "https://openagreements.org/practice-guides/stay-or-pay/us/texas.json", "type": "application/json" }, { "rel": "alternate", "href": "https://openagreements.org/practice-guides/stay-or-pay/us/texas", "type": "text/html" }, { "rel": "alternate", "href": "https://openagreements.org/practice-guides/stay-or-pay/us/texas/markdown", "type": "text/markdown" }, { "rel": "alternate", "href": "https://openagreements.org/practice-guides/stay-or-pay/us/texas/json", "type": "application/json" } ], "data": { "topic": "stay-or-pay", "state": "texas", "frontmatter": { "title": "Stay-or-Pay and Employee Repayment in Texas", "description": "A question-by-question summary of Texas stay-or-pay law, which enforces employee repayment terms as ordinary contracts subject to the liquidated-damages-versus-penalty doctrine and the Texas Payday Law, including Sanders v. Future Com on enforcing a training-repayment agreement, FPL Energy and Phillips v. Phillips on the penalty bar, the Labor Code Section 61.018 written-authorization rule for paycheck deductions, the Section 61.001(7) wages definition, and Exxon Mobil v. Drennen on why a forfeiture clause is not a non-compete under Section 15.50.", "state": "Texas", "lastReviewed": "2026-06-30", "license": "CC BY 4.0", "authors": [ "steven-obiajulu" ], "summary": { "repaymentEnforceable": "generallyEnforceable", "bottomLine": "Repayment terms are enforced as ordinary contracts; the real limits are the liquidated-damages-versus-penalty rule and the Payday Law written-authorization requirement for paycheck deductions.", "keyLaw": "Tex. Lab. Code §§ 61.018, 61.001(7); FPL Energy, LLC v. TXU Portfolio Mgmt. Co., 426 S.W.3d 59 (Tex. 2014)", "clawbackEarnedComp": "yes", "wageDeductionFromFinalPay": "withWrittenConsent", "statutoryStayOrPayLimit": "none", "trainingRepayment": "sameAsBonus", "prorationOrCap": "no", "safestStructure": "Tie repayment to a documented, prorated cost so it reads as recoupment, not a penalty; get written authorization before any final-pay deduction." }, "about": [ "Texas stay-or-pay and employee repayment law", "Texas training repayment agreements", "Texas Payday Law wage deduction rules", "Tex. Labor Code Section 61.018", "Liquidated damages versus penalty in Texas", "Forfeiture clauses and the Texas non-compete statute" ], "translations": [ { "language": "中文", "status": "planned" }, { "language": "Español", "status": "planned" }, { "language": "Português", "status": "planned" }, { "language": "Deutsch", "status": "planned" } ] }, "questions": [ { "slug": "repayment-enforceability", "label": "Are employee repayment or stay-or-pay terms enforceable?", "heading": "Are repayment terms enforceable?", "answerText": "Generally yes. Texas enforces a stay-or-pay or repayment term as an ordinary contract, with no statute singling these terms out for special scrutiny. A Texas appellate court enforced a training-repayment agreement that required a departing employee to reimburse his former employer for training received in the year before he resigned, treating it as a recoupment obligation rather than an illegal restraint.", "sources": [ { "id": "sanders-v-future-com-2017", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Sanders v. Future Com, Ltd., No. 02-15-00077-CV (Tex. App.—Fort Worth May 18, 2017)", "citation": "Sanders v. Future Com, Ltd., No. 02-15-00077-CV, 2017 WL 2180706 (Tex. App.—Fort Worth May 18, 2017, no pet.).", "url": "https://cases.justia.com/texas/second-court-of-appeals/2017-02-15-00077-cv.pdf", "proposition": "Sanders v. Future Com supports that Texas enforces a training-repayment agreement requiring a departing employee to reimburse the cost of training received before resignation as an ordinary recoupment obligation.", "verbatimQuote": "required him, among other things, to reimburse Appellee Future Com, Ltd., his former employer, for any training that he received in the twelve months preceding his resignation", "anchor": "https://openagreements.org/practice-guides/stay-or-pay/us/texas#src-sanders-v-future-com-2017" }, { "id": "fpl-energy-v-txu-2014", "authorityType": "case-law", "tier": "primary-source-backed", "title": "FPL Energy, LLC v. TXU Portfolio Mgmt. Co., 426 S.W.3d 59 (Tex. 2014)", "citation": "FPL Energy, LLC v. TXU Portfolio Mgmt. Co., 426 S.W.3d 59 (Tex. 2014).", "url": "https://www.courtlistener.com/opinion/5286853/fpl-energy-llc-v-txu-portfolio-management-co/", "deepLink": "https://www.courtlistener.com/opinion/5286853/fpl-energy-llc-v-txu-portfolio-management-co/#:~:text=the%20amount%20of%20liquidated%20damages,reasonable%20forecast%20of%20just%20compensation", "proposition": "FPL Energy v. TXU Portfolio Management supports that a contractual damages amount is enforceable only if it is a reasonable forecast of just compensation, and an amount that is not is an unenforceable penalty.", "verbatimQuote": "the amount of liquidated damages called for is a reasonable forecast of just compensation", "anchor": "https://openagreements.org/practice-guides/stay-or-pay/us/texas#src-fpl-energy-v-txu-2014" }, { "id": "exxon-mobil-v-drennen-2014", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Exxon Mobil Corp. v. Drennen, 452 S.W.3d 319 (Tex. 2014)", "citation": "Exxon Mobil Corp. v. Drennen, 452 S.W.3d 319 (Tex. 2014).", "url": "https://www.courtlistener.com/opinion/2831439/exxon-mobil-corporation-v-william-t-drennen-iii/", "deepLink": "https://www.courtlistener.com/opinion/2831439/exxon-mobil-corporation-v-william-t-drennen-iii/#:~:text=Forfeiture%20provisions%20conditioned%20on%20loyalty%2C,the%20employees'%20future%20employment%20opportunities", "proposition": "Exxon Mobil v. Drennen supports that a forfeiture clause conditioned on loyalty is not a covenant not to compete and is not governed by the Texas non-compete statute, because it does not restrict the employee's future employment.", "verbatimQuote": "Forfeiture provisions conditioned on loyalty, however, do not restrict or prohibit the employees' future employment opportunities", "anchor": "https://openagreements.org/practice-guides/stay-or-pay/us/texas#src-exxon-mobil-v-drennen-2014" } ] }, { "slug": "clawback-earned-comp", "label": "Can an employer claw back compensation the employee already earned or received?", "heading": "Can the employer claw back pay already earned?", "answerText": "Yes, in the sense that Texas places no statutory or common-law bar on recovering a contracted repayment. Unlike New York, which forbids clawing back compensation that has already vested as wages, Texas has no earned-wage shield: if a valid contract requires the worker to repay a signing or retention bonus, or a training cost, on early departure, the employer can enforce that repayment obligation through an ordinary breach-of-contract suit. A Texas court enforced exactly such a training-cost repayment as a recoupment.", "sources": [ { "id": "sanders-v-future-com-2017-clawback", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Sanders v. Future Com, Ltd., No. 02-15-00077-CV (Tex. App.—Fort Worth May 18, 2017)", "citation": "Sanders v. Future Com, Ltd., No. 02-15-00077-CV, 2017 WL 2180706 (Tex. App.—Fort Worth May 18, 2017, no pet.).", "url": "https://cases.justia.com/texas/second-court-of-appeals/2017-02-15-00077-cv.pdf", "proposition": "Sanders v. Future Com supports that Texas enforces a contracted repayment obligation — there, reimbursement of training cost on early departure — as an ordinary recoupment recoverable by contract suit, with no earned-wage bar to recovery.", "verbatimQuote": "required him, among other things, to reimburse Appellee Future Com, Ltd., his former employer, for any training that he received in the twelve months preceding his resignation", "anchor": "https://openagreements.org/practice-guides/stay-or-pay/us/texas#src-sanders-v-future-com-2017-clawback" }, { "id": "exxon-mobil-v-drennen-2014-clawback", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Exxon Mobil Corp. v. Drennen, 452 S.W.3d 319 (Tex. 2014)", "citation": "Exxon Mobil Corp. v. Drennen, 452 S.W.3d 319 (Tex. 2014).", "url": "https://www.courtlistener.com/opinion/2831439/exxon-mobil-corporation-v-william-t-drennen-iii/", "deepLink": "https://www.courtlistener.com/opinion/2831439/exxon-mobil-corporation-v-william-t-drennen-iii/#:~:text=Forfeiture%20provisions%20conditioned%20on%20loyalty%2C,the%20employees'%20future%20employment%20opportunities", "proposition": "Exxon Mobil v. Drennen supports that a forfeiture clause conditioned on loyalty is not a covenant not to compete and is not governed by the Texas non-compete statute, because it does not restrict the employee's future employment.", "verbatimQuote": "Forfeiture provisions conditioned on loyalty, however, do not restrict or prohibit the employees' future employment opportunities", "anchor": "https://openagreements.org/practice-guides/stay-or-pay/us/texas#src-exxon-mobil-v-drennen-2014-clawback" }, { "id": "tex-labor-code-61-001", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Tex. Lab. Code § 61.001(7)", "citation": "Tex. Lab. Code § 61.001(7).", "url": "https://texas.public.law/statutes/tex._labor_code_section_61.001", "proposition": "Tex. Labor Code Section 61.001(7) supports that the Texas Payday Law defines wages as compensation owed by an employer for labor or services rendered, plus listed categories such as vacation, holiday, sick leave, parental leave, and severance pay.", "verbatimQuote": "means compensation owed by an employer for: (A) labor or services rendered by an employee, whether computed on a time, task, piece, commission, or other basis", "anchor": "https://openagreements.org/practice-guides/stay-or-pay/us/texas#src-tex-labor-code-61-001" } ] }, { "slug": "final-pay-deduction", "label": "Can repayment be deducted from the final paycheck?", "heading": "Can repayment come out of the final paycheck?", "answerText": "Only with written authorization. The Texas Payday Law bars an employer from withholding or diverting any part of an employee's wages unless a court orders it, a law allows it, or the employee has given written authorization to deduct the amount for a lawful purpose, so an employer cannot self-help a repayment out of the final paycheck without the worker's written consent.", "sources": [ { "id": "tex-labor-code-61-018", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Tex. Lab. Code § 61.018", "citation": "Tex. Lab. Code § 61.018.", "url": "https://texas.public.law/statutes/tex._labor_code_section_61.018", "proposition": "Tex. Labor Code Section 61.018 supports that an employer may not withhold or divert any part of an employee's wages unless ordered by a court, authorized by state or federal law, or given written authorization from the employee to deduct part of the wages for a lawful purpose.", "verbatimQuote": "An employer may not withhold or divert any part of an employee's wages unless the employer: (1) is ordered to do so by a court of competent jurisdiction; (2) is authorized to do so by state or federal law; or (3) has written authorization from the employee to deduct part of the wages", "anchor": "https://openagreements.org/practice-guides/stay-or-pay/us/texas#src-tex-labor-code-61-018" } ] }, { "slug": "penalty-limit", "label": "What stops an aggressive or punitive repayment amount?", "heading": "What stops an aggressive repayment amount?", "answerText": "The penalty doctrine. A repayment or liquidated-damages amount is enforceable only if it is a reasonable forecast of the harm caused by early departure; an amount set to punish rather than to compensate is an unenforceable penalty.", "sources": [ { "id": "fpl-energy-v-txu-2014-penalty", "authorityType": "case-law", "tier": "primary-source-backed", "title": "FPL Energy, LLC v. TXU Portfolio Mgmt. Co., 426 S.W.3d 59 (Tex. 2014)", "citation": "FPL Energy, LLC v. TXU Portfolio Mgmt. Co., 426 S.W.3d 59 (Tex. 2014).", "url": "https://www.courtlistener.com/opinion/5286853/fpl-energy-llc-v-txu-portfolio-management-co/", "deepLink": "https://www.courtlistener.com/opinion/5286853/fpl-energy-llc-v-txu-portfolio-management-co/#:~:text=the%20amount%20of%20liquidated%20damages,reasonable%20forecast%20of%20just%20compensation", "proposition": "FPL Energy v. TXU Portfolio Management supports that a contractual damages amount is enforceable only if it is a reasonable forecast of just compensation, and an amount that is not is an unenforceable penalty.", "verbatimQuote": "the amount of liquidated damages called for is a reasonable forecast of just compensation", "anchor": "https://openagreements.org/practice-guides/stay-or-pay/us/texas#src-fpl-energy-v-txu-2014-penalty" }, { "id": "phillips-v-phillips-1991", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Phillips v. Phillips, 820 S.W.2d 785 (Tex. 1991)", "citation": "Phillips v. Phillips, 820 S.W.2d 785 (Tex. 1991).", "url": "https://www.courtlistener.com/opinion/1522113/phillips-v-phillips/", "deepLink": "https://www.courtlistener.com/opinion/1522113/phillips-v-phillips/#:~:text=to%20be%20enforceable%20as%20liquidated,the%20stipulation%20must%20be%20reasonable", "proposition": "Phillips v. Phillips supports that a stipulated-damages provision is enforceable as liquidated damages only if the harm is uncertain and the stipulated amount is reasonable; otherwise it is an unenforceable penalty.", "verbatimQuote": "to be enforceable as liquidated damages the damages must be uncertain and the stipulation must be reasonable", "anchor": "https://openagreements.org/practice-guides/stay-or-pay/us/texas#src-phillips-v-phillips-1991" } ] }, { "slug": "training-repayment", "label": "Are training, tuition, or relocation repayment terms treated differently?", "heading": "Are training or tuition repayments treated differently?", "answerText": "No. Texas analyzes a training-repayment agreement (a TRAP) the same way as any other repayment term — as an ordinary contract enforceable as a recoupment of a real cost, bounded by the penalty doctrine. A Texas court enforced exactly such an agreement requiring a departing employee to reimburse training costs from the year before he left.", "sources": [ { "id": "sanders-v-future-com-2017-training", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Sanders v. Future Com, Ltd., No. 02-15-00077-CV (Tex. App.—Fort Worth May 18, 2017)", "citation": "Sanders v. Future Com, Ltd., No. 02-15-00077-CV, 2017 WL 2180706 (Tex. App.—Fort Worth May 18, 2017, no pet.).", "url": "https://cases.justia.com/texas/second-court-of-appeals/2017-02-15-00077-cv.pdf", "proposition": "Sanders v. Future Com supports that Texas enforces a training-repayment agreement requiring a departing employee to reimburse the cost of training received before resignation as an ordinary recoupment obligation.", "verbatimQuote": "required him, among other things, to reimburse Appellee Future Com, Ltd., his former employer, for any training that he received in the twelve months preceding his resignation", "anchor": "https://openagreements.org/practice-guides/stay-or-pay/us/texas#src-sanders-v-future-com-2017-training" } ] }, { "slug": "safest-structure", "label": "What structure is safest under the Texas rule?", "heading": "What structure is safest?", "answerText": "Make it read as recoupment, not punishment, and get written consent before touching pay. Tie the repayment to a documented, prorated cost so the amount stays a reasonable forecast of the employer's actual outlay, and obtain the worker's written authorization in advance if repayment might come out of the final paycheck.", "sources": [ { "id": "fpl-energy-v-txu-2014-safest", "authorityType": "case-law", "tier": "primary-source-backed", "title": "FPL Energy, LLC v. TXU Portfolio Mgmt. Co., 426 S.W.3d 59 (Tex. 2014)", "citation": "FPL Energy, LLC v. TXU Portfolio Mgmt. Co., 426 S.W.3d 59 (Tex. 2014).", "url": "https://www.courtlistener.com/opinion/5286853/fpl-energy-llc-v-txu-portfolio-management-co/", "deepLink": "https://www.courtlistener.com/opinion/5286853/fpl-energy-llc-v-txu-portfolio-management-co/#:~:text=the%20amount%20of%20liquidated%20damages,reasonable%20forecast%20of%20just%20compensation", "proposition": "FPL Energy v. TXU Portfolio Management supports that a contractual damages amount is enforceable only if it is a reasonable forecast of just compensation, and an amount that is not is an unenforceable penalty.", "verbatimQuote": "the amount of liquidated damages called for is a reasonable forecast of just compensation", "anchor": "https://openagreements.org/practice-guides/stay-or-pay/us/texas#src-fpl-energy-v-txu-2014-safest" }, { "id": "tex-labor-code-61-018-safest", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Tex. Lab. Code § 61.018", "citation": "Tex. Lab. Code § 61.018.", "url": "https://texas.public.law/statutes/tex._labor_code_section_61.018", "proposition": "Tex. Labor Code Section 61.018 supports that an employer may not withhold or divert any part of an employee's wages unless ordered by a court, authorized by state or federal law, or given written authorization from the employee to deduct part of the wages for a lawful purpose.", "verbatimQuote": "An employer may not withhold or divert any part of an employee's wages unless the employer: (1) is ordered to do so by a court of competent jurisdiction; (2) is authorized to do so by state or federal law; or (3) has written authorization from the employee to deduct part of the wages", "anchor": "https://openagreements.org/practice-guides/stay-or-pay/us/texas#src-tex-labor-code-61-018-safest" } ] } ] } }