Employee Handbook Basics for Texas Small Businesses

No Texas law requires you to have an employee handbook. That’s true and also somewhat beside the point. What a handbook does is answer the questions employees will have, set the expectations you’ll hold them to, and give you a written record of your policies if a dispute arises.

Without a handbook, you’re managing your business on verbal agreements and assumptions. When PTO, attendance, or conduct questions come up, and they will, you’ll be reconstructing what was understood rather than pointing to what was written down.

This guide is for Texas business owners who don’t have a handbook yet, have an outdated one, or aren’t sure what theirs should say.

What a Handbook Does (and Doesn’t Do)

What it does:

• Documents your policies so employees know what to expect
• Protects you in TWC unemployment hearings by showing what rules existed and were communicated
• Establishes the expectations you’ll rely on if you need to discipline or terminate
• Addresses Texas-specific legal questions (final pay, at-will employment, workers’ comp notice)
• Provides an acknowledgment record that employees received and reviewed the policies

What it doesn’t do:

• Guarantee you’ll win every employment dispute
• Replace a lawyer when the situation is complicated
• Protect you if your actual practices don’t match what’s written

One critical requirement: you must follow your own policies. If your handbook says you conduct a 90-day review, conduct it. If it says PTO accrues monthly, accrue it that way consistently. A handbook that establishes policies you then ignore creates a credibility problem. Whatever you write, you need to be prepared to live by it consistently.

One important caution on language: your handbook can inadvertently limit your at-will employment rights if it includes language suggesting termination requires cause or a mandatory process. “We issue three warnings before termination” is a commitment. Be intentional about what your handbook says.

A Note for Businesses with Specific Circumstances

If your business has 50 or more employees, the Family and Medical Leave Act (FMLA) applies, and your handbook needs to specifically address FMLA rights, procedures, and notice requirements.

If any of your workers are represented by a union, your handbook must be consistent with the collective bargaining agreement. Union-related handbook questions require attorney review before you finalize anything.

The Texas Employment Law Thresholds

Texas employment law thresholds are as follows:

15 employees: The Texas Commission on Human Rights Act (TCHRA) applies for discrimination protections based on race, color, sex, national origin, religion, and disability. Your handbook should include a non-discrimination policy by this point.

20 employees: TCHRA age discrimination protections (40+) apply.

50 employees: FMLA applies. The ACA employer mandate also applies at 50 full-time equivalent employees.

Below these thresholds, federal law may still apply, particularly Title VII at 15 employees and the ADEA at 20 employees. But the Texas state-level complaint process (through TWC’s Civil Rights Division) becomes available at these counts.

What Texas Small Business Handbooks Should Cover

At-Will Employment Statement

Texas is an at-will employment state. Your handbook should include a clear, prominent statement that employment is at-will and can be terminated by either party at any time, for any lawful reason or no reason, with or without notice.

Keep this statement clear and don’t contradict it elsewhere. Language implying termination requires cause can be treated as a contractual modification of at-will employment under Texas law.

Pay and Payday

Texas Payday Law requires employers to establish regular paydays and pay at least twice monthly. State your pay periods and paydays. If you pay more frequently, state that too.

Overtime Policy

State whether your hourly employees are non-exempt and how overtime is authorized. Requiring supervisor approval for overtime doesn’t eliminate your obligation to pay it if it was worked, but it does give you grounds for discipline if the policy was violated.

PTO and Leave

Texas law does not require paid vacation or paid sick leave statewide, though some Texas cities have enacted paid sick leave ordinances. Check your city before assuming state law governs.

If you do offer PTO:

• How it accrues (hours per pay period or front-loaded annually)
• Whether it carries over year to year and whether there’s a cap
• Whether unused PTO is paid out at termination, your choice in Texas, but your written policy is what governs

Attendance and Punctuality

State your expectations and what constitutes job abandonment. TWC unemployment hearings turn on whether the employee knew what was expected and violated it willfully. A clear, written attendance policy and no-call/no-show policy is your protection.

Workers’ Compensation Notice (Non-Subscribers Only)

Texas is unique: workers’ comp is not mandatory. If you are a non-subscriber (not carrying workers’ comp), Texas law requires you to post a notice informing employees and to notify new hires before they begin work. Your handbook should include this notice and reference your non-subscriber status. Failing to provide required notice can eliminate defenses available to non-subscribers in negligence suits.

If you are a subscriber, include a section referencing your workers’ comp coverage and how employees should report workplace injuries.

Conduct Standards

Cover professional behavior, treatment of coworkers and clients, use of company property and technology, and social media. You need enough to establish that certain conduct is prohibited and that violations can result in termination.

Confidentiality and IP

Include a basic confidentiality policy stating that business information, client lists, pricing, internal processes, trade secrets, is confidential. This supports a trade secret claim if information is later misused.

Acknowledgment Form

The last page should be an acknowledgment: “I have received, read, and understand the Employee Handbook. I understand that it does not constitute a contract of employment.” Employee signs and dates it; you retain it.

How Often to Update

Review your handbook when:

• You reach 15 employees (add non-discrimination policy)
• You reach 50 employees (FMLA)
• Your PTO or pay policy changes
• You change your workers’ comp status
• There’s a significant change in Texas or federal employment law
• A situation has revealed a gap in your policies

Related Reading

• How to Fire an Employee in Texas
• Texas Wage Claim Response Guide
• Texas Independent Contractor Compliance
• 1099 vs W2 Worker Classification

Free Resource

Download the Texas Small Business Employment Guide →

Covers handbook basics, Texas employment law thresholds, offer letter essentials, and what to document before you need it. No registration required.

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