Texas Severance — No State Tax, Federal WARN, 2026

Texas WARN: what applies#

Texas has no state mini-WARN statute. Only federal WARN (29 U.S.C. ch. 23) applies — employers with 100 or more employees must give 60 days advance notice for mass layoffs affecting 50 or more employees at a single site.

How severance is taxed in Texas#

Texas has no state income tax. Your severance is subject only to federal supplemental withholding (22%, or 37% on amounts above $1,000,000 cumulative for the year) and FICA. No state withholding applies.

FAQ#

Does Texas require severance pay?

No. Texas does not have a state-mandated severance statute, and there is no Texas mini-WARN. Severance is entirely employer-discretionary unless your employment contract or company policy requires it.

How is severance taxed in Texas?

Texas has no state income tax, so only federal taxes apply. The federal supplemental withholding rate is 22% on amounts under $1,000,000 cumulative for the year, 37% above. Plus FICA (Social Security 6.2% up to $184,500 wage base, Medicare 1.45% on all wages, plus 0.9% additional Medicare on wages above $200,000 single or $250,000 married filing jointly).

Does federal WARN apply to my Texas layoff?

Federal WARN applies if (a) your employer has 100 or more employees and (b) the layoff at your single site of employment affects 50 or more employees AND at least 33% of the workforce, OR affects 500 or more employees regardless of percentage. If federal WARN applies, you are entitled to 60 days advance notice or pay-in-lieu.

Can I collect Texas unemployment while receiving severance?

It depends on how the severance is structured. Texas Workforce Commission rules: lump-sum severance generally does NOT delay unemployment benefits, but severance paid as "wages in lieu of notice" — installments tied to a specific notice period — is treated as wages and delays benefits dollar-for-dollar during that period. As a right-to-work state, Texas does not require employer cause for termination, but it does not bar you from collecting reemployment benefits after a no-fault separation. File your TWC claim when you separate and disclose the severance structure; TWC determines the impact.

Are non-competes enforceable in Texas after a layoff?

Yes, but only if reasonable in time, geographic area, and scope of activity (Tex. Bus. & Com. Code § 15.50). Texas courts will enforce post-employment non-competes that are tied to legitimate business interests like trade secrets or customer goodwill, but unreasonable restraints are reformed or struck down. Severance is often used as consideration for a non-compete in Texas; you can negotiate for a narrower non-compete in exchange for signing the release.