A severance agreement can outline what an employer and employee must do after a job ends. If one side does not follow the agreement, the other side may have a breach of contract claim.
Our Houston employment lawyers at Feldman & Feldman handle disputes over employment contracts, payments, and other business agreements. In a Texas severance case, the written contract is often the first place to look.
Severance Disputes in the Houston Area
According to the U.S. Bureau of Labor Statistics, the Houston-Pasadena-The Woodlands metro area had a labor force of about 3.92 million people in June 2026.1 About 204,000 people were unemployed, and the unemployment rate was 5.2%.
Houston also had about 3.5 million nonfarm jobs during summer 2026. Local workers are employed in many fields, including oil and gas, construction, health care, manufacturing, transportation, finance, and professional services. Layoffs, company sales, mergers, cutbacks, and executive departures can all lead to severance agreements.
What a Texas Severance Agreement May Cover
In addition to a final paycheck, a severance agreement can cover:
- A lump-sum payment
- Severance paid over several weeks or months
- Health insurance or COBRA costs
- Bonuses or commissions
- Stock or equity rights
- Paid time off
- Confidentiality rules
- Non-disparagement terms
- Non-solicitation or other work limits
- Return of company property
- Job reference terms
- Release of legal claims
Either side can breach the agreement.
How Employers Can Breach a Severance Agreement
One of the most common problems is when the company does not pay what it promised. Other disputes may involve health benefits, bonuses, commissions, stock rights, or PTO.
For example, Texas does not require every employer to pay unused vacation or PTO when a worker leaves.2 Payment is usually required only if a written policy or agreement requires it.
Employers may also break terms about references, confidentiality, or non-disparagement. Many severance agreements include a “neutral reference” clause, meaning the company is limited to confirming basic facts of employment if a prospective employer calls. If a former supervisor instead shares negative information that is prohibited by the contract, the employee may have grounds for a breach claim.
How Employees Can Breach a Severance Agreement
Employees can also violate severance terms. Common disputes involve confidential information, customer lists, company files, trade secrets, company property, or public statements about the business. An employer may claim that a former employee violated the severance agreement by downloading confidential files, copying pricing information, taking software, , or keeping records that should have been returned.
Some severance agreements also include non-compete or non-solicitation terms, meaning the employee agrees not to work for a competitor or reach out to former customers for a certain period of time. Whether an employer can enforce those terms depends on Texas law and the specific facts of the case.
What Must Be Proven in a Texas Breach of Contract Case?
A person bringing a contract claim in Texas usually must show four things:
- A valid contract existed.
- The person bringing the claim did what the contract required.
- The other side breached the agreement.
- The breach caused a loss.
In a severance case, the fight may be over whether a payment was due or whether one side had the right to stop performing. A clause may decide whether severance can be stopped, whether money must be repaid, or whether the former employee is still owed the rest of the package.
Texas Payday Law and Severance Pay
Not every payment made after a job ends is treated the same way. Under the Texas Payday Law, severance promised in a written policy or agreement may be treated as part of the wage agreement.3 The Texas Workforce Commission generally looks at the written payment terms and conditions.
Texas also distinguishes between regular severance and other kinds of termination payments. Money paid in exchange for a release of claims, pay given instead of advance notice, and certain other payments may be handled differently.
Clawbacks and Liquidated Damages
Some severance agreements have clawback clauses. These may require a former worker to repay some or all of the severance after certain violations. For example, a contract may require the employee to repay the money if they disclose confidential information or solicit company customers.
Some agreements also set a dollar amount for certain breaches, often referred to as a “liquidated damages” clause. However, Texas courts do not automatically enforce these clauses. When making its decision, a court may consider whether the amount was a fair estimate of likely harm or whether it was meant to punish the person who breached the agreement.
Monetary Damages in a Severance Case
The goal of contract damages is usually to put the injured person in the position they would have been in if the agreement had been followed.
For a former employee, that may include unpaid severance, lost benefits, commissions, bonuses, or other money promised in an agreement.
An employer may seek money for losses tied to a former employee’s breach, such as lost business or other financial harm that it can prove.
Texas law may also allow reasonable attorney’s fees in some successful contract cases.4 Certain notice and presentment rules can affect whether those fees are available.
Texas Severance Claim Deadlines
Different claims may have different time limits. A person must generally file a Texas Payday Law wage claim with the Texas Workforce Commission within 180 days after the wages were due. A Texas breach of contract5 lawsuit often has a four-year deadline when no other law sets a different time limit.
Those two deadlines are not the same. A person may still have time to file a contract lawsuit but may be too late to file a Texas Workforce Commission wage claim.
Records That Can Matter in a Severance Dispute
The signed agreement is important, but it may not be the only evidence. Other useful records may include:
- Drafts of the agreement
- Emails about the severance terms
- Payroll records
- Company severance policies
- PTO policies
- Termination letters
- Bonus or commission plans
- Stock or equity documents
- Confidentiality notices
- Proof that company property was returned
- Text messages and internal emails
- Records about the claimed breach
A Texas severance dispute may involve a few missed payments or a much larger package tied to benefits, bonuses, stock, and post-employment rules. If either side is accused of breaking the agreement, Feldman & Feldman can review the contract, the alleged breach, and the options available under Texas law.
Sources:
1 https://www.bls.gov/regions/southwest/tx_houston_msa.htm
2 https://efte.twc.texas.gov/accrued_leave_payouts.html
3 https://www.twc.texas.gov/programs/wage-and-hour/texas-payday-law
4 https://statutes.capitol.texas.gov/GetStatute.aspx?Code=CP&Value=38&Date=5/16/2019
5 https://statutes.capitol.texas.gov/?tab=2&code=CP&chapter=CP.16&artSec=16.004