Moving your company from California to Austin, Texas? Part 2: California vs. Texas employment law

This is Part 2 of a two-part series. Part 1 covered the business case for moving from California to Austin and the people plan behind it. This part compares California and Texas employment law, so HR knows exactly what changes for employees who move and what stays the same for employees who do not.

The rule that governs everything below: employment law follows where the employee works, not where the company is headquartered. An Austin company with a remote engineer in Oakland follows California law for that engineer, plus the rules Oakland adds on top. A California company that relocates an employee to Austin follows Texas law for that employee from the first day of work in Texas.

Is Texas employment law more employer-friendly than California’s?

Yes, on almost every measure: Texas generally adopts federal standards and adds little, while California layers its own rules on top of nearly every federal one. Most California employment laws apply once an employer has 5 employees; most Texas laws track federal thresholds of 15 or more. California courts, for their part, resist importing Texas law. In one arbitration dispute, a California Court of Appeal refused to apply a Texas choice-of-law clause to a California worker because Texas law offered fewer wage protections.

My caution to clients: “employer-friendly” is not “rule-free.” Texas has its own requirements, a few of them stricter than federal law, and a company that runs California employees on a Texas handbook will lose the savings it moved for in the first lawsuit.

Is Texas an at-will employment state?

Yes, and so is California: both states presume at-will employment, meaning either side can end the relationship at any time for any lawful reason. The difference is in the exceptions. California recognizes wrongful termination in violation of public policy broadly, along with implied contracts formed by handbooks and promises. Texas recognizes one narrow common-law exception, for an employee fired solely for refusing to commit an illegal act. In practice, a termination that would invite a lawsuit in Oakland is far less likely to draw one in Austin, but discrimination and retaliation claims apply in both.

Are non-compete agreements enforceable in Texas?

Yes: Texas enforces a non-compete agreement if it is part of an otherwise enforceable agreement and is reasonable in time, geographic area and scope of activity, under section 15.50 of the Texas Business and Commerce Code. California does the opposite. Business and Professions Code section 16600 voids nearly all non-competes, and since 2024 California also voids them regardless of where or when they were signed and lets employees sue to enforce that rule. I explain the details in California’s non-compete ban.

For a relocating employee, this is the biggest legal change in the move. A California employee who relocates to Austin and signs a Texas non-compete can be held to it. Employers should say so plainly in the relocation offer, and employees should read it before they sign. A trade secret is protected in both states; the right to change jobs is not.

How do California and Texas wage and hour laws compare?

California sets higher wage floors, counts overtime by the day under California overtime laws, requires paid meal and rest breaks and demands faster final pay; Texas follows federal law on each point, so the Texas minimum wage is the federal $7.25 and Texas overtime is counted only by the week. The California Labor Commissioner confirms the state minimum wage is $16.90 per hour in 2026, with an exempt salary threshold of $70,304.

Rule	California	Texas
Minimum wage (2026)	$16.90 per hour, higher in many cities	$7.25 per hour (federal)
Exempt salary threshold	$70,304 per year	$35,568 per year (federal, $684 per week)
Overtime	Over 8 hours a day or 40 a week; double time over 12 hours a day	Over 40 hours a week
Meal and rest breaks	30-minute meal before the end of the fifth hour; 10-minute rest per 4 hours; one hour of premium pay per missed break	None required for adults
Paid sick leave	40 hours or 5 days a year	No statewide requirement
Final pay when fired	Immediately, on the last day	Within 6 calendar days
Final pay when an employee quits	Within 72 hours, or on the last day with 72 hours’ notice	Next regular payday
Pay ranges in job postings	Required at 15 or more employees	Not required
Salary history questions	Banned	Allowed
State income tax	Up to 13.3%	None

Two consequences HR should plan for. First, a California exempt employee earning between $35,568 and $70,304 may become exempt on relocating to Texas, which changes how their hours are tracked and paid. Second, California’s final pay rules carry waiting time penalties of up to 30 days of wages, so the separation of every California employee who declines to move needs a calculated final check. My guide to California final paycheck rules covers the math, and meal and rest breaks and PAGA covers the exposure Texas employers leave behind.

Does Texas require paid sick leave or meal breaks?

No: Texas has no statewide paid sick leave law and no meal or rest break requirement for adult employees. Austin passed a paid sick leave ordinance in 2018, but a Texas appeals court blocked it as preempted by the Texas Minimum Wage Act, and it never took effect. Employers in Austin set sick leave by policy, not by law. California, by contrast, requires at least 40 hours or 5 days of paid sick leave a year, explained in my guide to California leave laws.

Texas’s own wage rules live in the Texas Payday Law, enforced by the Texas Workforce Commission. It governs when wages are paid and what can be deducted, and employees generally have 180 days to file a wage claim.

How do discrimination and harassment laws differ?

California’s Fair Employment and Housing Act covers employers with 5 or more employees, while Texas Labor Code chapter 21 covers employers with 15 or more, with one major exception: Texas sexual harassment law covers employers with even one employee. Texas Senate Bill 45, effective September 1, 2021, defines an employer for sexual harassment claims as anyone employing one or more employees, and it can reach supervisors and others acting in the employer’s interest. Texas also gives employees 300 days to file a sexual harassment charge, up from 180.

The gaps run the other way on prevention. California requires sexual harassment prevention training for employers with 5 or more employees: two hours for supervisors and one hour for everyone else, every two years. Texas requires none for private employers. My guide to harassment prevention training for small employers covers the California rule. The headcount is where relocating companies get caught: the Civil Rights Department counts employees inside and outside California toward the five but requires training only for the ones in California, so a company with 200 people in Austin and two left in Oakland still owes those two the training. My California training requirements calculator runs the count. I recommend Texas employers train anyway, because SB 45 is one of the few places where Texas law is stricter than federal law.

How do family and medical leave laws differ?

California guarantees job-protected family leave at 5 employees and pays wage replacement through a state program; Texas relies on the federal Family and Medical Leave Act, which applies only at 50 employees. The California Family Rights Act provides up to 12 weeks of job-protected leave, California Paid Family Leave replaces part of an employee’s wages for up to 8 weeks, and Pregnancy Disability Leave adds up to four months. A Texas employee at a company with fewer than 50 employees has no statutory right to family leave at all.

For a relocating parent, that difference can matter more than the tax savings. HR should tell relocating employees, in writing, which leave they will have in Texas and which they will lose.

Do Texas employers have to carry workers’ compensation?

No: Texas is the only state where private employers may choose not to carry workers’ compensation insurance, and 24% of Texas employers were non-subscribers in 2024, the lowest share since 2016, according to the Texas Department of Insurance. Non-subscribers give up key legal defenses if an injured employee sues, so many provide a private injury benefit plan instead. California requires workers’ compensation coverage for every employer with even one employee.

How do independent contractor rules differ?

California uses the strict ABC test from Assembly Bill 5, under which a worker is an employee unless the business proves all three conditions; Texas uses a control-based test that asks how much the business directs the work. A contractor relationship that holds up in Texas can be misclassification in California. Read contractor or employee under California’s ABC test before keeping California contractors after a move.

What does a multi-state employee handbook need?

A multi-state handbook needs a core policy set that satisfies both states plus a California supplement for every rule where California goes further. That supplement covers daily overtime, meal and rest breaks, paid sick leave, CFRA and Paid Family Leave, expense reimbursement, the non-compete ban, pay transparency and final pay timing. Texas policies should cover the Texas Payday Law, workers’ compensation status and SB 45 harassment reporting.

The most expensive mistake I see is the simplest: applying Texas policies to California employees because the company is “a Texas company now.” Start with the California employee handbook template for the supplement, and if you want both states checked before the move, that is what the HR compliance check-up is for.

McKinley holds a J.D. but is not a licensed attorney. Articles here are general information, not legal advice. For your specific situation, talk with an employment attorney.

Data current as of September 2026. Sources are linked where each figure appears.