Workers' Comp Requirements in Texas

Voluntary System Framework

Texas stands out among states by maintaining a voluntary workers' compensation system for most employers. Private businesses can legally choose to operate as "non-subscribers" outside the workers' compensation system. This distinctive approach makes Texas the only state where workers' compensation remains completely optional for most employers, regardless of size or industry. Companies electing non-subscriber status must file annual notices with the Texas Department of Insurance, provide written notification to employees about their lack of coverage, and report workplace injuries. Approximately 28% of Texas private employers choose non-subscriber status, creating a substantial segment of the workforce operating outside traditional workers' compensation protections.

Mandatory Coverage Categories

Despite the generally voluntary system, specific employer categories face mandatory coverage requirements. All Texas government entities—including state agencies, counties, cities, school districts, and public universities—must provide workers' compensation coverage without exception. Private employers with government contracts, particularly in construction and transportation sectors, must maintain coverage for workers assigned to those public projects, regardless of their status on private sector work. Professional sports teams must provide coverage for athletes and team staff due to specific statutory requirements addressing their unique injury risks. These mandatory categories create important coverage islands within Texas's otherwise optional system.

Non-Subscriber Consequences

Employers rejecting workers' compensation coverage face significant consequences affecting their legal position and risk exposure. Non-subscribers lose crucial common law defenses in workplace injury lawsuits, including contributory negligence, assumption of risk, and fellow employee negligence. This legal disadvantage means injured employees need only prove minimal employer negligence to potentially secure substantial damages exceeding workers' compensation benefits. Non-subscribers typically implement alternative benefit plans providing limited injury benefits while requiring mandatory arbitration, though these alternatives lack the comprehensive protection of statutory workers' compensation. Without state-regulated coverage, non-subscribers face unlimited lawsuit exposure, potentially including punitive damages unavailable in the workers' compensation system.

Coverage Verification Requirements

Texas imposes specific requirements for communicating and verifying workers' compensation status. Employers must post notices in both English and Spanish clearly stating whether they maintain coverage. Businesses without coverage must file annual non-subscriber notifications with the state by specific deadlines or face administrative penalties. Workers' compensation subscribers must provide coverage information to new employees within 15 days of hiring. Job applicants maintain legal rights to inquire about workers' compensation status during the application process, and companies cannot legally discriminate against applicants based on previous workers' compensation claims. These communication requirements ensure transparency regarding workplace injury protection regardless of an employer's coverage decision.