Here’s a fact that surprises most business owners: Texas is the only state in the nation that does not require private employers to carry workers’ compensation insurance.
That might sound like good news for your bottom line. But before you skip workers’ comp to save on premiums, you need to understand what you’re risking.
What “Non-Subscriber” Means
In Texas, employers who choose not to carry workers’ comp are called “non-subscribers.” About 20-25% of Texas employers fall into this category. As a non-subscriber, you still have obligations. You must file an annual notice with TDI’s Division of Workers’ Compensation (DWC). You must display a notice in your workplace informing employees of your non-subscriber status. You must provide written notice to each new hire that you don’t carry workers’ comp. The annual reporting window is February 1 through April 30 each year.
The Real Cost of Going Without
Here’s where it gets serious. When you don’t carry workers’ comp in Texas, you lose three critical legal defenses: contributory negligence (you can’t argue the employee’s own negligence caused the injury), assumption of risk (you can’t argue the employee knew the job was dangerous), and fellow employee negligence (you can’t blame a coworker for the injury).
Without these defenses, if an employee is injured on the job, they can sue you directly. And in Texas courts, employee injury lawsuits against non-subscribers have an extremely high success rate. Jury awards can reach into the hundreds of thousands or even millions of dollars.
One serious workplace injury can bankrupt a small business that doesn’t carry workers’ comp.
Who Must Carry Workers’ Comp
While most private employers have a choice, some are required by law: government entities (cities, counties, state agencies), building and construction contractors working on public projects, motor carriers (trucking companies with DOT authority), compressed natural gas and LP gas dealers, and employers of inmates in work furlough programs.
If your trucking company has a DOT number, you need workers’ comp. Period.
The Cost of Workers’ Comp
Workers’ comp premiums in Texas are based on your industry classification code, payroll amount, and claims history (experience modification rate). For office-based businesses, rates can be as low as $0.15 to $0.30 per $100 of payroll. For construction, manufacturing, or trucking, rates range from $2.00 to $15.00+ per $100 of payroll.
A small office with $200,000 in annual payroll might pay $300 to $600 per year. A construction company with $500,000 in payroll might pay $10,000 to $50,000 per year.
Making the Decision
For most Texas businesses, carrying workers’ comp is the smart choice, even though it’s not legally required. It provides a defined, predictable cost for workplace injuries. It protects your business from lawsuits. It covers medical expenses and lost wages for injured employees. It demonstrates professionalism to clients and contractors who may require it. Many contracts, leases, and client agreements require proof of workers’ comp.
Alternatives for Non-Subscribers
If you choose to go without workers’ comp, consider: occupational accident insurance (lower cost but more limited coverage), a strong safety program to prevent injuries, an employee injury benefit plan, and robust legal liability insurance.
Get a Quote
Whether you need a new workers’ comp policy, want to compare your current rate, or have questions about your obligations as a Texas employer, call TAP Insurance at (800) 666-2254. We help small businesses across Texas find the right coverage at the right price.
