The laws of many states require employers to carry workers’ compensation insurance to protect themselves and their employees in case of a workplace injury. There are sometimes exceptions for small businesses with few employees for which paying workers’ compensation insurance premiums may impose an undue hardship.
Texas law is different in that it allows all companies, large and small, to opt not to purchase workers’ compensation coverage. According to the Insurance Journal, approximately 22% of Texas employers were non-subscribers in 2016. Working for a non-subscriber has implications for employees.
Despite a decrease in the number of non-subscribing employers in Texas from 2014 to 2016, the number of workers employed by non-subscribing companies remained fairly steady, only decreasing by about 2%. The reason is that some of the non-subscribers are large companies with 500 employees or more. Believing that they can provide appropriate benefits to employees while effectively managing costs, approximately one out of five large employers is a non-subscriber.
With a large number of small employers, and a small number of large ones, opting out of workers’ compensation insurance, 4% of private-sector workers did not have coverage for work-related injuries in 2016. This amounts to approximately 400,000 workers.
Texas law requires transparency of non-subscribers. Companies without work comp insurance must make an annual status report to the Division of Workers’ Compensation. According to the Texas Workforce Commission, they must also inform new workers of their non-subscriber status prior to hiring. Additionally, employers who currently have work comp insurance and decide to discontinue it must inform employees as well as the Texas Division of Insurance and the DWC.
Employees who sustain an injury while working for a non-subscriber have the right to file personal injury lawsuits against their employer.