Impact when Texas employers opt out of workers’ comp

A Texas employer that decides to opt out of the state’s workers’ compensation system is commonly referred to as nonsubscriber. Although injured employees of nonsubscribers cannot file claims with the Texas Division of Workers’ Compensation, those employees are still afforded certain statutory safeguards under Texas law, so long as they have not waived those protections in an employment agreement.

In 2012, the Texas Department of Insurance, which is the agency authorized by Texas law to regulate the state’s Division of Workers’ Compensation, reported that 33 percent of employers are nonsubscribers of workers’ compensation. In that same study, the TDI found that about 1.7 million Texans worked for nonsubscribing employers. This amounts to roughly 19 percent of employees in Texas.

If an employee of a nonsubscriber is injured in the course and scope of employment, Texas law affords certain protections to the employee beyond those available under common law principles. An action brought by an employee against a nonsubscriber to recover for workplace injuries is essentially an action for negligence. However, in Texas, nonsubscribers are prevented from asserting certain defenses that would normally be available to them because they have elected to opt out of providing workers’ compensation coverage.

As reported in the Star-Telegram, nonsubscribers in Texas include large companies, such as Wal-Mart, Costco, Home Depot, Lowe’s, and AutoZone. Although employers in Texas are not required by law to subscribe to the workers’ compensation system, approximately two-thirds of nonsubscribers provide occupational insurance coverage. This means more than a million Texans are still covered by their employer’s insurance.