In the majority of states, employers are required to maintain workers compensation insurance (WC) for their employees.  In Texas, however, employers have the ability to "opt-out" of purchasing such coverage.  Several factors come into play in determining whether this option might be right for your business.

First, companies that do business directly with the State of Texas or local governments are required to maintain workers compensation insurance, so if you fall into this category, you cannot operate as a ''non-subscriber" (the term used to describe those who do not carry WC). Many large companies also require that their vendors and contractors carry WC, so this may limit your practical ability to operate as a non-subscriber.

If you are still in the running, the next issue involves weighing the risks and benefits.  First, if you have just a few employees working in a low-risk environment such as an office, maintaining WC is probably your safest, cheapest, and easiest option. But if you are reading this, you are probably paying or have been quoted rates that have a significant impact on your bottom line and are looking for an alternative.  If you are in this category, taking a hard look at operating as a non-subscriber may be in order.

The downside to operating as a non-subscriber is that you lose the immunity to lawsuits that you enjoy as a WC subscriber. In addition, you lose the right to assert common law defenses such as contributory negligence.

The legal requirements for operating as a non-subscriber are minimal. You must file an "Employer Notice of No Coverage" form with the Texas Department of Insurance (TDI) on an annual basis. You also must inform new employees that you do not have coverage and post notices of no coverage in your workplace.  You must also report workplace injuries to TDI. TDI provides forms and instructions for these purposes.

Beyond the foregoing, responsible employers will also consider purchasing some type of accident insurance or employee benefit plan.  The important thing to recognize, however, is that this type of policy or plan is not workers compensation and does not give you the same protections as you would have if you carried WC. That is, you do not regain the immunity from lawsuits that you enjoy as a WC subscriber or the right to assert common law defenses.

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