Workers compensation insurance provides medical and income benefits to employees who suffer work-related injuries. Unlike in most states, participation in workers compensation is optional for most private employers in Texas. The major exception is that employers who contract with governmental entities are required to maintain workers’ compensation coverage for each employee working on the public project. Many clients or customers may also require that a company maintain workers compensation as condition of doing business with it.
The major advantage of workers compensation coverage for the injured employee is that benefits are payable without regard to fault: in most circumstances, an employee can recover even if his or her own negligence caused or contributed to the injury. The disadvantage (and corresponding advantage to the employer) is that the employee gives up the right to sue for common law damages in almost all circumstances. (The single exception being where the gross negligence of the employer caused the death of the employee.)
In order to encourage employers to maintain workers compensation coverage, Texas law imposes certain disadvantages on those that do not. In addition to remaining liable for all damages recoverable by an injured party at common law (which can be significantly greater than amounts that would be payable as workers comp benefits), employers lose certain common law defenses to liability. Chief among these is the right to reduce or avoid liability based on the fact that the negligence of the employee or of a co-worker was the cause of the injury.
For businesses that choose to provide workers compensation coverage, there are three options. The first and most common is to purchase a standard policy that is sold only by companies licensed to do so by the Texas Depart of Insurance (TDI). Other than checking the financial stability of the company offering the policy, there are few additional considerations when going this route. Some employers may also be able to join self-insurance groups that have been approved by TDI. A final option for larger employers is to become certified by TDI as a self-insurer.
If you choose to remain a “non-subscriber” (the term for employers who do not provide workers compensation insurance) you must file an annual notice of no coverage with TDI; display notices of noncoverage throughout the workplace; and give a written statement of non-coverage to each new employee.