Texas Workers' Comp: Non-Subscriber Basics

If you are hiring in Texas, you will hear the word "non-subscriber" sooner or later. A friend might say they do not carry workers' comp. A customer might ask for proof of coverage. Here is a plain explanation of what it means, what you have to do, and what to think through before you decide.

What "non-subscriber" means

Under the Texas Labor Code, coverage is generally elective for private employers, with exceptions for public employers and as otherwise provided by law. The Texas Department of Insurance says that employers who choose not to provide coverage are non-subscribers, and so are employers who end their coverage, starting the day the policy ends.

Employers who carry coverage are called subscribers. If you subscribe, an injured employee generally gets medical care and income benefits through the system without having to prove fault, and the system generally limits the employee's ability to sue.

What non-subscribers must do for employees

According to TDI, an employer without coverage must:

• Give new employees written notice that there is no coverage, at the time of hire.
• Post a notice of no coverage in the workplace, in English, Spanish, and any other language that employees need, where employees can see it regularly. TDI publishes the required form, Notice 5.
• Update employees if coverage ends. If you had coverage and it is terminated, the Labor Code requires telling employees within 15 days of the effective date.

What non-subscribers must file with the state

The Texas Division of Workers' Compensation (DWC) asks non-subscribers to file a notice of no coverage, called DWC Form 005:

• Each year between February 1 and April 30.
• After hiring the first employee.
• After ending a workers' compensation policy.

If you have five or more employees, you must also report work-related injuries, illnesses, and deaths on DWC Form 007 when they involve more than one day of lost time. TDI says those reports are due within one month and seven days of the date of death, the date you learned of the illness, or the date lost time began. Missing these notices is an administrative violation under the Labor Code, so put the dates in your compliance calendar. TDI's non-subscriber page has the forms and online filing.

The tradeoff: what changes if someone is hurt

This is the part to understand before you decide. If an injured employee of a non-subscriber sues, the Labor Code takes away three defenses that employers usually use. It is not a defense that:

• the employee was partly at fault (contributory negligence),
• the employee knowingly accepted the risk, or
• a coworker's negligence caused the injury.

The employee still has to prove the employer was negligent. But an employer who skipped coverage is now defending a lawsuit, with lawyers and possibly a jury, instead of paying a claim through a defined system. The law also says an employee cannot waive the right to sue ahead of time, and an agreement to do so before an injury is void.

I am not an attorney, so please read this as a map and not as advice. If you are thinking about going without coverage, a conversation with an employment attorney and an insurance broker is worth the hour.

Other reasons you might still need coverage

• Contracts and customers. Some customers, general contractors, and landlords require proof of coverage. If you do construction work for a government entity, Texas law requires the contractor to certify in writing that it provides coverage for employees on the public project.
• Public employers are not allowed to opt out.
• Your own risk tolerance. One serious injury can cost far more than years of premiums, and many businesses never have one. Either can happen, so make the decision on purpose.

What non-subscribers can offer instead

Notice 5 says a non-covered employer "can and may provide other benefits to injured employees." Some non-subscribers use an occupational injury benefit plan, which is a private plan that pays benefits for on-the-job injuries. Those plans vary widely and can have their own legal requirements, so get an attorney and a broker involved before you buy or write one.

Whichever way you go, do the HR basics

Coverage choice does not change the fundamentals. Safe workplaces, clear written safety rules, training that is documented, and a simple process for reporting injuries all lower risk either way. Employees can also report unsafe conditions to the state, and you may not fire or punish someone for a good faith safety report. Notice 5 spells that out.

A short injury response process is worth writing down:

1. Get the employee care first.
2. Record what happened, when, where, and who saw it, as soon as you can.
3. Report to your carrier if you have one, or note the date for your DWC reporting if you do not.
4. Keep the file separate from the regular personnel file.
5. Follow up with the employee on their recovery and return to work.

Frequently asked questions

This article is general information for business owners and is not legal advice. Workers' compensation decisions can have serious consequences, so please talk with an employment attorney and an insurance professional about your situation.