In Texas, most private employers are not required by law to carry workers' compensation insurance, unlike in many other states. However, there are specific situations where coverage is mandated, such as for government contractors and certain public entities. Whether legally required or not, having workers’ compensation insurance can offer valuable protection for both employers and employees.
Affiliated HR & Payroll is here to help Texas employers understand their obligations and make informed decisions about whether to carry workers' compensation coverage. Let’s explore why workers' compensation matters, when it's required, and what you need to know if you decide not to provide coverage.
Why Workers’ Compensation Matters
Workers' compensation offers several benefits for both employees and employers. For employees, it provides financial protection in case of work-related injuries, helping attract and retain top talent. For employers, it reduces liability, as workers' compensation helps protect businesses against lawsuits if an employee gets injured or dies on the job. Additionally, the insurance company investigates claims to prevent fraud and ensures injured employees receive the care they need to return to work faster.
Unique Aspects of Texas Workers’ Compensation Laws
Unlike most states, private employers in Texas are not required to carry workers' compensation insurance unless they are contracting with the government. However, all Texas governmental entities (such as public schools, utilities, cities, or counties) must have workers’ compensation coverage.
Employers that choose not to provide workers’ compensation coverage (non-subscribers) must notify their employees and the Texas Division of Workers' Compensation (DWC). This transparency is essential to avoid penalties and manage the increased legal risks associated with opting out.
Workers’ Compensation Coverage Options in Texas
Employers have several options to meet the workers’ compensation requirements, especially if they choose to offer coverage voluntarily:
- Purchase coverage from a licensed insurance company.
- Provide self-insurance if the company is large enough, meets state financial requirements, and receives approval from Texas authorities.
- Utilize certified healthcare networks set up by insurance companies, self-insured groups, or government entities.
Texas does not allow alternative policies from unlicensed companies. Businesses using unlicensed coverage are classified as "non-covered," leaving them without the legal protection authorized workers' compensation insurance provides. Without proper coverage, businesses face higher risks of lawsuits and penalties if an employee is injured, falls ill, or dies on the job.
Handling a Workers’ Compensation Claim in Texas
When an employer does provide workers' compensation insurance and an employee is injured on the job, specific steps must be followed throughout the treatment and claims process:
- Employee notification: Employees must inform their employer of the injury or illness within 30 days of the incident.
- Employer notification: Employers should notify employees if the coverage is part of a network and direct them to network providers.
- Employer report: Employers must file DWC Form-0001 (Employer’s First Report of Injury or Illness).
- Employee report: Employees must inform the Texas Division of Workers’ Compensation (DWC) within one year of the incident by filing DWC Form 041.
Additionally, employees should inform their doctor about the work-related cause of the injury to ensure proper documentation.
Tips for Managing Workers’ Compensation Claims Efficiently
Managing claims quickly and preventing fraud are key concerns for many employers. Workers' compensation insurance helps reduce the risk of fraudulent claims as the insurance company investigates each case. Here are some best practices:
- Ensure workplace safety: Adhering to Texas workplace safety regulations helps minimize accidents and reduce opportunities for fraudulent claims.
- Promptly report claims: Respond to claims in a timely manner and follow up on the investigation to ensure fairness and compliance.
Managing Workers’ Compensation Costs
The cost of workers' compensation insurance can be a burden for many businesses. However, there are strategies to reduce expenses while maintaining compliance:
- Safety training: Offering safety training to employees can reduce premiums, as many insurers offer discounts for businesses that actively promote workplace safety.
- Fewer claims, lower premiums: Reducing workplace accidents lowers the number of claims filed, which in turn helps reduce insurance premiums.
- Explore coverage options: Review your workers’ compensation policy regularly to ensure you get the best coverage at the most competitive rates.
Implementing workplace safety best practices—such as removing hazards, encouraging anonymous reporting of unsafe conditions, and maintaining equipment—helps prevent accidents and injuries.
Additionally, return-to-work programs offer accommodations for injured employees, allowing them to transition back to work more quickly and reduce workers’ compensation costs.
Legal Requirements and Compliance for Texas Employers
While not all private businesses are required to offer workers' compensation coverage, non-subscribing companies (those that do not offer workers' compensation insurance) face increased legal risks and must clearly notify employees and the Texas Division of Workers' Compensation (DWC) about their lack of coverage.
According to the DWC, non-subscribers must complete and submit DWC Form-005 (Employer Notice of No Coverage or Termination of Coverage) each year by April 30, or when they terminate their coverage.
Employers that opt out of coverage need to ensure full compliance with these requirements to avoid potential penalties and protect themselves from legal challenges. Non-subscribing businesses that do not follow these procedures could expose themselves to lawsuits in the event of workplace injuries, as injured employees can file claims directly against the employer.
Conclusion: Understanding Workers’ Compensation in Texas
Navigating the choice to provide or opt out of workers' compensation coverage is a critical decision for Texas employers. Understanding how to protect employees and the business from risks associated with workplace injuries is key.
If you have questions about Texas workers’ compensation, claims management, or compliance, contact Affiliated HR & Payroll today. Our team has years of experience helping Texas businesses manage their workers' compensation responsibilities and can guide you through the process.