Almost every state requires businesses to carry workers’ compensation insurance. There is only a single one that does not. It probably doesn’t come as a surprise that Texas, with its independent streak and pull-up your bootstraps mentality, is that single state.
That said, there are some exceptions, but the vast majority are not legally mandated to do so. So when is it required in Texas? Here is a quick guide to everything you need to know about workers comp coverage in Texas.
Who Must Have Workers’ Compensation Insurance in Texas?
The exceptions primarily have to do with government and public employers. So state, city, and county employees, along with university employees, must have workers’ compensation. If construction workers are building and repairing the public property, then they must have coverage as well. Motor carriers and public transport workers are also mandated to be protected by their employers.
The one non-public exception is companies that sell and distribute liquid propane and compressed natural gas. There are many public workers in Texas, just like any other state, so these exceptions ensure that a lot of workers are covered.
What Happens With Companies That Do Not Have Workers’ Compensation for Their Employees?
Unless they are an exception, every business in Texas has the option to get workers comp coverage in Texas for their employees. Companies that choose not to tend to have funds reserved for if an employee gets injured due to their job duties and is unable to work because of it.
However, by declining coverage, they are also accepting that their employees can sue them if there is a disagreement over compensation or if the company declines compensation for some reason. In most cases, the potential award of damages to an employee who successfully sues their workplace will be much more than the cost of getting insurance. However, many of these businesses take the chance that they will never need to pay out for it.
Choosing not to carry workers’ compensation is perfectly acceptable in Texas. However, they must notify all new employees that they will not have this coverage. They also have to file with the Texas Department of Labor every year to show that they have the financial means to “self-insure.” If they do not, then they either purchase coverage from a private insurance provider or the state’s workers’ compensation fund. If they carry workers’ compensation but decide to discontinue it, they must also notify their employees and the Department of Labor immediately.
Employees have more responsibilities for their health and safety in Texas when compared to other states. For example, if they are notified that their employer will not provide workers’ compensation, then they may choose to find coverage for themselves. If they do not have coverage and are injured, then they will have to find representation and initiate a lawsuit on their own.
Unlike other states, employees are also able to opt out of coverage if they so wish. When they are hired, employers must notify the employee if they are covered or not. If the employee chooses to be covered, then they waive their right to possibly sue for compensation if they are injured down the road. If they waive the protection, then they retain that right. Essentially, the worker can decide whether they want the security of coverage or the potential of a bigger payout by remaining uncovered.
Employees are responsible for reporting medical issues as soon as possible to their employers. If they don’t report within 30 days, then they may be denied compensation. Once this report is made to the employer, the employer has 8 days to notify their insurance provider or the state. Even if the state is a non-subscriber to workers’ compensation, they still have to report workplace injuries and deaths to the state.
Risks of Not Having Workers’ Compensation
28% of businesses that employ 18% of the workforce do not carry workers’ compensation for their employees. That is a large number. However, those businesses have proven their financial ability to cover a certain amount of employees for injury or illness on the job. That said, there is still considerable risk for employers who do not provide coverage, regardless of their financial situation.
Perhaps the biggest risk is that they are sued by an injured employee. In many court cases, the eventual payout will be much more than the cost of getting insurance would ever be. Some cases could get up to millions of dollars in damages. With workers’ comp, many costs can be covered, but those costs rarely add up to what a judge or jury might award.
Employers may also find it harder to find talent to hire. Especially as we enter a time when there seems to be a labor shortage, employers need to do whatever they can to attract talent. Many workers may choose to join up with a company that provides the security of workers’ compensation rather than one that doesn’t.
On top of that, if an employer does not follow their responsibilities as a non-subscriber to workers’ compensation, they may face legal penalties. They must notify employees in writing that they are not covered, and they must display that information in a noticeable place on the premises as well. This is also a requirement if they discontinue workers’ compensation coverage. Employees must be given adequate time to find new work if they so choose.
Even though it’s not required by law, it’s important to remember that employees are people. They can get hurt or sick, and if they do so on the job, then they are doing so in service of helping to make your business successful.
Protecting them in the form of workers’ compensation is the same as providing them protection such as hard hats and steel-toed boots. Plus, while you may never need the coverage, having it in place will give you the peace of mind that you will not be sued if there is ever an issue between yourself and an employee regarding their compensation. Make the choice, but be certain that you have everyone’s best interests in mind.