Non-Subscriber Considerations for Businesses Operating in Texas: Outside Corporate Counsel Viewpoint

Unlike workers’ compensation laws in every other state, the Texas Worker’s Compensation Act (TWCA) allows private Texas employers to choose whether to subscribe to workers’ compensation insurance. Texas Labor Code Section 406.002(a); Lawrence v. CBD Servs., Inc., 44 S.W.3d 544, 552 (Tex. 2001). Employees of subscribing employers also have a choice: they may opt out of the system within the prescribed time and retain their common-law rights.  Texas Labor Code Section 406.034.  Although the TWCA is unique among the states in allowing private employers to choose whether to subscribe, it encourages employers to subscribe by abolishing their common-law defenses of contributory negligence, assumption of the risk, and fellow servant if they do not subscribe.  Texas Labor Code Section 406.033.   

So, technically, from the perspective of this employer, this may actually be a non-subscriber case (which is permitted in Texas). The term “nonsubscriber” effectively just means an employer who does not benefit from the protection of a statutory workers compensation insurance policy. A "nonsubscriber" is an employer in Texas that has opted out of the state's workers' compensation insurance system. These employers do not provide workers' compensation coverage to their employees and are not required to do so by law. In a nonsubscriber case, an employee must prove the employer was negligent, unlike in a workers' compensation case where fault is not a factor.  

Even though there is no requirement in Texas for an employer to carry workers’ compensation insurance (which again is unique to Texas that we don’t mandate workers comp insurance be carried here), that does not mean that the claimant can’t sue the employer directly for personal injury damages under a negligence theory (with no comparative negligence against the claimant allowed as a defense by the employer). A relevant consideration in evaluating damages in a non-subscriber claim is determining what the amount of medical expenses are and quantifying lost wages. However, there should be a credit available for any medical benefits paid or wage replacement monies paid to an injured worker by the employer. 

A Texas claim with a non-subscriber would mean that the parties would not be dealing with the Texas Department of Insurance-Division of Workers' Compensation (TDI-DWC) at all, rather the parties typically look to what the whatever work injury benefit plan is in place. If there is no work injury benefit plan governing how benefits must be administered for the benefit of the employee, the administration of benefits, what is paid, how, when etc. is then ostensibly unspecified and presumed to be discretionary.

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