Texas is the only state in the country where workers’ compensation is optional for most private employers. That makes the decision to carry it — or not — a real conversation with real trade-offs. Here’s how to think about it.
The basic Texas option
In 49 states, workers’ compensation insurance is required for most employers. Texas is the exception. Texas private employers can choose to be either subscribers (carrying workers’ comp) or non-subscribers (opting out). Each path has different consequences for both the employer and employees if someone is injured on the job.
This isn’t a loophole or a workaround. It’s an explicit feature of Texas labor law. Roughly 28% of Texas employers are non-subscribers, according to the Texas Department of Insurance, with the percentage varying significantly by industry.
The subscriber path
If you carry workers’ compensation insurance in Texas, you’re a subscriber. Your business operates the same way it would in any other state:
- Injured employees receive statutory medical and wage-replacement benefits through the workers’ comp system.
- The benefits are defined by Texas law — specific medical coverage, specific wage replacement percentages, specific timelines.
- In exchange, employees generally cannot sue you for negligence related to a workplace injury. The workers’ comp system is the “exclusive remedy.”
This is the trade-off baked into the system everywhere it exists: predictable benefits for employees, predictable liability protection for employers.
The non-subscriber path
If you opt out of workers’ comp, you’re a non-subscriber. The trade-offs flip:
- You don’t pay workers’ comp premiums, which for some industries can be significant.
- Injured employees don’t automatically receive statutory benefits.
- You lose the “exclusive remedy” protection. Injured employees can sue you for negligence, and Texas law doesn’t cap those damages.
That last point is the one that matters most. As a non-subscriber, you’re directly exposed to lawsuits for workplace injuries. Most thoughtful non-subscribers carry an occupational injury benefit plan — a non-statutory program that provides medical and wage benefits to injured employees voluntarily. Done well, this can match or exceed what workers’ comp would pay, while still preserving the cost flexibility that drives some employers to opt out.
Which path makes sense?
The answer depends on several factors specific to your business:
Industry and injury frequency. Industries with low injury rates — office-based work, professional services — often find subscriber premiums are reasonable and the protection is worth it. Industries with higher injury rates — construction, manufacturing, trucking — sometimes find non-subscriber paths with carefully designed occupational injury plans more economical, but the lawsuit exposure has to be managed seriously.
Claim history. If you’ve had injury claims, your workers’ comp premium reflects that. A clean history can keep subscriber rates manageable; a complicated history can push some employers to look at non-subscriber alternatives.
Employee mix. Highly compensated employees increase your wage-replacement exposure on the non-subscriber side. Larger workforces increase frequency exposure. Both factor in.
Risk tolerance. Non-subscriber status gives you more flexibility but also more exposure. Some Texas business owners prefer the predictability of being a subscriber; others prefer the cost control of non-subscribing with a robust occupational injury plan.
What we tell Texas employers
This isn’t a one-size-fits-all decision, and we don’t push subscribers toward non-subscribing or vice versa. Different businesses need different structures.
What we will tell you: if you’re a non-subscriber without a real occupational injury plan, you’re exposed in ways that can become very expensive in a single bad incident. And if you’re a subscriber paying premiums you haven’t actively reviewed in years, there’s usually room to compare and at least understand your options.
If you’re a Texas employer thinking through this question, give Harvey Insurance a call at (469) 513-3379. We’ll walk through both paths for your specific business and help you make a decision you can stand behind.