Is Workers Comp Mandatory in Texas? What the Law Says

Short answer: no, workers compensation is not mandatory for most private employers in Texas. The Texas Department of Insurance states plainly that Texas does not require most private employers to have workers compensation. A major statutory exception applies to governmental building or construction projects, and other laws or contract terms can also require coverage.

That is the legal answer, and it is where most articles stop. It is also the least useful part of the answer, because "not required" is not the same as "free." Declining coverage in Texas is a real election with real consequences attached, and the state has built a specific set of filing, posting, and reporting duties around employers who make it.

This page covers who is actually required to carry it, what a nonsubscriber must do to stay compliant, what legal protection you are trading away, and how to think about the decision honestly rather than by default. If you already know you need coverage because a contract demands it, start with a business insurance quote.

The rule, and the exceptions that swallow parts of it

Texas is the outlier. In nearly every other state, workers compensation is compulsory above some small employee threshold. Texas lets most private employers elect not to participate, and employers who make that election are called nonsubscribers.

The exceptions worth knowing:

Public construction work. Labor Code Section 406.096 puts the mechanism on the governmental entity: a governmental entity entering a building or construction contract must require the contractor to certify in writing that it provides coverage for each employee working on the public project. Each subcontractor must provide the same certificate to the general contractor, who passes it to the governmental entity. "Governmental entity" means the state or a political subdivision of the state, including a municipality.

Private contract requirements. Not law, but binding on you all the same. TDI notes that some contractors may require their subcontractors and independent contractors to have workers compensation. General contractors, property managers, retailers onboarding vendors, and hospital systems routinely make coverage a condition of the contract. When that happens, the question stops being whether the state requires it and becomes whether you want the job. See Houston contractor general liability requirements for how these requirements usually arrive bundled.

Certain employers outside the private election. Public entities and some categories of employer operate under their own rules. Cities and counties may buy coverage from insurance companies, self-insure, or join with other cities and counties that self-insure, and emergency service organizations and local governments may also cover volunteers such as volunteer firefighters and emergency medical personnel.

Exempt employee categories. Some employees are exempt from coverage under the Texas Workers' Compensation Act, including certain domestic workers and certain farm and ranch workers. This matters mainly for the filing duty described below: an employer whose only employees are exempt does not have to file the nonsubscriber notice.

What you are actually trading away

This is the part the "not required" answer buries.

An employer that carries workers compensation generally gets exclusive remedy protection. Labor Code Section 408.001 provides that recovery of workers compensation benefits is the exclusive remedy of a covered employee, or a legal beneficiary, against the employer for a work-related injury or death. The statute preserves a death-case exception for exemplary damages recoverable by the surviving spouse or heirs of the body of an employee whose death was caused by an intentional act or omission of the employer or by the employer's gross negligence.

There is also a procedural benefit that owners rarely price. Disputes go through DWC's dispute resolution process rather than starting in court, and TDI notes that if the matter reaches district court, your workers compensation insurance company pays for your attorneys' fees and other costs.

Now the other path. Labor Code Section 406.033 removes three defenses from a nonsubscriber sued by an injured employee. In an action by an employee not covered by workers compensation, it is not a defense that the employee was guilty of contributory negligence, that the employee assumed the risk of injury or death, or that the injury or death was caused by the negligence of a fellow employee.

Read that list again with a real workplace in mind. Most workplace injuries involve some employee error, some coworker error, or some obvious hazard the worker knew about. Those are exactly the three arguments the statute takes off the table.

What is left to the nonsubscriber is narrow. The employer may defend on the ground that the injury was caused by an act of the employee intended to bring about the injury, or that it occurred while the employee was intoxicated. And the plaintiff still carries a burden: under Section 406.033(d), the plaintiff must prove negligence of the employer or of an agent or servant acting within the general scope of employment. A nonsubscriber suit is not automatic liability. It is negligence liability with the employer's best defenses removed.

You also lose the financial ceiling. Workers compensation benefits are defined by statute. A negligence judgment is not.

The pre-injury waiver does not work

Employers sometimes try to solve this with paperwork at hire. It does not work, and the statute is explicit.

Section 406.033(e) says a cause of action described in the statute may not be waived by an employee before the employee's injury or death, and any agreement by an employee to waive it in advance is void and unenforceable.

A post-injury waiver is possible but heavily conditioned. Under Section 406.033(f), the employee must enter it voluntarily and with knowledge of its effect, not earlier than the 10th business day after the date of the initial report of injury, after receiving a medical evaluation from a nonemergency care doctor, and in a writing that specifically states the true intent of the parties. Section 406.033(g) adds that the waiver provisions must be conspicuous on the face of the agreement, appearing in larger type than the body of the agreement or in contrasting colors.

If your onboarding packet contains an injury waiver, it is worth having someone look at whether it does anything at all.

What a nonsubscriber has to do to stay compliant

Choosing not to carry coverage does not remove you from the system. It moves you into a different set of duties, and TDI enforces them.

File DWC Form-005. An employer without workers compensation insurance must file the Employer Notice of No Coverage or Termination of Coverage, unless the employer's only employees are exempt from coverage under the Act. The current form lists four filing triggers: within 30 days of hiring the first employee; within 10 days after coverage terminates; within 10 days of a DWC request; and annually between February 1 and April 30. TDI states that failure to file the form when required may subject the employer to administrative penalties.

Post the notice. The employer must post the Notice to Employees Concerning Workers' Compensation in Texas in the workplace in English, in Spanish, and in any other language common to the employer's employee population, in the print type specified by DWC rules. The posting duty is triggered when the employer elects not to have coverage, cancels or terminates coverage, withdraws from certified self-insurance, or has coverage cancelled by the carrier.

Notify each employee individually. The same notice must go to each employee at the time of hire, when the employer elects not to have coverage, within 15 days of notifying the carrier of termination unless continuous coverage is maintained under a new policy, and within 15 days of cancellation by the carrier.

Report injuries if you have five or more employees. Employers with five or more employees must report work-related injuries and diseases to DWC using DWC Form-007. The filing deadline is not later than the 7th day of the month following the month in which a work-related death occurred, an employee was absent from work for more than one day as a result of an on-the-job injury, or the employer acquired knowledge of an occupational disease. The day of injury and the day the employee returned to work are not counted when calculating days absent.

None of that is difficult. All of it is routinely missed by employers who became nonsubscribers by accident rather than by decision.

The most expensive mistake: thinking you have coverage when you do not

TDI is unusually blunt on this point, and it is worth repeating exactly.

Texas law does not consider alternative policies, or coverage bought from unlicensed insurance companies, to be workers compensation. If you buy one of those, you are a nonsubscriber. You lose the legal protection against lawsuits, because the statute keys the exclusive remedy to coverage obtained in the manner the Act authorizes.

You also lose financial protection. TDI notes that alternative policies carry dollar and time limits, and if an injured employee's care expenses exceed the limit, you might have to pay the rest of the cost. Workers compensation medical benefits under the Texas system are not capped that way.

There is a licensing dimension too. Buy only from companies licensed by TDI. The Texas Property and Casualty Guaranty Association pays claims for licensed insurance companies that become insolvent, and claims against companies that are not licensed might not get paid.

If you are being sold something described as workers comp coverage at a price that seems unrelated to your payroll, find out what it actually is before you buy it.

The three ways to actually provide coverage

If you decide to subscribe, Texas gives you three routes.

Buy a policy from a licensed insurance company. The normal path for the overwhelming majority of employers. Note that you must have at least one employee to buy a workers compensation policy, though the employee may be part time, and some carriers will sell a policy covering executive officers of a business with no other employees. You can also buy coverage if you employ contractors who do not have their own workers compensation.

Self-insure. Available to large private employers, subject to DWC approval and financial requirements. Self-insured employers pay the cost of their claims themselves.

Join a self-insurance group. The group must be approved by TDI, and members must be in the same or similar business and meet additional requirements.

One more rule worth knowing: you cannot charge your employees for workers compensation coverage, with exceptions for independent contractors and construction workers.

And if nobody will write you, Texas has a backstop. Texas Mutual Insurance Company operates as the insurer of last resort. Under Insurance Code Section 2054.351, if an applicant would be rejected under the company's underwriting standards, the company generally cannot reject the risk. It must insure it at a higher premium and may impose conditions necessary to protect the company's interests.

How to make the decision honestly

The nonsubscriber math is not absurd. It is a real strategy, run deliberately by large Texas employers with sophisticated safety programs, funded benefit plans, and lawyers who have modeled the litigation exposure. What is absurd is arriving at nonsubscriber status because nobody bought a policy.

Questions worth answering before you decide:

• What does the coverage actually cost for my payroll and class codes? Get the number before deciding it is too expensive.
• Do any of my contracts, leases, or bids require workers compensation? Check before you decline, not after you lose a job.
• Do I bid or want to bid any public work? Section 406.096 makes the answer for you.
• What is my realistic worst case in a negligence suit without contributory negligence, assumption of risk, or the fellow servant defense available to me?
• If I go without, do I have a written occupational injury benefit plan, and who is funding it?
• If I go without, do I have liability coverage that responds to employee bodily injury? Most standard general liability forms exclude it.
• Am I prepared to file DWC Form-005 every year, post the notices in the required languages, notify every new hire in writing, and file DWC Form-007 injury reports if I have five or more employees?

If the answer to the last several questions is uncertain, you are not running a nonsubscriber strategy. You are exposed and hoping.

Frequently asked questions

Is workers compensation required for private employers in Texas?

Generally no. The Texas Department of Insurance states that Texas does not require most private employers to have workers compensation. A major statutory exception applies to governmental building or construction projects, and other laws or contract terms can also require coverage.

What does a Texas employer give up by not carrying workers comp?

The exclusive remedy protection that generally applies to a subscribing employer. Labor Code Section 408.001 preserves a death-case exception for exemplary damages based on an intentional act or omission or gross negligence. Without coverage, an injured employee can sue directly, and Section 406.033 removes several common-law defenses.

What must a Texas nonsubscriber file with the state?

The current DWC Form-005 lists four filing triggers: within 30 days of hiring the first employee; within 10 days after coverage terminates; within 10 days of a DWC request; and annually between February 1 and April 30. TDI states that failure to file when required may subject the employer to administrative penalties.

Do nonsubscribers have to tell employees they have no coverage?

Yes. The employer must post the Notice to Employees Concerning Workers' Compensation in Texas in the workplace in English, Spanish, and any other language common to its workforce, and must give the notice to each employee at time of hire, when electing not to carry coverage, and within 15 days of terminating or being cancelled.

Do nonsubscribers have to report workplace injuries?

Employers with five or more employees must report work-related injuries and diseases to DWC using DWC Form-007, filed no later than the 7th day of the month following the month in which a work-related death occurred, an employee was absent from work more than one day due to an on-the-job injury, or the employer learned of an occupational disease.

Can an employee sign away the right to sue a nonsubscriber?

Not in advance. Labor Code Section 406.033(e) makes any pre-injury waiver of that cause of action void and unenforceable. A post-injury waiver is valid only if it is voluntary, entered no earlier than the 10th business day after the initial report of injury, made after the employee has received a medical evaluation from a nonemergency care doctor, and set out conspicuously in writing.

Where Argo fits

Argo Insurance is an independent agency, and on this question our job is mostly to make the choice explicit rather than accidental. We can price coverage across several markets so you are comparing a real premium against a real exposure, tell you which of your contracts already require coverage regardless of what state law says, and flag when a product being marketed to you is not workers compensation under Texas law.

If you are going the nonsubscriber route deliberately, we can talk through what liability coverage actually responds to employee injury, because the standard general liability policy generally does not. Start with a small business insurance review or read the fuller Texas workers compensation guide for employers.

This page is general information about Texas law and insurance, not legal advice. Statutes and rules change, obligations vary by employer, and the policy issued controls.