Workers' comp nonsubscribers in Texas

What a subscriber gets that a nonsubscriber doesn't

When an employer carries workers' comp, injured employees generally receive benefits through the workers' comp system, and the system limits their ability to sue the employer. A nonsubscriber stays outside that trade. Its employees keep the right to sue in court for on-the-job injuries.

Under Labor Code Sec. 406.033, in a lawsuit by an employee who isn't covered by workers' comp, the employer can't defend by arguing that the employee was contributorily negligent, assumed the risk, or was hurt by a co-worker's negligence. The employer can still defend on the ground that the employee intended the injury or was intoxicated, and the employee must prove the employer's negligence.

The same section says employees can't waive these rights before an injury. A waiver after an injury is valid only if it's voluntary, signed at least 10 business days after the initial injury report, preceded by a medical evaluation from a non-emergency doctor, and written with the waiver conspicuously displayed.

Filing DWC Form-005

Labor Code Sec. 406.004 requires an employer without coverage to notify the Division of Workers' Compensation (DWC) in writing, and failing to do so is an administrative violation. DWC's Form-005 instructions set the deadlines:

• Every year between February 1 and April 30.
• Within 30 days of hiring your first employee.
• Within 10 days of ending your workers' comp coverage.
• Within 10 days of DWC asking you to file.

How to file, and who doesn't need to

DWC's Employer E-File tool lets nonsubscribers file and manage the annual notice online. The form instructions also list email, fax and TXCOMP upload as options. All fields are required, and you file a new form to add, remove or change business locations.

According to DWC, you must file if you're a nonsubscriber with one or more employees who aren't exempt from workers' comp coverage. If all your employees are exempt, such as certain domestic workers and certain farm and ranch workers, you don't have to file.

Telling your employees

Labor Code Sec. 406.005 requires every employer to tell employees whether it has workers' comp. DWC spells out what a nonsubscriber has to do:

• Give written notice of non-coverage to each new employee when hired.
• If you dropped coverage, give written notice that coverage ended, including the date. The statute's deadline is the 15th day after the termination takes effect.
• Post DWC's Notice 5 at the workplace in English, Spanish and any other appropriate language, where employees can see it regularly.

Reporting injuries as a nonsubscriber

A nonsubscriber with five or more employees who aren't exempt must report work-related injuries and illnesses to DWC on DWC Form-007. Reportable events include an injury that keeps an employee off work for more than one day, a work-related illness you know about, and a work-related death.

DWC's FAQ says the report is due no later than the seventh day of the month after the month the death occurred, the employee was off work for more than one day, or you learned of the illness. Set a monthly reminder if you go this route.

When coverage isn't optional

Labor Code Sec. 406.096 requires a state agency, city, county or other political subdivision that enters a building or construction contract to make the contractor certify in writing that it provides workers' comp for each employee on the public project. Each subcontractor must provide the same certificate through the general contractor.

Building or construction under that section includes erecting, remodeling, repairing or demolishing structures such as buildings, bridges, roadways and utility facilities. Beyond the statute, private customers, general contractors and leases often require proof of coverage by contract, and some state license applications ask how you handle it (see our contractor guide).

Questions to work through before opting out

Some nonsubscribers buy other coverage to manage the lawsuit risk, such as employer's liability or occupational injury benefit plans. These aren't workers' comp and work differently. Before deciding, ask:

• Do any of my contracts, customers or public projects require workers' comp?
• How would I pay for an injured employee's medical bills and lost wages, and a lawsuit defense, without it?
• Who will file Form-005 each spring and Form-007 each month, and post the notices?
• If I offer an injury benefit plan, has an attorney reviewed it, including any federal benefit-plan rules?
• What would switching back to workers' comp involve, and what notice must employees get within 15 days?