Why Texas Workers' Comp Is Different
Texas is one of only two states (along with South Dakota for certain employers) where workers' compensation insurance is voluntary for most private employers. Employers who choose not to carry coverage are called "non-subscribers." About one-third of Texas employers operate as non-subscribers.
While this sounds like a cost-saving opportunity, non-subscribers face significant legal exposure. If an employee is injured on the job and sues, non-subscribers cannot use three common legal defenses: contributory negligence, assumption of risk, and the fellow employee doctrine. This means juries often award large damages against uninsured employers.
Who Must Carry Coverage in Texas
While most private employers can opt out, certain categories must carry workers' comp in Texas: construction companies working on government-funded projects, motor carriers (trucking companies), and all public sector employers including state agencies, counties, cities, and school districts. Many private contracts — especially in oil and gas, construction, and manufacturing — also require proof of workers' comp as a condition of doing business.
Non-Subscriber Requirements
If you choose not to carry workers' comp in Texas, you must file DWC Form-005 with the Texas Department of Insurance Division of Workers' Compensation, post a notice in your workplace informing employees that you do not carry coverage, and provide written notice to each new hire. Failure to follow these notification requirements can result in administrative penalties.
How Texas Workers' Comp Rates Work
Texas uses NCCI class codes to categorize employees by job type. Premiums are calculated based on your classification codes, total payroll, experience modification rate, and carrier-specific rating factors. Texas is an "open rating" state, meaning carriers have flexibility to set their own rates — which makes shopping multiple carriers especially important.
Common Texas Class Codes
| Code | Description | Risk Level |
|---|---|---|
| 8810 | Clerical Office Employees | Low |
| 8742 | Outside Salespersons | Low |
| 1320 | Oil or Gas Lease Operator | Medium |
| 5606 | Contractors — General | Medium-High |
| 7219 | Trucking NOC | Medium-High |
| 5403 | Carpentry NOC | Medium-High |
| 5551 | Roofing — All Kinds | High |
Subscriber vs. Non-Subscriber: What You're Risking
| With Coverage | Without Coverage | |
|---|---|---|
| Employee lawsuits | Protected — employees cannot sue | Exposed — employees can sue with no cap |
| Legal defenses | Full defenses available | Three key defenses stripped |
| Medical costs | Carrier pays | Employer pays out of pocket |
| Contract eligibility | Qualifies for most contracts | Disqualified from many contracts |