Business Lines · Workers' Compensation
Workers' compensation in Texas: the only state where it's optional.
Opting out is legal. It is not free, and the trade-off is more specific than most people are told.
The short version
Texas is the only state where private employers can legally decline workers' compensation coverage. Employers who opt out are called non-subscribers. They file a notice with the Texas Division of Workers' Compensation, post notice of no coverage for employees, and — at five or more employees — report workplace injuries to the state.
Under Texas Labor Code § 406.033, a non-subscriber sued by an injured employee cannot argue that the employee was contributorily negligent, that they assumed the risk, or that a coworker caused the injury. Those three defenses are gone by statute. Two remain: that the employee intentionally caused the injury, or was intoxicated. The employee still has to prove the employer was negligent — but damages aren't limited to a benefit schedule, so a single serious claim is open-ended in a way a comp claim never is.
Non-Subscriber Paperwork
Opting out is a formal status, not just the absence of a policy.
Getting these wrong turns a legal choice into a compliance problem — you keep the lawsuit exposure and add a failure a plaintiff's lawyer will put in front of a jury.
- DWC Form-005 within 30 days of your first employee
- Again every year between February 1 and April 30
- Within 10 days of terminating comp coverage
- Within 10 days of a DWC request
- Post notice of no coverage in the workplace — English, Spanish, and any other language your crew needs
- DWC Form-007 injury reports if you have five or more non-exempt employees
- Reportable: more than one day missed, a known work-related illness, or a fatality
- Due by the seventh day of the month following the event
DWC takes these through its Employer E-File system, so filing is a short online task. The February–April window is the one employers forget, because nothing prompts them.
The Real Trade-Off
What you actually give up — and what you keep.
More nuanced than either side usually admits.
With comp: predictability
Medical care and a portion of lost wages are paid on a statutory schedule, and the employee generally cannot sue you. Claims are expensive and predictable. Predictability is the entire product.
Without it: three defenses gone
§ 406.033 strips contributory negligence, assumption of risk, and the fellow servant rule. The legislature did that deliberately, to make opting out carry a real cost.
But you are not defenseless
Two defenses survive by statute — intentional self-injury and intoxication — and the employee still carries the burden of proving negligence. Non-subscribers can also attribute fault to responsible third parties. Pages that imply automatic liability are wrong.
The exposure is the ceiling, not the odds
Damages in a negligence suit aren't capped by a benefit schedule and can include pain and suffering. Comp turns a bad injury into a known cost. Non-subscriber status turns it into a jury question.
Premium Mechanics
How the price is actually calculated.
Comp pricing is more transparent than most commercial lines, and knowing the formula is how you catch errors in your own favor.
Class code × payroll × modifier
Every job function has a classification code with its own rate per $100 of payroll. Multiply, then adjust for claims history.
Misclassification is the common error
A code that overstates your hazard inflates every renewal until someone catches it. Office staff coded as field workers is frequent, and it compounds year over year.
The experience modifier
Above 1.0 is a surcharge, below 1.0 a credit. Driven more by claim frequency than severity — several small claims hurt more than one large one. Some contracts require it under 1.0.
Audits and owner elections
Premium is estimated on projected payroll and trued up at year end. Separately, sole proprietors, partners, LLC members, and officers can often elect in or out — getting that wrong either leaves an owner uncovered or charges for someone who didn't need it.
Straight Talk
When you need less than you think.
No employees, no legal requirement
A true sole proprietor with no employees isn't required to carry comp in Texas. What forces the issue is almost always a contract.
If a certificate is the only reason
Ask about a minimum premium policy — sometimes called a ghost policy — which satisfies a contract without covering an owner who elected out.
1099 does not solve this
Paperwork doesn't determine employment status. If the relationship functions as employment, the exposure exists regardless, and it surfaces at audit or after an injury.
How to actually decide
There's no universal payroll number, and anyone who gives you one is guessing. It turns on four things: how physical the work is, whether a contract requires coverage, whether you could absorb a serious verdict, and whether you'll genuinely keep up the filing obligations.
Get Started
Request a workers' compensation quote.
Tell us your industry and headcount, and we'll price conventional comp and explain the non-subscriber question honestly.
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You'll hear back from a real person on our team, not a call center.
Plano, TX 75074
Workers' Comp FAQ
Questions we hear often.
Is workers' compensation required in Texas?
Not for most private employers — Texas is the only state where it's optional. Building or construction work under a contract with a governmental entity is an exception, and private contracts commonly require it regardless.
What is a non-subscriber in Texas?
An employer that has opted out of workers' compensation. Non-subscribers file DWC Form-005 with the Division of Workers' Compensation, post notice of no coverage in the workplace, and — at five or more non-exempt employees — report injuries on DWC Form-007.
When do I have to file the non-subscriber notice?
Within 30 days of hiring your first employee, annually between February 1 and April 30, within 10 days of dropping coverage, and within 10 days of a DWC request. It's filed through DWC's Employer E-File system.
What do I give up by not carrying workers' comp in Texas?
The exclusive remedy. An employee can sue you for negligence, and Texas Labor Code § 406.033 removes three defenses: contributory negligence, assumption of risk, and the fellow servant rule. Damages aren't limited to a benefit schedule.
If I'm a non-subscriber, am I automatically liable when someone gets hurt?
No. The employee still has to prove you were negligent. You also keep two defenses — that the employee intentionally caused the injury, or was intoxicated — and you can attribute fault to responsible third parties.
Do I need workers' comp if I have no employees?
Not by law. But general contractors and commercial clients usually require proof of coverage, which is why solo operators often buy a minimum premium policy just to satisfy a certificate.
What is an experience modifier and why does mine matter?
A multiplier based on your claims history versus your industry. Above 1.0 is a surcharge, below 1.0 a credit. It's driven more by how often you have claims than how large they are, and some contracts require it under 1.0.
Why did I get a bill after my workers' comp policy ended?
Comp premium is estimated on projected payroll and audited at the end of the term. If actual payroll came in higher, the audit trues it up.
Can I pay my workers as 1099 contractors instead?
Paperwork doesn't determine employment status. If the relationship functions as employment, the exposure remains and typically surfaces at audit or after an injury.