Here's something that surprises most people moving to Texas: your employer doesn't have to carry workers' compensation insurance. That's right—Texas is the only state in the country where workers' comp is optional for most private employers. About 28% of Texas businesses choose to operate as "non-subscribers," meaning they've opted out of the traditional workers' comp system entirely. Whether you're an employer weighing your options or an employee wondering what happens if you get hurt on the job, understanding how this unique system works can save you from costly surprises down the road.
Why Texas Makes Workers' Comp Optional
Texas has maintained its optional workers' compensation system for decades, rooted in the state's traditionally business-friendly approach to regulation. The philosophy is simple: let the market decide. Employers can choose to carry coverage if they want the legal protections it offers, or they can self-insure their risk and potentially save on premiums. But here's the catch—if you opt out, you're giving up something valuable.
When an employer carries workers' comp insurance, they get what's called "exclusive remedy" protection. This means that if an employee gets injured on the job, they can't sue the company—they can only file a workers' comp claim. It's a trade-off that has worked well in every other state: employees get guaranteed benefits without having to prove fault, and employers get protection from lawsuits. But in Texas, you can walk away from that deal entirely.
What It Means to Be a Non-Subscriber
If you're an employer considering the non-subscriber route, understand what you're getting into. You'll save money on workers' comp premiums—Texas employers pay an average of 55 cents per $100 of payroll for coverage, which can add up for larger businesses. Some non-subscribers offer alternative injury benefit plans to employees, covering medical costs and partial wage replacement. These plans can look similar to workers' comp on paper, but the Texas Department of Insurance doesn't recognize them as true substitutes.
The bigger issue is what you lose. Non-subscriber employers lose nearly all common-law defenses against employee injury lawsuits. In most states, employers could argue that an employee's own negligence contributed to their injury, or that they assumed the risk by taking the job. In Texas, non-subscribers can't use these defenses. If an employee gets hurt and can prove even minimal employer negligence, the employer is on the hook. And we're not talking about just medical bills and lost wages—injured employees can sue for pain and suffering, mental anguish, disfigurement, and even punitive damages.
Despite these risks, about 75,000 non-subscriber injury claims are filed in Texas every year. That's a lot of businesses betting they can manage workplace safety well enough to avoid major lawsuits. For some companies with strong safety programs and low-risk operations, it's a calculated decision. For others, it's a ticking time bomb.
Who Must Carry Workers' Comp Coverage
While private employers have a choice, not everyone gets to opt out. All government entities in Texas must provide workers' compensation coverage—this includes state agencies, counties, cities, school districts, and public universities. There are no exceptions for public-sector employers, regardless of size or budget.
Building and construction contractors working on government projects must also carry coverage, even if they operate as non-subscribers on private projects. Additionally, temporary staffing agencies must provide workers' comp for their placed workers, regardless of whether the client company has coverage. These carve-outs exist to protect workers in higher-risk industries and ensure taxpayer-funded projects don't expose governments to liability.
What Employees Need to Know
If you work in Texas, you need to know whether your employer is a subscriber or non-subscriber. Your employer is legally required to post a notice in the workplace and provide written notification about their coverage status. Pay attention to this—it completely changes your rights if you get injured.
If your employer has workers' comp and you get hurt on the job, you file a claim with the insurance carrier. You'll receive medical treatment and partial wage replacement without having to prove fault. The downside is you can't sue your employer for additional damages, even if their negligence caused your injury. Texas injury rates have been declining—in 2024, the state hit an all-time low of 1.9 nonfatal occupational injuries per 100 full-time workers—so most covered employees go their entire careers without needing to file a claim.
If your employer is a non-subscriber, you have very different options. You can still receive benefits if your employer offers an alternative injury benefit plan, but you're not guaranteed anything. More importantly, you have the right to sue your employer in civil court if you can prove their negligence caused your injury. This can potentially result in much larger awards than you'd get through workers' comp—including compensation for pain, suffering, and lost future earnings. However, you'll need to hire a lawyer and actually win your case, which isn't guaranteed.
The Cost Question for Employers
Texas workers' comp premiums have been trending favorably for employers. In July 2025, the state adopted an 11.5% average loss cost reduction, reflecting improved claims experience across the board. The Texas workers' comp market is the fifth largest in the nation at $2.6 billion in direct written premiums, though that figure actually fell 4% in 2024.
Currently, 76% of Texas employers subscribe to the workers' comp system, the highest participation rate since 2016, and these employers cover 87% of employees. This suggests that most businesses—especially larger ones—find the legal protection worth the cost. The premium you'll pay depends on your industry, payroll, and claims history, but the average of 55 cents per $100 of payroll gives you a ballpark figure for budgeting.
Making the Right Choice
If you're an employer deciding whether to carry workers' comp, think beyond just premium savings. Consider your industry's risk level, your safety program's strength, and your financial ability to handle a major lawsuit. A single serious injury lawsuit could cost far more than years of workers' comp premiums. On the flip side, if you run a low-risk office operation with strong safety protocols and offer a robust alternative injury benefit plan, the non-subscriber route might make financial sense.
If you do choose to be a non-subscriber, you must file Form DWC005 annually with the Texas Department of Insurance, post workplace notices in appropriate languages, and report all work-related injuries resulting in more than one day of lost time. You also need to report all work-related illnesses and deaths. These aren't optional—they're legal requirements that apply whether or not you carry coverage.
The Texas workers' comp system gives you choices that don't exist anywhere else in America. Just make sure you understand what you're choosing—and what you're giving up—before you make the call.
