Texas Workers’ Compensation Rules for Employers

My first Texas hire came with a question I had never had to ask anywhere else: do I actually have to buy workers' compensation insurance? In most of the country the answer arrives at one employee, or three, or five. In Texas the answer is no, and it stays no however large the payroll gets.

That sentence is where a lot of Texas employers stop reading, and it is exactly where the expensive mistakes begin. Opting out is legal here. Opting out quietly, without the annual filing, the posted notice and the written notice at hire, is not.

What follows is the Texas rulebook: when coverage is mandatory anyway, who sits outside the system, where a policy actually comes from, what goes on the wall, and how fast an injury has to move. For how the insurance itself works in general, read the guide to workers' compensation insurance. This page is Texas only.

Is Workers' Compensation Required in Texas?

No. For private employers, Texas workers' compensation coverage is elective at every headcount. Texas Labor Code Section 406.002 states that except for public employers, and except as otherwise provided by law, an employer may elect to obtain workers' compensation insurance coverage.

Read that again with a small business hat on. There is no threshold to cross, no exemption to claim and no waiver to apply for. A two-person bakery and a four-hundred-person fabrication plant are governed by the same sentence. Other states set a trigger, commonly at one to five employees, which is why the state-by-state requirements read so differently once you cross the Red River.

The Division of Workers' Compensation states it without hedging on its page explaining the system: Texas is the only state that allows private employers to choose whether to provide workers' compensation coverage for their employees. Everything else on this page follows from that one design decision.

An employer who does elect coverage becomes what Texas calls a subscriber and is subject to the whole subtitle: capped statutory benefits, a claims process run through the carrier, and the exclusive remedy protection that keeps most injury suits out of civil court. An employer who declines is a non-subscriber, which is a legal status with its own duties rather than a loophole.

Public employers are outside the election entirely. State agencies and political subdivisions provide coverage through the mechanisms in Chapters 501 to 504 of the Labor Code, so a city or a school district is never choosing the way a private employer chooses.

Who Sits Outside the Texas System

Three categories of worker are excluded by statute, and several more move in or out of coverage by paperwork. Labor Code Section 406.091 places domestic workers, casual workers engaged in employment incidental to a personal residence, people covered by a federal compensation scheme, and farm or ranch employees outside the subtitle.

Two of those exclusions are elective in the other direction. An employer may choose to buy coverage for domestic workers or for farm and ranch employees anyway, and doing so accepts the rights and duties of the Act for those workers for as long as the coverage runs. An employer who leaves exempt workers uncovered does not lose the common-law defenses discussed further down, which is the single most useful sentence in Section 406.091 for a household employer.

Farm and ranch work is the messiest line. Subchapter H pulls certain agricultural workers back inside the Act: migrant workers, seasonal workers on a truck farm, orchard or vineyard, seasonal workers whose employer met an inflation-adjusted gross annual payroll figure in the prior year, and other farm or ranch employees of an operator who met that payroll figure or employs three or more such workers. The Texas Department of Insurance recalculates the payroll number every year and publishes it; for 2026 the adjusted gross annual payroll requirement is $73,163.

Owners are a paperwork question, not a statutory exclusion. Under Section 406.097 a sole proprietor, partner or corporate executive officer of a business that elects coverage is covered as an employee unless specifically excluded by an endorsement to the policy or to the self-insurance certificate. A corporate officer with at least 25 percent equity, a sole proprietor or a partner can be excluded even where the public-project rule would otherwise apply.

Independent contractors sit outside because of what they do, not because of what a contract calls them. Section 406.122 makes anyone performing work for a general contractor or a motor carrier an employee of that business for coverage purposes unless the person is operating as an independent contractor or is the employee of one. Getting classification wrong is a payroll problem before it is a comp problem, which is why the contractor test deserves its own read.

Two written agreements move the line cleanly. A subcontractor and its crew are not employees of the general contractor when the subcontractor is genuinely independent and has signed an agreement assuming employer responsibilities. A hiring contractor and an independent subcontractor can also sign a joint agreement on DWC Form-083, file it with the Division, and settle independent contractor status as a matter of law for a year.

Where a Texas Employer Buys Coverage

Two routes, set out in Labor Code Section 406.003: a policy from a licensed insurance company, or self-insurance. Texas is not a monopolistic state, so there is no government fund you are forced to buy from and no state-run policy queue to join. The market is competitive and priced by class code and claims history.

The first route is the one nearly every small employer takes. Many carriers licensed by the Texas Department of Insurance write workers' compensation here, and TDI runs a free coverage verification lookup so you can confirm a policy is on file. Buy only from a licensed company, because an unlicensed policy is not coverage obtained in the manner the Act authorizes.

If no carrier will quote you, Texas has a backstop. The TDI workers' compensation insurance guide describes Texas Mutual, created by the Legislature in 1991 as the Texas Workers' Compensation Insurance Fund, as the last resort for employers who cannot find coverage anywhere else. New businesses in high-hazard class codes are the usual customers.

Self-insurance is the second statutory route and it is out of reach for a small business. TDI's certified self-insurance program requires an estimated unmodified manual premium of at least $500,000 in Texas or $10 million nationwide, audited financials, a qualifying financial strength rating, a security deposit of at least $300,000, excess insurance of at least $5 million per occurrence, and a $1,000 application fee. The certificate lasts one year and is renewed annually.

Between those poles sits group self-insurance under Chapter 407A of the Labor Code, where similar employers pool risk through a TDI-regulated group. It suits trade associations more than individual small employers, but it is a real third option and it carries its own employee notice, Notice 10.

One disclosure, since this is a page about buying something. FirstHR is an HR platform, not an insurer, a broker or an agent, and we do not sell coverage. What our platform does here is hold the employee records, the signed acknowledgments and the onboarding paperwork that the notice rules below turn into evidence.

Posters and the Notice You Hand a New Hire

Every Texas employer owes its employees a written answer to one question: do you have workers' compensation coverage or not. Labor Code Section 406.005 requires the employer to notify each employee of the existence or absence of coverage, to notify a new employee at the time of hire, and to post the same information at conspicuous locations at the workplace. Failing to do it is an administrative violation.

The posted version has a prescribed form. Under DWC rule 110.101 an employer with a commercial policy posts Notice 6, a certified self-insurer posts Notice 7, a self-insurance group member posts Notice 10, and an employer with no coverage posts Notice 5. The current versions of all of them sit on the TDI page of employer forms and notices.

The mechanics are unusually specific, and they are where a self-printed sign fails. Notices go up in English, Spanish and any other language common to your workforce. They belong in the personnel office if you have one, and elsewhere around the workplace so each employee is likely to see one regularly. The type sizes are set: title at least 26 point bold, subject at least 18 point bold, body at least 16 point normal, using the exact wording the rule prescribes.

The new hire notice is separate from the poster and is the piece small employers skip. Rule 110.101(a) requires a written notice of coverage status at the time an employee is hired, meaning when federal law requires them to complete both a W-4 and an I-9. It carries the same text as the poster. A covered employer must add the election paragraph telling the new hire they may retain their common-law right of action by notifying the employer in writing within five days of starting.

Coverage changes restart the clock. Section 406.005(d) gives you 15 days after coverage is obtained, terminated or cancelled to tell every employee in writing, and the posted notice has to be revised whenever the information on it changes. A non-subscriber's written notice states plainly that there is no coverage, and if a policy was dropped, the date it ended.

Contractors on a public project post one more sign. Rule 110.110(d)(7) requires Notice 8 on each project site, in English and Spanish, telling everyone providing services there that coverage is required, with a title in at least 30 point bold and text in at least 19 point normal.

Injury Reporting Deadlines

Three clocks matter, and they run at different speeds. The employee has 30 days to tell you. A covered employer has eight days to tell the carrier. A non-subscriber reports monthly, by the seventh of the following month.

Section 409.001 gives the employee, or someone acting for them, until the 30th day after the injury to notify the employer, and for an occupational disease until the 30th day after they knew or should have known it may be work related. Notice can go to the employer or to any supervisor or manager, which means a foreman hearing about a strained back has started the clock whether or not the office ever finds out.

Missing that deadline matters to the employee, not to you. Section 409.002 relieves the employer and the carrier of liability when notice is late, unless the employer or carrier had actual knowledge of the injury, the Division finds good cause, or the claim is not contested. The employee then has one year from the injury to file a claim with DWC on Form-041.

Your own deadline is eight days. Under Section 409.005 a covered employer reports to its insurance carrier no later than the eighth day after an injury keeps the employee away from work for more than one day, or after the employer receives notice of an occupational disease, using DWC Form-001. A written copy goes to the injured employee at the same moment the report goes to the carrier. The carrier then files it with the Division electronically within seven days.

Skipping that report has a quiet consequence worth knowing. Section 409.008 provides that when an employer or carrier with notice of an injury fails to file the Section 409.005 report, the period for filing a claim does not begin to run against the employee. An unfiled report keeps the claim window open indefinitely instead of closing it.

DWC takes the non-subscriber notice and the injury report online through its Employer E-File tool, described on the TDI non-subscriber page, and both forms can also be filed by fax, by mail or through a TXCOMP profile. Set a calendar reminder for February, because the annual window is the one that gets missed.

What Going Without Coverage Actually Costs

There is no fine for having no coverage, because having no coverage is legal. Texas has no uninsured employer penalty and no stop-work order aimed at the uninsured, for the simple reason that Section 406.002 makes the choice yours. The penalties attach to two other things: the paperwork, and the lawsuit.

Start with the lawsuit, because it is the whole reason three in four Texas employers buy a policy they do not have to buy. Section 406.033 says that in a suit by an employee of an employer without coverage, it is not a defense that the employee was contributorily negligent, that the employee assumed the risk of injury, or that a fellow employee caused it. Those three defenses do most of the work in an ordinary workplace injury case.

What survives is thin. The employer may still argue that the employee acted with intent to cause the injury or was intoxicated, and the plaintiff still has to prove employer negligence. Damages are ordinary civil damages, not the capped schedule the comp system pays, and the exclusive remedy bar that keeps subscribers out of civil court simply does not exist for you.

Waivers do not fix this. A cause of action under Section 406.033 cannot be waived before the injury, and any pre-injury agreement to waive it is void and unenforceable. A post-injury waiver counts only when the employee enters it voluntarily and knowingly, no earlier than the tenth day after the injury, in the prescribed form.

Then the paperwork. Failing to file the non-subscriber notice is an administrative violation under Section 406.004(e). Failing to post or deliver the employee notices is an administrative violation under Section 406.005(e). Failing to report an injury to the Division is an administrative violation under Section 411.032(c) unless the commissioner finds good cause. Section 415.021 sets the ceiling for any of them at $25,000 per day per occurrence, with each day of noncompliance a separate violation, and allows a cease and desist order against an employer who repeats them.

Criminal exposure exists too, though not for going bare. Section 418.002 makes it an offense to knowingly make a false statement, misrepresent or conceal a material fact in order to obtain coverage or avoid premium: a Class A misdemeanor below $2,500 of premium avoided, a state jail felony at $2,500 or more. Under-reporting payroll to shrink a premium is the classic route into that section, and a premium audit is how it usually surfaces.

What to Do the Day Someone Gets Hurt

Medical care first, paperwork second, and the paperwork starts the same day. The order below assumes you carry coverage; the divergence for non-subscribers is called out in the last two steps.

One more habit worth building. Keep the signed coverage notice from each employee's first day in the same place you keep the I-9 and the W-4, because in a dispute the question is not whether you posted a sign but whether you can show what this employee was handed and when. Onboarding records are the cheapest evidence you will ever collect, and the broader Texas compliance picture runs on the same principle.

The Act itself is worth a bookmark. TDI publishes the full Texas Workers’ Compensation Act after every legislative session, and the DWC employer FAQ answers most operational questions faster than a broker will. Wage-side questions sit on the Texas minimum wage page instead.

Frequently Asked Questions

Is workers' compensation insurance required in Texas?

No, not for private employers. Labor Code Section 406.002 lets an employer elect to obtain coverage, with public employers carved out, and there is no headcount at which the choice disappears. A two-person shop and a five-hundred-person plant follow the same rule. Electing coverage brings you inside the Act; declining makes you a non-subscriber, a legal status with its own filings and its own exposure.

Which Texas employers have to carry coverage anyway?

Public employers, and private contractors on a government building or construction contract. Section 406.096 requires a governmental entity entering such a contract to make the contractor certify in writing that every employee on the public project is covered, and each subcontractor gives the general contractor the same certificate. Employing a maintenance worker does not make a business a construction employer if construction is not its primary business.

What does a Texas non-subscriber have to file?

DWC Form-005, and DWC Form-007 when someone gets hurt. The Form-005 notice goes to the Division within 30 days of hiring a first employee, within 10 days of terminating a policy, within 10 days of a DWC request, and again between February 1 and April 30 every calendar year. With five or more non-exempt employees you also file Form-007 by the seventh of the month after a death, an absence beyond one day, or a known work-related illness.

Are owners and corporate officers covered by a Texas policy?

By default yes. Section 406.097 covers a sole proprietor, partner or corporate executive officer as an employee once the business elects coverage, unless that person is specifically excluded by an endorsement to the policy or the self-insurance certificate. An officer holding at least 25 percent equity, a sole proprietor or a partner may be excluded even where the public-project rule would otherwise apply.

How fast does a work injury have to be reported in Texas?

The employee has 30 days under Section 409.001, counted from the injury or from the day they knew an occupational disease might be work related, and notice to any supervisor counts. A covered employer has until the eighth day after the employee misses more than one day of work to report to its carrier, and hands the employee a copy of that report at the same time. The carrier files with the Division within seven days.

What happens when an injured employee sues a Texas non-subscriber?

You defend an ordinary negligence suit without three ordinary defenses. Section 406.033 removes contributory negligence, assumption of risk and fellow-employee negligence. What remains is an argument that the employee intended the injury or was intoxicated, plus the plaintiff's burden to prove employer negligence. Damages are not capped by the benefit schedule, and a waiver signed before the injury is void.

Can a Texas employee turn down workers' compensation coverage?

Yes. Section 406.034 lets an employee retain the common-law right to sue by giving the employer written notice no later than the fifth day after starting work, or the fifth day after being told the employer has obtained coverage. You may not make that election a condition of employment. If such an employee is later injured, you report it on DWC Form-007 rather than DWC Form-001.

Can a small Texas business self-insure workers' compensation?

Realistically, no. Certified self-insurance requires an estimated unmodified manual premium of at least $500,000 in Texas or $10 million nationwide, audited financials, a qualifying financial rating, a security deposit of at least $300,000, excess insurance of at least $5 million per occurrence and a $1,000 application fee, renewed annually. That leaves a licensed carrier or a Chapter 407A self-insurance group as the practical routes.