Texas Workers Compensation Guide

Workers Compensation Requirements in Texas

Texas is the only state in the nation where workers' compensation is not mandatory for most private employers. Employers can choose to be 'subscribers' (carry workers' comp) or 'non-subscribers' (not carry coverage). Non-subscribers lose most liability defenses and face direct lawsuits from injured workers. Texas Mutual Insurance Company serves as the competitive state fund.

Workers Comp Rates in Texas

The average rate of approximately $1.55 per $100 of payroll is a statewide blended average — actual rates vary significantly by job classification.

For example, an employer with $1 million in payroll at the average rate of $1.55 per $100 would pay approximately $15,500 annually before experience modification adjustments.

Average Workers Comp Rates by City in Texas

What Makes Texas Unique

Texas's voluntary workers' comp system is unique in the nation. Non-subscriber employers who opt out of workers' comp face significant liability risk — they cannot use the fellow servant rule, contributory negligence, or assumption of risk as defenses against injured worker lawsuits. Texas non-subscription creates a complex risk management decision for employers. Some large Texas employers have opted out and created their own non-subscriber benefit plans.

Opting Out Is Not Opting Out of the System

Texas is the only state where a private employer can legally decline workers' compensation. That much is widely known. What catches employers is the second half: declining coverage does not remove you from the regulatory system. It moves you into a different part of it, called non-subscriber status, with its own set of filing, posting, and reporting duties.

A non-subscriber has three ongoing obligations:

• File DWC Form-005 every year between February 1 and April 30. This is the requirement that trips people up. It is not a one-time registration you complete when you open the business — it comes due every February. An employer who filed once in 2023 and never again is out of compliance today. Filing is done through the Employer E-File system in TXCOMP, and DWC Form-205 is the addendum used to add or remove locations, subsidiaries, or separate entities under the same employer.
• Post a Notice of No Coverage in the workplace, somewhere employees actually see it regularly, in English, Spanish, and any other language needed for your workforce.
• Give written notice to each new employee at hire stating that you do not carry workers' compensation coverage. Not later, not at the first review — during hiring. Keep a copy on file.

Employers with five or more employees carry an additional duty regardless of subscriber status: reporting workplace injuries. Non-subscribers file DWC Form-007 by the seventh day of each month covering on-the-job injuries causing more than one day of lost time, occupational illnesses, and fatalities. Certain domestic and farm and ranch workers are exempt from these counts.

You may switch direction at any time — buy a policy and become a subscriber, or cancel and file the notice to become a non-subscriber. There is no lock-in period.

What You Actually Give Up: The Three Defences

The trade is not "premiums versus no premiums." It is premiums versus legal exposure, and the exposure is specific.

A subscriber gets the exclusive remedy protection that workers' compensation exists to provide: injured employees receive no-fault benefits and generally cannot sue the employer. A non-subscriber can be sued directly in civil court, and in that lawsuit loses three common-law defences that would otherwise be available:

• Contributory negligence — you cannot argue the employee's own carelessness caused the injury.
• Assumption of risk — you cannot argue the employee knew the job was dangerous and accepted it.
• Fellow employee negligence — you cannot argue a co-worker was at fault.

Strip those three away and an injured employee has a substantially easier path to a verdict, with no statutory cap of the kind workers' compensation applies. The filing window differs too: a claim against a subscriber generally runs one year from the date of injury, while a lawsuit against a non-subscriber runs two.

For a business with meaningful assets and no deep reserves, a single six-figure verdict is the scenario that makes this decision serious. Non-subscription is most common among smaller service and office-based employers, where injury frequency and severity are low — which is a rational place for it, and a poor fit for construction or manufacturing.

Occupational Injury Plans: The Middle Path

Many non-subscribers do not simply go bare. They set up an occupational injury plan — a private benefit programme that pays medical costs and some wage replacement to injured workers, typically with tighter reporting deadlines and provider networks than the state system.

These plans are usually cheaper than workers' compensation premium and let the employer control the benefit design. What they do not do is restore the three lost defences. An employee who accepts benefits under an occupational injury plan may still sue, unless a separate and enforceable arbitration agreement is in place. If you are evaluating this route, the plan document and the liability protection are two different conversations, and the second one belongs with an employment lawyer rather than an insurance agent.

Why Contracts Often Decide This For You

Even where the state gives you a choice, your customers frequently do not. General contractors, property owners, and government entities routinely require proof of workers' compensation before allowing anyone on site, and a Texas non-subscriber cannot produce that certificate. For subcontractors and trades businesses, the practical question is rarely "does Texas require it" but "will my clients hire me without it."

This is why many Texas contractors carry coverage they are not legally obliged to have. If you are in that position, see our guides to insurance requirements in contracts and to the minimum-premium policies solo operators use to produce a certificate.

Workers Comp Benefits in Texas

Texas workers' comp provides temporary income benefits at 70% of average weekly wage. Impairment income benefits use a percentage of average weekly wage based on impairment rating.

Employee Rights in Texas

Texas workers' comp subscribers receive benefits through the Division of Workers' Compensation. Non-subscriber employees can sue their employers directly. Dispute resolution for subscribers is through the Division with access to district courts.

How to Reduce Workers Comp Costs in Texas

Texas employers should carefully evaluate the subscriber vs non-subscriber decision with an attorney and risk manager. Non-subscription eliminates liability defenses — the potential exposure from a serious injury lawsuit can far exceed workers' comp premiums. Most small and medium employers benefit from subscribing. Texas Mutual provides competitive pricing, particularly for small businesses.

Frequently Asked Questions

Is workers' comp required in Texas?

No. Texas is the only state where private employers may legally decline workers' compensation coverage. Employers who decline are called non-subscribers, and they remain inside the regulatory system with three ongoing duties: filing DWC Form-005 annually between February 1 and April 30, posting a Notice of No Coverage in the workplace, and giving written notice to each new employee at hire. Employers with five or more employees must also report injuries monthly on DWC Form-007.

What does a Texas non-subscriber give up?

Three common-law defences in an injury lawsuit: contributory negligence, assumption of risk, and fellow employee negligence. A subscriber receives exclusive remedy protection and generally cannot be sued by an injured employee, while a non-subscriber can be sued directly in civil court without those defences and without the benefit caps workers' compensation applies. The filing window also differs - one year from injury against a subscriber, two years for a lawsuit against a non-subscriber.

How often do I file DWC Form-005 in Texas?

Every year, between February 1 and April 30. This is the most common compliance failure among Texas non-subscribers, because many treat it as a one-time registration completed at start-up. A business that filed once several years ago and never again is out of compliance now. Filing is done through the Employer E-File system in TXCOMP, with DWC Form-205 used as the addendum for adding or removing locations and entities.

Does an occupational injury plan protect a Texas non-subscriber from lawsuits?

Not by itself. An occupational injury plan is a private benefit programme that pays medical costs and some wage replacement, usually more cheaply than workers' compensation premium, but it does not restore the three lost common-law defences. An employee who accepts benefits under the plan may still sue unless a separate and enforceable arbitration agreement is in place, which is a question for an employment lawyer rather than an insurance agent.

The information on this page is provided for general informational purposes only and reflects estimated industry averages and state requirements as of 2026. Workers compensation laws, rates, and requirements change frequently and vary significantly by employer size, industry, and job classification. Rate estimates shown are blended averages and do not represent actual quotes for any specific employer. Always consult a licensed workers' compensation insurance professional and your state's workers' compensation regulatory agency for current, employer-specific information.