Texas Workers' Compensation: Subscriber or Non-Subscriber?

The short answer

If you have employees doing physical work, contracts that require coverage, or a payroll large enough that one serious injury would strain the business, workers' compensation is usually the simpler and safer choice. If you have a small office staff, no customer contracts demanding coverage, and you are prepared to fund an occupational accident plan and accept lawsuit exposure, non-subscription can be a legitimate decision. It should be a decision, not a default.

What a subscriber gets

A Texas employer that buys workers' compensation insurance from a licensed carrier becomes a subscriber. The policy pays an injured employee's reasonable medical care and a portion of lost wages under the Texas Labor Code schedule, without the employee having to prove the employer did anything wrong. In exchange, the law generally limits the employee's remedy to those benefits; outside of gross negligence resulting in death, the employee cannot sue the employer for damages. The Texas Department of Insurance describes this trade-off on its employer workers' compensation page.

Subscribers also satisfy the general contractors, school districts, and governmental entities whose contracts require coverage, and they avoid the annual non-coverage filings described below.

What a non-subscriber must do, and what it gives up

A private employer that does not carry workers' compensation is not breaking the law, but it takes on filing duties and legal exposure that many owners do not learn about until an injury happens.

Required filings and notices

• File DWC Form-005, Employer Notice of No Coverage or Termination of Coverage, with the Division of Workers' Compensation between February 1 and April 30 each year, and again within 30 days of hiring your first employee or dropping coverage.
• Post the DWC's notice of non-coverage (Notice 5) in English, Spanish, and any other language your workforce uses, where employees see it regularly.
• Give written notice of non-coverage to every new employee.
• Employers with more than four employees file DWC Form-007, Non-covered Employer's Report of Occupational Injury or Illness, monthly for injuries causing more than one day away from work, all occupational illnesses, and all fatalities.

The details are in TDI's fact sheet for employers who do not carry workers' compensation.

The defenses a non-subscriber loses

Under Texas Labor Code §406.033, when an injured employee sues a non-subscribing employer, it is not a defense that the employee was contributorily negligent, that the employee assumed the risk, or that a fellow employee caused the injury. The employee still has to prove the employer, or its agent, was negligent, but one percent of fault on the employer's side can mean responsibility for the whole loss, including pain and suffering, which a workers' compensation policy never pays.

Contracts that take the choice away

General contractors, oilfield operators, and most governmental entities require workers' compensation from everyone on the job, and Texas law requires it on building and construction contracts with governmental entities. If you bid that work, the choice is already made.

Side by side

A non-subscriber who wants to do it responsibly typically buys an occupational accident policy for employee medical and wage benefits plus a separate employer's liability or non-subscriber liability policy for the lawsuits. Those two policies together are not always cheaper than workers' compensation once payroll passes a few hundred thousand dollars, and they come with benefit caps, exclusions, and arbitration provisions that employees may challenge.

Start your workers' compensation review

Send your payroll by job type, your current coverage or non-subscriber plan documents, and any contracts that mention insurance to greg@gregagency.com, or select Workers Compensation on our short quote request form. We compare a workers' compensation quote against your current arrangement and show the difference in dollars and in what each one pays. Requesting a review does not bind coverage.

Two scenarios to discuss before deciding

Back injury at a non-subscriber. A warehouse employee of a non-subscribing distributor lifts a pallet improperly, against training, and herniates a disc. Because the employer opted out, the employee's own carelessness is not a defense. If a jury finds the employer negligent for any reason, such as a missing lift or an unrepaired forklift, the employer can owe medical bills, lost wages, and pain and suffering without the Labor Code's limits.

Same injury at a subscriber. The same employee at a subscribing employer receives medical care and income benefits under the policy, and the employer's exposure ends there. The experience modifier may rise at renewal, which is a measurable cost rather than an open-ended one.

These are hypothetical illustrations, not client claims or promises of payment. The facts, the policy, and the court determine the outcome.

What to have ready for a workers' compensation review

• Legal business name, entity type, and federal employer identification number
• Payroll by job duty for the past twelve months and projected for the next
• Current workers' compensation or occupational accident declarations and loss runs
• Your DWC Form-005 filing history if you are currently a non-subscriber
• Contracts or bid documents that specify insurance requirements
• Subcontractor and 1099 arrangements, with their certificates

Reviewed by Greg Williams, Texas-licensed independent insurance agent and owner of Greg Williams Insurance Agency, Longview, TX. Last reviewed October 2026.