Texas Workers' Compensation Compliance Guide: What Every Employer Must Know

Texas stands alone. It is the only state in the U.S. where private employers are not required to carry workers' compensation insurance. This distinction creates both opportunity and complexity for every employer operating in the state.

Whether you subscribe to the Texas workers' compensation system or opt out as a non-subscriber, you face a distinct set of legal obligations, reporting requirements, and risk management decisions. Getting these wrong exposes your organization to regulatory penalties, litigation, and financial losses that dwarf the cost of doing it right.

This guide covers the complete compliance landscape for Texas employers—subscribers and non-subscribers alike—so you can make informed decisions and build programs that hold up under regulatory scrutiny.

The Texas Workers' Compensation Framework

How Texas Differs from Every Other State

In 49 states, the question of whether to carry workers' compensation insurance is settled: you must. Texas treats it differently under the Texas Workers' Compensation Act (Texas Labor Code, Title 5).

Texas employers fall into one of two categories:

Subscribers carry workers' compensation insurance through the Texas system. In exchange for providing coverage, subscribers receive protection from most employee lawsuits related to workplace injuries. The Texas Department of Insurance, Division of Workers' Compensation (DWC) oversees the system.

Non-subscribers choose not to carry workers' compensation insurance. They may self-insure, purchase alternative occupational accident coverage, or operate without injury coverage entirely. Non-subscribers lose the exclusive remedy protection that the workers' comp system provides, meaning injured employees can sue directly in civil court.

Neither path is inherently right or wrong. The correct choice depends on your industry, workforce size, risk profile, and tolerance for litigation exposure. What matters is that whichever path you choose, you execute the compliance requirements correctly.

Key Statistics

• Approximately 33% of Texas private employers are non-subscribers
• Non-subscribers employ roughly 20% of the Texas private workforce
• Texas DWC processes over 200,000 injury claims annually
• The average cost of a Texas workers' comp claim is approximately $42,000

Subscriber Employer Obligations

If you carry workers' compensation insurance in Texas, your obligations are defined by DWC rules and the terms of your policy. Here is what the DWC requires.

DWC Form-001: First Report of Injury

The most critical filing requirement for Texas subscribers is DWC Form-001 (Employer's First Report of Injury or Illness). This form must be filed within 8 days of learning about a work-related injury or illness.

What triggers the filing requirement:

• Any work-related injury requiring medical treatment beyond first aid
• Any occupational disease or illness
• Any injury that results in lost time from work
• Death of an employee from a work-related cause

Filing mechanics:

• File electronically through the DWC portal or via your insurance carrier
• Ensure the form includes complete and accurate information about the employee, the incident, and the nature of the injury
• Retain copies for your records—DWC auditors will request them

Common filing mistakes:

• Filing late (beyond the 8-day window)—this triggers automatic penalties
• Incomplete employee information (missing SSN, incorrect job classification)
• Vague injury descriptions that don't specify body part, nature, and cause
• Failing to file for injuries that seem minor but later escalate

DWC Form-006: Supplemental Report of Injury

When an employee's status changes—they return to work, reach maximum medical improvement, or the claim is closed—you must file DWC Form-006 within 30 days of the change.

Posting Requirements

Texas subscribers must display the following notices in conspicuous workplace locations:

1. DWC Form-005: Notice of coverage, informing employees that the employer carries workers' compensation
2. Ombudsman information: Contact details for the DWC Office of Injured Employee Counsel
3. Network information: If using a workers' comp health care network, the network name and contact information

These postings must be in English and Spanish if you have Spanish-speaking employees.

Record Retention

DWC requires subscribers to maintain injury records and related documentation for a minimum of 5 years from the date of the injury. This includes:

• Copies of all DWC forms filed
• Medical records related to the claim
• Wage statements and employment records
• Return-to-work documentation
• Correspondence with the insurance carrier

Premium Reporting and Audit Cooperation

Your workers' comp carrier will conduct annual premium audits to verify that your payroll classifications and reported wages are accurate. You are required to cooperate with these audits and provide access to payroll records, job descriptions, and employee classification data.

Misclassification of employees into lower-risk job codes is one of the most common—and most expensive—audit findings. If your premium audit reveals that employees were misclassified, you will owe additional premium, often retroactively.

Non-Subscriber Employer Obligations

Opting out of workers' compensation does not mean opting out of compliance. Non-subscribers face their own set of DWC requirements, and the consequences of non-compliance are arguably more severe because non-subscribers lack the litigation shield that the workers' comp system provides.

DWC Form-005: Notice of Non-Coverage

Non-subscribers must file DWC Form-005 with the DWC and post it in the workplace. This form notifies the DWC and your employees that you do not carry workers' compensation insurance.

Filing requirements:

• File with DWC within 30 days of becoming a non-subscriber (or within 30 days of hiring your first employee if you start as a non-subscriber)
• Re-file annually if your status does not change
• Post the notice conspicuously in the workplace in English and Spanish

Employee Acknowledgment Requirements

Non-subscribers must obtain written acknowledgment from every employee confirming that the employee has been informed the employer does not carry workers' compensation. This acknowledgment should include:

• A clear statement that the employer is a non-subscriber
• An explanation that the employee's rights differ from employees of subscriber employers
• Information about any alternative coverage the employer provides (occupational accident policies, etc.)
• The employee's signature and date

Maintain these acknowledgments in employee personnel files. In the event of a lawsuit, the employer's ability to demonstrate that the employee was informed of non-subscriber status becomes a critical piece of evidence.

Reporting Workplace Fatalities

Non-subscribers must report workplace fatalities to the DWC within 24 hours. This requirement applies regardless of whether the employer carries workers' compensation insurance.

The Litigation Exposure Reality

The most significant consequence of non-subscriber status is the loss of exclusive remedy protection. When a subscriber's employee is injured at work, the employee's remedy is limited to workers' compensation benefits—they generally cannot sue the employer in civil court.

Non-subscribers have no such protection. Injured employees can file negligence lawsuits, and Texas law removes three of the employer's most powerful common-law defenses:

1. Contributory negligence: The employer cannot argue that the employee's own negligence caused the injury
2. Assumption of risk: The employer cannot argue that the employee voluntarily assumed the risk of injury
3. Fellow servant doctrine: The employer cannot blame a co-worker's negligence

This means that in a non-subscriber lawsuit, the employer must prove it was not negligent at all. If any negligence is found, the employer is liable for the full amount of damages, including medical expenses, lost wages, pain and suffering, and potentially punitive damages.

Average jury verdicts in Texas non-subscriber cases frequently exceed $1 million. Some reach $10 million or more for catastrophic injuries or deaths. This is why non-subscriber employers must take their alternative risk management programs extremely seriously.

Building a Compliant Program: Regardless of Subscriber Status

Whether you subscribe or not, the following compliance infrastructure protects your organization.

Incident Reporting and Documentation

Build a system that captures workplace incidents within hours, not days. Your incident reporting system should:

• Be accessible to all employees: Paper forms, digital forms, phone hotlines—remove barriers to reporting
• Capture complete details: Who, what, when, where, how, witnesses, body part affected, treatment administered
• Timestamp everything: Demonstrate that you learned of the incident on a specific date to establish your filing deadline
• Route automatically: Incidents should immediately route to HR, safety, and (for subscribers) the insurance carrier
• Track follow-up: Every incident should have documented follow-up actions, responsible parties, and completion dates

Safety Program Requirements

Both subscribers and non-subscribers benefit from documented safety programs, but non-subscribers face particular pressure to demonstrate proactive safety efforts because their litigation defense depends on proving they were not negligent.

A defensible safety program includes:

1. Written safety policies specific to your industry and workplace hazards
2. Regular safety training with documented attendance and content
3. Hazard identification and correction procedures with records of inspections and remediation
4. Personal protective equipment (PPE) policies with documentation of issuance and training
5. Incident investigation procedures that identify root causes and implement corrective actions
6. Return-to-work programs that document modified duty availability and employee accommodation

Experience Modification Rate (EMR) Management

For subscribers, your Experience Modification Rate directly impacts your premium. An EMR above 1.0 means you are paying more than the industry average; below 1.0, you are paying less.

EMR is calculated based on your three-year claims history, with the most recent year excluded. Key strategies:

• Report claims accurately and promptly—late reporting increases claim costs
• Manage claims aggressively—ensure injured employees receive appropriate treatment and return to work as quickly as safely possible
• Implement light-duty programs—modified duty reduces indemnity costs, which carry more weight in EMR calculations
• Challenge incorrect classifications—verify that your payroll is classified correctly for your actual operations
• Audit your experience modification worksheet—NCCI and the Texas DWC sometimes make errors; review your worksheet annually

Multi-Location Coordination

Texas employers with multiple locations face additional complexity:

• Each location may have different safety requirements based on local hazards
• DWC filings must accurately reflect the location where the injury occurred
• Insurance carriers may rate locations separately based on their individual loss history
• Non-subscriber notices must be posted at every location

Industry-Specific Considerations

Construction

Construction employers face the highest scrutiny in Texas workers' comp compliance. General contractors must verify subcontractor coverage, and the DWC monitors construction industry compliance closely.

• Verify subcontractor workers' comp certificates before allowing them on-site
• Maintain certificates of insurance for all subcontractors
• Understand that general contractors may be liable for subcontractor employee injuries if the subcontractor lacks coverage
• File Form-001 within 8 days even for subcontractor injuries on your project

Healthcare

Healthcare employers face unique injury patterns (needlestick injuries, patient handling injuries, workplace violence) that require specialized reporting and investigation procedures.

• Needlestick injuries require additional OSHA reporting under the Bloodborne Pathogen standard
• Patient handling injuries are the most common healthcare worker injury—document your safe patient handling program
• Workplace violence incidents must be reported to DWC and may also trigger OSHA requirements

Oil and Gas

The energy sector's high-risk operations create significant workers' comp exposure. Many oil and gas employers operate as non-subscribers but maintain robust occupational accident programs.

• Ensure your occupational accident policy covers the specific hazards of your operations
• Document safety training that meets OSHA 29 CFR 1910 (general industry) and 29 CFR 1926 (construction) requirements
• Maintain drug and alcohol testing programs with documented results
• Coordinate with contractors on multi-employer worksites to establish clear safety responsibilities

Regulatory Bodies and Resources

Texas employers should be aware of these regulatory bodies:

Key Filing Deadlines

Common Compliance Failures

Based on DWC enforcement data and our advisory experience, these are the most frequent compliance failures Texas employers make:

Subscriber Failures

1. Late Form-001 filing: Missing the 8-day window—usually because supervisors don't report incidents to HR promptly
2. Incomplete forms: Vague injury descriptions, missing employee data
3. Employee misclassification: Using incorrect NCCI job codes that understate risk
4. Failure to post required notices: Missing Form-005 or network information
5. Poor record retention: Discarding files before the 5-year retention period expires

Non-Subscriber Failures

1. Not filing Form-005: Many non-subscribers don't realize they must affirmatively notify DWC
2. Missing employee acknowledgments: Not obtaining signed acknowledgments from every employee
3. Inadequate alternative coverage: Occupational accident policies with low limits or narrow exclusions
4. No safety program documentation: Relying on informal safety practices with no written evidence
5. Failure to report fatalities: Not reporting workplace deaths to DWC within 24 hours

How AlignSure Automates Texas Compliance

Managing Texas workers' comp compliance manually—whether as a subscriber or non-subscriber—creates gaps. Forms get filed late, acknowledgments go unsigned, safety documentation falls behind.

AlignSure automates the critical compliance workflows:

• Automated Form-001 generation: Incident reports trigger pre-populated DWC Form-001s, ensuring 8-day filing deadlines are met
• Employee acknowledgment tracking: Digital acknowledgment workflows for non-subscriber notices with audit-ready records
• Filing deadline alerts: Automated reminders for all DWC filing deadlines
• Document retention management: Automated 5-year retention schedules with destruction holds for active claims
• EMR monitoring: Real-time tracking of claims activity and projected EMR impact
• Multi-location coordination: Centralized compliance dashboard across all Texas locations

The system integrates directly with your Microsoft 365 environment—no new platform to adopt.

Next Steps

1. Determine your subscriber status: If you haven't made an active decision about workers' comp coverage, make one. The default of doing nothing creates unmanaged risk.
2. Audit your current compliance: Use this guide to verify you're meeting every obligation for your subscriber/non-subscriber status.
3. Document your safety program: If it's not written down, it doesn't exist for compliance purposes.
4. Establish filing workflows: Create processes that ensure DWC forms are filed accurately and on time, every time.
5. Talk to an advisor: Texas workers' comp compliance intersects with federal OSHA requirements, ADA obligations, and FMLA considerations. An experienced advisor can identify gaps you haven't considered.

Schedule a consultation to discuss your Texas workers' comp compliance program with our advisory team.