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  • Writer's pictureRobert Schuerger

Who Is Exempt from Workers' Compensation Insurance Coverage Inn Texas? Find Out Here

In the US, the workers' comp policy is not the same throughout the country. Different states have their own laws and statutes that employers must follow. As such, issues involving workers' compensation insurance can get very complicated.

It is, therefore, very important for business owners and their employees to understand where they stand in terms of workers' compensation insurance so that if workplace accidents occur, they both know the proper steps to take.

One of the most important aspects involves workers' compensation insurance exemptions, specifically the question of who is exempt from workers' compensation.

The Division of Workers' Compensation (DWC) regulates workers' compensation insurance coverage in Texas. According to its statutes, certain employees must carry workers' compensation insurance while others may be exempt.

In this article, we will look closer at the issue of workers' compensation exemptions to give all employed residents of Texas a better understanding of what insurance coverage, if any, they are entitled to. Schuerger Shunnarah Trial Attorneys can help advise on questions like, "What do workers comp investigators look for?"

What Is Workers' Compensation Coverage?

What Is Workers' Compensation Coverage?

Workers' compensation insurance is a type of insurance coverage that is required by law for any company with employees working for it. This type of coverage is a lawful requirement in all states except Texas, where businesses are not forced to carry workers' compensation insurance.

Workers' comp insurance covers a wide range of benefits, such as medical expenses, lost wages, job displacement, temporary or permanent disability, legal fees in workers' comp cases, death benefits, and funeral costs.

When a workplace accident occurs, workers' comp can be seen as a way to help the employee and their family members to receive the benefits they desperately need, as well as help to protect the business owner from potentially damaging personal injury lawsuits.

In most cases, workers' compensation claims are accepted and the case is resolved quickly. However, there may be times when the employer refuses to accept liability, or the employees do not think the offer being made by the insurance company is a fair one. This usually results in workers' compensation lawsuits that will only be resolved with a workers' compensation insurance settlement.

Why Is Workers' Comp Insurance Important?

Workplace injuries are very common in Texas and other states throughout the US. As such, business owners and employees need to have a plan for handling the associated costs of dealing with these injuries.

Workers' compensation insurance provides an easy way of handling medical expenses and compensating injured workers without having to go through a lawsuit after every workplace accident.

In general, a business owner may find it benefits the business to carry workers' compensation insurance because:

  • It is a lawful requirement in most states (but not Texas).

  • Covering medical expenses, lost wages, and other injury-related costs becomes easy.

  • The business is protected from lawsuits related to workplace injury.

  • Having a good worker's comp policy can make businesses more attractive to potential employees.

How Does Workers' Comp Insurance Work?

Applying for workers' comp insurance benefits is a very simple process that takes only a few steps to complete, as follows:

  • The employees are required to report the injury as soon as it happens.

  • Depending on the severity of the on-the-job injuries, the employee will receive medical treatment.

  • The business owner then reports the injury to the insurance carrier, including all relevant information about the employee and how the injury happened.

  • Once the injury or illness has been reviewed, the insurance carrier will send an info packet to the employer, containing important information, such as the contact details of the insurance adjuster, policies on workers’ rights, etc.

  • The insurance carrier will then decide to either accept or deny the workers' compensation insurance claim based on whether they think the injury or illness is job-related or not.

  • A personalized return-to-work plan is developed by the employee, employer, and insurance carrier to help the worker resume their duties without making the business hire someone else.

  • The workers' comp claim is successfully closed and the employee can return to work.

Who Needs To Carry Workers' Compensation Insurance in Texas?

Texas stands apart from other states in that business owners are not required to carry workers' comp insurance if they choose not to. However, certain exceptions to the rules apply to employees of the following companies:

  • Companies using a work furlough program for inmates

  • Combustible gas dealers, such as those handling compressed natural gas or liquid propane

  • Bus companies and motor carriers

  • Construction contractors for public corporations

  • Public employers, such as cities, state universities, state agencies, and counties

In general, Texas employers have a lot of freedom regarding whether they choose to provide workers' comp insurance for their employees or not. Consider the following two options:

Business Owners Can “Go Bare”

Employers can decide to carry on without paying for any workers' comp insurance coverage for employees. While this may seem like a cost-effective option, the situation can change very quickly if injured employees decide to file a lawsuit against the business owners.

The damages that may be awarded to injured workers in such cases are not limited by any statutory amounts and, therefore, have the potential to result in severe economic losses for employers.

What makes the situation worse for the employer is that they are not allowed to use defenses such as contributory negligence by the employees or their coworkers. As such, a lot of power will be in the hands of the employees, leaving the business owners exposed to huge losses.

Voluntary Employee Workers' Comp Insurance

The other option is for the employer to volunteer to offer workers' compensation insurance to its employees. In this case, once an employee is hired, they will have five days to decide whether or not they will be covered by workers' comp insurance coverage, or if they would rather retain the common law right to sue for personal injury.

This second option is beneficial to both parties as it helps the employees to receive benefits for the injury while protecting the employer from a personal injury lawsuit.

Employers who decide to go for voluntary workers' compensation insurance need to give their employees a five-day Notice of Right, which is available on the workers' compensation website.

What Is a Workers’ Compensation Exemption?

A workers' compensation exemption means that employers are not legally required to carry workers' compensation insurance for employees. This means if the employees are injured while on the job, they cannot receive any workers' compensation benefits.

Exemptions from workers' compensation coverage can apply to individuals or groups of employees. In some cases, the entire business may be exempt from workers' compensation.

Different states have different requirements when it comes to worker's comp exemptions. In most businesses, it is the number of employees on the payroll that determines whether or not they may be exempt from workers' compensation coverage.

Four Types of Workers Who Are Exempt From Workers' Compensation

In most states, the following are the common factors that determine whether workers may be exempt from workers' compensation:

Businesses With Fewer Employees Than Required

Most businesses with one or more employees are required to have workers' compensation, depending on the location of the business. Consider the following state laws:

  • Arkansas, Georgia, New Mexico, North Carolina, and Virginia require coverage for any company with three or more employees.

  • Four or more employees is the requirement in Florida and South Carolina.

  • Alabama, Mississippi, Missouri, and Tennessee require employers with five or more employees to provide workers' compensation insurance.

Specific Job Categories

Understanding that the number of employees determines the requirements for workers' compensation exemption is the first step.

However, not all employees can be included in this headcount. Some job categories are not considered, such as:

  • Business owners, executives, managing members, and sole proprietors and partners (excluding corporate officers)

  • Longshoreman and harbor workers

  • Railroad employees

  • Federal employees

  • Independent contractors

  • Family members working for other family members

  • Casual employees

  • Agricultural workers or farm laborers

  • Domestic workers

While these job categories may seem clear, it is important to note that in some states, the number of hours the employee works is an important factor in determining whether or not they are exempt from workers' compensation.

The exact nature of the work, rather than simply the job title, also need to be considered before workers' comp exemptions can be approved. Employers and employees are still free to sign up for workers' comp on the workers' compensation board even if they qualify for exemptions.

Self Employed Individuals

Self-employed individuals, independent contractors, and sole proprietors are usually exempt from workers' comp benefits. This, however, does not mean they cannot access workers comp benefits if they want to.

There are a lot of benefits to being covered by a workers' comp policy, such as not being left open to liability after a job-related accident.

Consider, for example, if independent contractors or sole proprietors suffer a broken leg while working. Such an injury will leave them unable to work for many months, during which they will also have to pay steep medical bills. Workers' comp benefits would be very useful in such cases.

Certain Industries

There are some industries or businesses that can be exempt from workers' comp, such as private employers of household workers, religious organizations, public officers, professional athletes, personal chefs, taxi drivers, and real estate agents.

Another important factor to consider is freelancing, which is common in the entertainment, design, and arts industry. In this case, freelancers may be exempt from workers comp in the same way that independent contractors are.

How to Apply for Workers’ Comp Exemptions

Each state has its own process of applying for workers' comp exemption. In some states, employees and businesses may find themselves automatically exempted from workers' compensation.

However, if that is not the case, business owners can complete an application form with their state's workers' compensation board.

The required application form is called a "Notice of Election to be Exempt from Workers Compensation." These are the requirements:

  • Employee information

  • Application fee

  • Description of company/business type

  • Proof of business ownership

  • Up-to-date business license proof

Is Filing for a Workers’ Comp Exemption a Good Idea?

Workers' comp exemptions can be seen as ways for businesses to cut back on expenses by eliminating expensive insurance premiums, but is this the right move for a business to take?

If a workplace accident results in serious injuries, the medical bills alone could be quite high. In most cases, these medical expenses will be far more than the premiums the company was trying to avoid.

This is why, even when a business is employing exempt workers, such as maids or agricultural workers, it may be better to offer these employees workers' compensation as well. This will greatly minimize the risks associated with hiring contractors for a project. Contact Schuerger Shunnarah Trial Attorneys for questions such as, "Can you take a vacation while on workers compensation?"

Workers’ Comp for Sole Proprietors, Partners, and Independent Contractors

Regarding sole proprietors, partners, and independent contractors, it is also a good idea for these individuals to make sure they are covered by workers' compensation.

A lot of people make the mistake of thinking that since they are self-employed they do not need any workers' compensation.

However, even though they qualify for a workers' comp exemption if an injury occurs, the medical bills may be staggering, so the safer option is to make sure that they are covered at all times.

Are There Penalties for Not Having Workers’ Comp in Texas?

Are There Penalties for Not Having Workers’ Comp in Texas?

Since Texas does not have state laws that make workers' compensation mandatory coverage, employers are not liable to any penalties if they choose not to provide coverage for their workers.

However, there is a penalty/administrative fine imposed for not posting a Notice of No Coverage to Employees. The notice must be posted each year in English, Spanish, and any other languages used by employees.

A copy of the notice needs to be given to each employee when they are hired. This has to be signed, dated, and filed along with the employee’s other details.

The Bottom Line

Texas has specific rules regarding its workers' comp exemption policies that employers and employees need to be aware of.

The inclusion of a workers comp exemption can make compensation claims very complicated. In such cases, it is best to have good workers comp attorneys in Houston providing sound legal advice regarding Texas workers' compensation laws.

Schuerger Shunnarah Trial Attorneys has been assisting injured workers fight for their rights for many years. Victims of workplace injury should call +1 713-999-4150 and ask for a free consultation.


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