By: Lyle Y. Courtney
In Texas, most private employers have the right to choose not to participate in the workers’ compensation system. An employer who does not have workers’ compensation insurance is known as a “nonsubscriber” and must notify the Texas Department of Insurance Division of Workers’ Compensation of this election. Tex. Lab. Code 406.004(a). There are many reasons why a business owner may choose to go without workers’ compensation insurance. However, this decision is not without risk.
Nonsubscribers can get sued
In general, an employee covered by workers’ compensation insurance cannot sue the employer for personal injuries sustained in the course and scope of employment.
In contrast, a nonsubscriber employer can be sued by an injured employee. A nonsubscriber must be prepared to defend any potential claim by an employee.
Nonsubscribers lose some defenses
The Texas Workers’ Compensation Act prohibits a nonsubscriber from raising certain defenses such as contributory negligence, assumption of the risk and negligence of a fellow employee. Tex. Lab. Code § 406.033(a). As a result, a jury verdict against a nonsubscriber will not be reduced by the percentage of fault attributable to the employee.
An employee must still prove negligence
An injured employee does not automatically win a lawsuit against a nonsubscriber. The employee must still prove the employer was negligent. In addition, nonsubscribers may defend on the basis that the employee was intoxicated or the injury was caused by an act of the employee that was intended to cause the injury.
Agreements to limit liability
Some nonsubscriber employers have tried to limit their liability by having their employees sign pre-injury waiver forms. Any agreement by an employee to waive a cause of action before an injury occurs is void and unenforceable under Texas law. Tex. Lab. Code § 406.033(e). However, an employee’s cause of action could be waived after the injury under certain conditions.
An agreement to arbitrate any personal injury claims against a nonsubscriber is enforceable. This is because arbitration agreements do not limit liability but rather sets the forum in which to resolve the dispute.
Any decision by an employer not to subscribe to worker’s compensation insurance should be carefully considered. Employers should look at their risks and potential liability in the event of an on-the-job injury. It is always advisable to consult an attorney before making such a decision.
This article has been prepared for educational and informational purposes only and does not constitute legal advice. The laws of other states and nations may be entirely different from what is described in this article. Because of these differences, you should not act or rely on any information on this article without seeking the advice of a competent attorney licensed to practice law in your jurisdiction for your particular problem. The author has endeavored to comply with all legal and ethical requirements in writing this article and does not desire to solicit or represent clients based upon their review of any portions of this article which do not comply with the legal or ethical requirements of the jurisdiction in which the client is located. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship.