Who needs workers compensation coverage? If you are a business owner in Texas, maybe not you. Texas is one of the few states that allows business owners to opt out of carrying workers compensation insurance coverage for its employees. So if you thought football was the only game played in Texas, think again.
Carrying workers compensation insurance coverage for your employees definitely has its advantages. If your employee is injured on the job, you, as the employer, cannot be sued for negligence. However, having this coverage still doesn’t protect an employer if an employee is killed while in the course and scope of his/her employment. Regardless of whether you have coverage or not, if your employee is killed, you can still be sued; however, the employer can only be sued for gross negligence. In Texas, proving gross negligence is harder than driving across the state with one tank of gas. If you are one of the employers who elects not to have workers compensation coverage, something as simple as a paper cut can get you sued. In Texas, once you are the defendant, if even 1 % of the negligence is attributed to the employer, the employer pays that entire judgment. Many employers who opt out of carrying the insurance coverage do have their own benefits plans set up for their employees. If the employer decides to go this route, it is entitled to a credit for all monies paid to or on behalf of the employee as a result of the injury. That credit would be applied to any judgment.
If you are contemplating opting out of workers compensation insurance coverage in Texas, here are some of the items you should consider:
- The number of employees you have and the kind of work you perform. If you have a small number of employees who are at low risk of being injured while performing their job, opting out may be the thing for you. (I would never recommend a construction company that has employees working on scaffolding or being tied off while erecting a building to opt of insurance coverage, but you are allowed to in Texas.)
- A comparison of how much money is being paid in premiums for workers compensation insurance versus how that money could be put into a benefits plan. If you are paying more money for workers compensation insurance coverage than you have ever paid out in a claim, and can better put that money into an insurance plan for the use of your employees, not having workers compensation insurance coverage may be a suitable situation for you to consider.
- The status of your employees. If you hire independent subcontractors based upon need, and do not have any persons whom you call “employees” this may be an option for you.
As with any decision regarding insurance coverage, consult a lawyer before making any decisions that will affect you and/or your employees. And remember, when they say everything is bigger in Texas, they don’t always mean insurance premiums. Texas means big business!