LITIGATION ALERT: "Opting Out" of the Texas Workers' Compensation System: Pros and Cons of Becoming a Non-Subscriber

Texas enacted its first workers’ compensation laws nearly a century ago.  In most jurisdictions then, an employer’s participation in the workers’ compensation system was elective.  However, after a United States Supreme Court ruling in 1917 held that compulsory participation in the workers’ compensation system did not violate an employer’s constitutional rights, most states enacted compulsory workers’ compensation laws mandating that employers offer workers’ compensation coverage to its employees.  Texas did not.  In Texas, providing workers’ compensation coverage is optional for Texas employers.   However, in order to “opt out” of providing state mandated benefits, an employer must annually file paperwork with the State establishing that they have an alternative program in place as well as sufficient finances and insurance to cover the program.

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