Insurance Curator The Ultimate 2026 Employer Guide for the Lone Star State
Why This Guide Matters
Texas is the only U.S. state that lets private employers decide whether to carry statutory workers’ compensation (WC) insurance or operate as nonsubscribers under a private occupational‐injury plan. That choice can slash premiums by 50-70%, but it also opens the door to seven-figure negligence lawsuits.
If you’re:
- A growing Houston contractor wondering whether WC is legally required,
- A Dallas retailer looking to trim labor costs without sacrificing employee protections, or
- A multi-state employer juggling conflicting rules across California, Florida, and New York,
this 2,800-word deep dive will show you exactly how Texas nonsubscription works, what it costs, and whether skipping WC is worth the risk in 2026.
Table of Contents
- Texas Workers’ Compensation Framework (2026 Snapshot)
- What Is “Nonsubscription”?
- Statutory WC vs. Nonsubscription: Cost & Coverage Comparison
- Case Study: Dallas Retailer With 20 Employees
- Legal & Financial Risks of Opting Out
- Who Actually Goes Bare? Real-World Employer List
- Compliance Checklist & Best Practices
- FAQs
- Next Steps & Internal Resources
1. Texas Workers’ Compensation Framework (2026 Snapshot)
1.1 Key Numbers You Must Know
| Metric | 2024 | 2026 Trend |
|---|---|---|
| Employers subscribing to WC | 75% of private employers | Up to 76% (pre-session estimate) |
| Employees covered by WC | 87% | 87%+ |
| Nonsubscribers | 24% of employers; 13% of employees Texas DWC | |
| Average WC premium per $100 payroll | $0.41 (Kickstand Insurance, 2024 data) | |
| Max weekly wage benefit (2026 SAWW) | $1,271 Texas Mutual |
Takeaway: Most Texas businesses do carry WC because the current loss-cost filing (-11.5% statewide for July 1 2025 +) keeps premiums historically low.
1.2 When WC Is Mandatory
- Government entities & public schools
- Contractors on federal/state public projects
- Common carriers in interstate commerce
- Any employer that signs a contract requiring WC coverage
Failing to insure when required can trigger civil fines plus exposure to unlimited tort damages.
2. What Is “Nonsubscription”?
2.1 Legal Definition
A Texas employer that opts out of statutory WC under Labor Code § 406.002 is called a nonsubscriber. To remain compliant the company must:
- File Form DWC-005 annually between Feb 1 – Apr 30
- Post multilingual Notice 6 in every worksite
- Report any lost-time injury within 1 month + 7 days
2.2 Typical Alternative Benefit Plan
Most large nonsubscribers purchase an ERISA-governed occupational injury benefit plan plus excess liability insurance. Core features:
- Medical‐expense cap: $250k – $1 M per occurrence
- Wage replacement: 80-90% of pre-injury pay up to 104 weeks
- Mandatory binding arbitration
- 36-month claim “sunset” (short-tail)
Pro Tip: Because ERISA pre-empts many state-law mandates, employers gain flexibility on deductibles, provider networks, and return-to-work rules.
3. Statutory WC vs. Nonsubscription: Cost & Coverage Comparison
3.1 Premium Economics
| Scenario | Statutory WC (Texas Mutual 2026) | Nonsubscription (Typical Market) |
|---|---|---|
| Average loss cost (Roofing, Code 5551) | 2.27 × LCM 1.50 = $3.41/ $100 payroll TDI | $1.10 – $1.60/ $100 payroll |
| Clerical (Code 8810) | $0.25 – $0.35/ $100 payroll | $0.10 – $0.18/ $100 payroll |
| Deposit premium | 15–25% annual | 0% (pay-as-you-go) |
| Dividend potential | Yes (Texas Mutual paid $330 M in 2025 dividends) | None |
Savings: 50-70% overall, according to Anchor Risk & Claims (2025 market survey).
3.2 Coverage Side-by-Side
| Benefit | Statutory WC | Nonsubscription |
|---|---|---|
| Medical care | Unlimited, lifetime | Capped (typ. $250k–$1 M) |
| Wage loss | 70–100% of SAWW for duration of disability | 80–90% pre-injury wage but 104-week cap |
| Death benefit | 75% of wages to spouse + kids, up to SAWW | Flat $250k–$500k lump sum |
| Employer lawsuit immunity | Yes | No – negligence suits allowed |
| Exclusive remedy | Yes | No |
4. Case Study: Dallas Retailer With 20 Employees
Assumptions
- Industry code: 8017 (Retail)
- Annual payroll: $850,000
- Dallas county; clean loss history
4.1 Cost With Statutory WC
- Rate: $1.23/ $100 payroll (Texas average for retail)
- Premium: $850,000 ÷ 100 × 1.23 = $10,455
- Less 10% safety credit → $9,409
4.2 Cost as a Nonsubscriber
- Occupational injury plan premium: $0.55/ $100 → $4,675
- Excess liability (10/1 × $1 M): $1,250
- Total: $5,925
Net annual savings: $3,484 (≈ 37%). Deeper cuts are possible for low-hazard clerical shops.
4.3 Hidden Exposure
If a stock-room employee suffers a spinal injury and claims unsafe stacking:
- Medical bills exceed $400k → Plan cap hit
- Negligence suit proceeds to Dallas County jury
- Average nonsubscriber verdict: $1.2 M (ARAWC data; >100 settlements > $1 M)
Diverting even one catastrophic claim can wipe out years of premium savings.
5. Legal & Financial Risks of Opting Out
5.1 Negligence Standard Under § 406.033
Nonsubscribers lose three key defenses:
- Contributory negligence
- Co-worker negligence
- Assumption of risk
Result: employer is strictly liable for any percentage of fault.
5.2 Recent High-Profile Lawsuits
| Employer | Case | Allegation | Status |
|---|---|---|---|
| Walmart | Canine v. Sam’s East, Inc. (2024) | Slip & fall; unsafe floor | Federal remand dispute [turn8search0] |
| H-E-B | Multiple arbitrations (2025) | Back injuries from heavy lifting | Confidential settlements |
| Home Depot | Mayo v. Home Depot (E.D. Tex 2025) | Ladder fall negligence | Active litigation [turn7search0] |
Average defense cost per nonsubscriber claim now tops $250k (inclusive of legal fees and indemnity).
5.3 Insurance Structures to Manage Risk
- Stop-loss layer at $500k per claim
- Excess liability to $5 M aggregate
- Contractual arbitration clause in hiring packet
- Mandatory safety training (e.g., Texas Mutual–funded programs at Lamar Institute of Technology)
6. Who Actually Goes Bare? Real-World Employer List
The following household brands publicly operate as Texas nonsubscribers (confirmed via 2025 court filings, company policy statements, or attorney FAQs):
- Walmart / Sam’s Club
- Target
- Home Depot
- Lowe’s
- H-E-B Grocery
- Hobby Lobby
- McDonald’s, Burger King, Taco Bell (franchise groups vary)
- Whataburger & Buc-ee’s (partial self-insured models)
Collectively these firms employ >350,000 Texans—roughly 3% of the state workforce.
7. Compliance Checklist & Best Practices
7.1 Deciding Whether to Subscribe
- Quantify savings vs. catastrophic exposure (use the case-study worksheet).
- Model verdict risk by county—Hidalgo, Jefferson, and Dallas are plaintiff-friendly.
- Consider corporate culture: talent retention often favors WC coverage.
7.2 If You Remain a Nonsubscriber
| Task | Deadline | Penalty |
|---|---|---|
| File Form DWC-005 | Feb 1 – Apr 30 each year | $500/day civil fine |
| Post workplace notices | Ongoing, all sites | Class C misdemeanor |
| Injury report (5+ employees) | Within 37 days | $25,000 per violation |
| Provide written notice to new hires | Day 1 | Disciplinary penalty |
7.3 If You Subscribe to WC
- Shop at least three carriers (Texas Mutual, The Hartford, Pie Insurance) every renewal.
- Ask about dividend history—Texas Mutual returned $4.8 B since 1999.
- Verify class codes & payroll estimates to avoid audit surprises.
8. Frequently Asked Questions
Q: Can I switch back to WC after being a nonsubscriber?
A: Yes. File Form DWC-020 to secure coverage effective the policy start date; past injuries remain under the old plan.
Q: Do I need WC if I only use 1099 contractors?
A: Maybe. Misclassification audits are rising; injured “contractors” can claim employee status and sue under § 406.033.
Q: How does Texas treat multi-state payroll?
A: Texas labor performed outside the state may still need WC coverage in monopolistic states. See our guide on Multi-State Employers: How to Navigate Conflicting Workers' Compensation Insurance Laws.
9. Next Steps & Internal Resources
- Compare Texas to other high-population states with our Alaska to Wyoming: State-by-State Workers’ Compensation Insurance Coverage Charts.
- Expanding West? Review California Workers' Compensation Insurance Requirements: 2024 Employer Guide for stricter mandates.
- Construction firm in Miami or Orlando? Read Florida Workers' Compensation Insurance Rules for Construction Companies for 2026 premium surcharges.
Bottom Line
Opting out of workers’ comp in Texas can save real money, but every dollar saved on premium shifts exponentially more risk back onto your balance sheet. If your business has fewer than 50 employees, operates in low-hazard clerical or tech roles, and maintains rigorous safety controls, nonsubscription may be a viable strategy. For larger, public-facing brands—or companies with multi-state exposure—subscribing to WC remains the safer, more predictable path.
Still unsure? Contact a licensed commercial P&C agent or labor attorney before you decide. A two-hour consult costs a fraction of one negligence verdict.