Is Workers’ Comp Required in Texas for Contractors? (Non-Subscriber Rules)

The short answer: workers’ comp is optional in Texas, and only Texas

Texas is the only U.S. state that lets private employers legally choose not to carry workers’ compensation insurance. Employers who opt out are called non-subscribers. In every other state, coverage is mandatory or effectively mandatory. (This is a long-recognized point of Texas law; the elective nature of coverage is set out in Texas Labor Code §406.002.)

It is a real and common choice, not a loophole. According to the Texas Department of Insurance, about 24% of Texas employers were non-subscribers in 2024, covering roughly 13% of employees, both near their lowest levels in years.

So if you are a contractor asking “do I have to carry workers’ comp in Texas?”, the headline answer is no. The rest of this guide is about the exceptions and consequences, because that is where contractors get caught.

The big exception: public and government projects (Texas Labor Code §406.096)

The most important exception for contractors is written directly into the Labor Code. Under Texas Labor Code §406.096, a governmental entity that enters into a building or construction contract must require the contractor to certify, in writing, that it carries workers’ comp for every employee on that project. Each subcontractor has to give a coverage certificate to the general contractor, and the general contractor passes those certificates up to the government.

“Governmental entity” is broad. It means the State of Texas or any political subdivision, including cities, counties, and school districts. So a road job for a county, a build-out for a school district, or a facility for a municipality all trigger the requirement.

The practical version: on public work, no workers’ comp certificate means no job, for both the general contractor and its subs.

The real risk of going bare (Texas Labor Code §406.033)

On private work you can legally operate without workers’ comp, but Texas law makes that choice expensive if a worker is injured. Under Texas Labor Code §406.033, when a non-subscriber is sued by an injured employee, it loses its three core legal defenses. In that lawsuit, it is not a defense that:

• the worker was contributorily negligent (partly at fault);
• the worker assumed the risk of the job; or
• the injury was caused by the negligence of a fellow employee.

The employer keeps only two narrow defenses: that the worker intended to injure themselves, or was intoxicated. The injured employee still has to prove the employer was negligent, but with the usual defenses gone, that is a much lower bar.

There is more. A non-subscriber also gives up the “exclusive remedy” protection that shields insured employers from being sued at all. An injured worker can take a non-subscriber to court for negligence, with no statutory cap on damages, and any waiver the worker signed before the injury is void and unenforceable under Texas law.

Non-subscribers still have duties to the state

Opting out does not mean going off the grid. The Texas Department of Insurance requires non-subscribers to do three things:

• File DWC Form-005 (Employer Notice of No Coverage) with the state, annually by April 30, and within 30 days of becoming a non-subscriber.
• Post and give notice of no coverage: display a workplace notice and give written notice of non-coverage to each new hire.
• File DWC Form-007 to report workplace injuries, illnesses, and fatalities, if you have five or more employees.

Skipping these filings can bring administrative penalties, up to the statutory maximum, on top of the lawsuit exposure above.

What non-subscribing contractors buy instead

Most non-subscribers do not go completely uninsured. They usually buy an alternative program made of two stacked pieces: occupational accident insurance, which pays defined medical and disability benefits up to a policy limit and is often set up as an ERISA plan (common for 1099 crews), and non-subscriber employer liability coverage, which defends the negligence lawsuit that §406.033 exposes you to.

The key thing to understand is that these are not the same as workers’ comp. Benefits are capped by the policy you buy, there are no statutory benefits, and purchasing them does not restore your legal immunity. You can still be sued.

The takeaways to remember: capped benefits, no statutory floor, and no legal immunity. Occupational accident coverage is a budget tool, not a substitute for the protection true workers’ comp provides.

On private jobs, the market requires what the law does not

Here is the twist that “it’s optional” advice usually leaves out. On a private project, a general contractor cannot legally force you to become a comp subscriber. But two market forces make workers’ comp effectively mandatory anyway:

• Contracts. General contractors routinely require subs to carry workers’ comp, or employer’s liability at set limits, proven by a certificate of insurance before you set foot on site.
• Premium audits. At the general contractor’s own annual workers’-comp premium audit, the carrier reviews every subcontractor. If you cannot produce a valid workers’ comp certificate, the auditor treats your payroll as the general contractor’s payroll and charges the general contractor extra premium for you.

So an uninsured sub is not just taking a legal risk. It loses jobs, because general contractors will not clear it, and it costs its general contractors money at audit. Carrying coverage and handing over a clean certificate is what keeps you eligible for work. For the full picture on what general contractors require from subs, see our guide to subcontractor insurance requirements.

Key takeaways

• Texas is the only state where private employers can skip workers’ comp; opt-outs are called non-subscribers (about 24% of Texas employers in 2024).
• Public and government construction requires it by law (Texas Labor Code §406.096), for both general contractors and subs.
• Going bare on private work strips your three common-law defenses (§406.033) and removes the cap on what an injured worker can sue you for.
• Non-subscribers must still file DWC Form-005 annually, post notice, and (with 5+ employees) report injuries on DWC Form-007.
• Occupational accident coverage is not workers’ comp: capped benefits, no immunity.
• On private jobs, general contractors and premium audits make workers’ comp effectively mandatory anyway.

Frequently asked questions

Sources

• Texas Labor Code §406.002 (elective coverage)
• Texas Labor Code §406.096 (required coverage for building or construction contractors on government projects)
• Texas Labor Code §406.033 (common-law defenses; burden of proof)
• Texas Department of Insurance, Division of Workers’ Compensation, non-subscriber employer resources
• TDI-DWC biennial non-subscriber data, 2024
• DWC Form-005 (Employer Notice of No Coverage) and DWC Form-007 (Report of Non-Covered Injury)