Texas is the only state where a private employer can legally skip workers' compensation. Contractors who go without are "non-subscribers" — and they trade the comp system's lawsuit immunity for the risk of an unlimited negligence suit by an injured worker. Meanwhile the general contractors they bid still demand real coverage: typically $1M/$1M/$1M employer's liability and a waiver of subrogation.
Workers' Comp · Texas · Regulated by TDI · Workers' Comp in Texas
A Texas non-subscriber is a private employer that has chosen not to carry workers' compensation insurance, which Texas Labor Code Chapter 406 makes optional for most private employers. In exchange, the non-subscriber loses the comp system's "exclusive remedy" lawsuit immunity and gives up its three common-law defenses (contributory negligence, assumption of risk, fellow-servant), so an injured employee can sue directly for unlimited negligence damages. Most non-subscribing contractors buy a non-subscriber occupational-injury plan plus employer's liability coverage, because general contractors routinely require their subs to carry workers' comp or, at minimum, $1,000,000 / $1,000,000 / $1,000,000 employer's liability limits with a waiver of subrogation before they'll let them on the job.
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Texas stands alone: it is the only state in the country where workers' compensation is not mandatory for most private employers. Under Texas Labor Code Chapter 406, a private employer may simply elect not to carry comp. An employer that makes that choice is called a "non-subscriber" — it does not subscribe to the state workers' compensation system.
This is genuinely Texas-specific mechanics. In all 49 other states, a contractor over the state's employee threshold must carry comp or face penalties. In Texas, going without is a lawful business decision — but a consequential one, because the entire legal bargain of workers' comp flips. The trade-offs below are what every Texas contractor weighing non-subscription has to understand, and what every GC contract is reacting to.
A few employers can't opt out even in Texas — notably those building or maintaining public works under government contracts, and certain motor-bus and similar regulated employers — so confirm your specific situation. But for the typical private contractor, subscribing to comp is a choice, not a mandate.
Workers' compensation is a grand bargain. A subscribing employer gets the "exclusive remedy" protection of Labor Code §408.001: an injured employee's only recovery is comp benefits, and the employee generally cannot sue the employer in tort, no matter how negligent the employer was. The employer trades defined (but capped) benefits for immunity from lawsuits.
A non-subscriber gets neither side of that bargain — and worse, is stripped of its ordinary defenses. Under Labor Code §406.033, in a suit by an injured employee, a non-subscribing employer may not raise the three classic common-law defenses:
To win, the injured employee only has to prove the employer was negligent in any degree that caused the injury — and the employer is left with very little to fight back with. Damages are not capped the way comp benefits are: a non-subscriber suit can reach lost wages, full medical costs, pain and suffering, mental anguish, and more. That asymmetry — easy liability, uncapped damages, no defenses — is the central risk of being a non-subscriber.
Opting out isn't silent. A Texas non-subscriber has affirmative obligations to the state and its workers under Chapter 406:
Failing to file or post the required notices can itself draw administrative penalties and can be used against the employer in litigation — so a non-subscriber that skips the paperwork compounds its exposure. These filings are how the state and employees know the employer is operating outside the comp system.
Even though Texas lets a contractor be a non-subscriber, the general contractors they bid usually won't. A GC's standard subcontract almost always requires the sub to carry workers' compensation, and if the sub is a non-subscriber, the contract typically requires — at minimum — an employer's liability / non-subscriber occupational program with substantial limits and specific endorsements. The near-universal ask:
The reason GCs insist is the same severity logic everywhere: if a sub's worker is hurt and the sub is uninsured, the injured worker — and any liability — can flow up to the GC. Texas's optional-comp rule doesn't change that; it just means the GC has to spell out exactly what a non-subscribing sub must carry instead. A bare "we're a non-subscriber" answer doesn't satisfy a GC contract — the GC wants the $1M EL limits, the waiver, and the certificate.
Most Texas contractors who choose non-subscription don't go bare — they buy a non-subscriber program that pairs two pieces:
The occupational plan is what an injured worker is offered up front; the employer's liability policy is the backstop if the worker rejects the plan and sues instead. A well-built non-subscriber program is designed so the two work together — the benefit plan resolves most injuries, and the EL policy with adequate limits covers the litigation tail. Programs can also be designed to meet a GC's specific contract language, including the waiver of subrogation and certificate requirements.
Whether non-subscription saves money depends entirely on the contractor's loss experience, claims handling, and the lawsuit exposure of the trade — high-hazard work (roofing, structural, heights) carries a bigger uncapped-lawsuit tail. Many Texas contractors still choose a subscribing workers' comp policy precisely to keep the exclusive-remedy lawsuit immunity and to clear GC requirements cleanly.
The choice is a genuine business trade-off, and it turns on a few questions:
Acolite is a licensed brokerage, not an insurer. We place Texas contractor coverage both ways — subscribing workers' compensation, and non-subscriber occupational-injury plans paired with employer's liability limits structured to meet a GC's $1M/$1M/$1M and waiver-of-subrogation requirements — with appointed carriers, subject to underwriting. We can read your GC's insurance exhibit and tell you whether non-subscription will clear it. This page is informational only and isn't legal advice; confirm your obligations with the Texas DWC.
These are the gaps that competitors gloss over and that cause denied claims or rejected certificates.
Labor Code §406.033 strips a non-subscriber of contributory negligence, assumption of risk, and the fellow-servant rule in a suit by an injured employee. The worker only has to prove the employer was negligent in any degree, and damages aren't capped — the core risk of going without comp.
Many Texas GC subcontracts require workers' compensation by name. A non-subscriber occupational plan can fall short of that exact language. Read the insurance exhibit before you bid — you may need a subscribing policy, or EL limits and endorsements structured to qualify.
GCs routinely require non-subscribing subs to carry $1,000,000 each-accident / $1,000,000 each-employee / $1,000,000 policy-limit employer's liability. Confirm your program actually carries those three limits, not a lower default, before handing over the certificate.
GC contracts almost always require a waiver of subrogation in the GC's favor. A bare decision to be a non-subscriber can't carry one — the waiver has to ride on an actual employer's liability or occupational policy. Verify the endorsement is on the policy.
A non-subscriber must file the DWC-005 notice annually with the Texas DWC, post notice in the workplace, and tell new hires in writing there's no comp. Skipping these can draw penalties and be used against the employer in any injury lawsuit.
Public-works contractors on government building/maintenance contracts and certain regulated employers can be required to carry workers' comp even in Texas. Confirm your specific work and contracts don't fall into a mandatory-coverage category before relying on non-subscriber status.
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| Factor | Impact | Detail |
|---|---|---|
| Subscriber comp vs. non-subscriber program | Major | A subscribing workers' comp policy is rated on payroll and class code with predictable premium and exclusive-remedy immunity. A non-subscriber program (occupational plan + employer's liability) can cost less for some low-loss employers but carries an uncapped lawsuit tail — a single negligence verdict can erase the savings. |
| Employer’s liability limits ($1M/$1M/$1M) | Major | Carrying the $1,000,000/$1,000,000/$1,000,000 employer's liability limits GCs demand costs more than a lower default EL line, but it's frequently the minimum a Texas GC contract will accept from a non-subscribing sub. |
| Trade hazard / injury severity | Major | High-hazard trades — roofing, structural, work at height — carry both higher comp manual rates and a larger uncapped-lawsuit tail as a non-subscriber, pushing up the cost of either path. |
| Payroll (rating base for comp) | Moderate | For a subscribing policy, payroll is the exposure base — more covered wages, more premium — and the split across class codes (field vs. clerical) moves the blended rate. |
| Loss history / claims experience | Moderate | Both a subscribing policy's experience modifier and a non-subscriber program's renewal pricing react to prior claims. Good loss control lowers cost on either path; a bad year raises it. |
| Occupational plan design and administration | Moderate | A non-subscriber's benefit-plan design (benefit levels, dispute terms) and how well claims are administered affect both program cost and how often injured workers reject the plan and sue — which drives the employer's liability exposure. |
Even where Texas lets a sub skip workers' comp, the GC's subcontract usually doesn't: it typically requires either a subscribing policy or a non-subscriber program carrying $1,000,000/$1,000,000/$1,000,000 employer's liability limits, a waiver of subrogation in the GC's favor, and an ACORD certificate. (For whether comp is mandatory in Texas at all, see the Texas workers' comp page; this page covers the contract and employer's-liability mechanics a non-subscriber has to meet.)
A non-subscriber is a private employer that has elected not to carry workers' compensation. In exchange it loses the comp system's exclusive-remedy lawsuit immunity and gives up its three common-law defenses, so an injured employee can sue directly for unlimited negligence damages.
Under Labor Code §406.033, a non-subscriber can't raise contributory negligence, assumption of risk, or the fellow-servant rule when an injured employee sues. The worker only has to prove the employer was negligent in any degree, and damages aren't capped the way comp benefits are.
Because an uninsured sub's injured worker — and the liability — can flow up to the GC. So GC subcontracts require the sub to carry workers' comp or, for a non-subscriber, at least $1,000,000/$1,000,000/$1,000,000 employer's liability limits plus a waiver of subrogation. "We're a non-subscriber" alone doesn't satisfy that.
It's $1,000,000 each accident (bodily injury by accident), $1,000,000 each employee (bodily injury by disease), and $1,000,000 policy limit (disease aggregate). It's the employer's liability limit set Texas GCs commonly require from a non-subscribing sub to cover the negligence-lawsuit exposure.
Yes. A non-subscriber must file the DWC Form-005 notice annually with the Texas Department of Insurance, Division of Workers' Compensation, post notice in the workplace, tell new hires in writing there's no comp, and report certain injuries to the DWC. Skipping these can draw penalties and hurt the employer in litigation.
It's a voluntary benefit plan (often an ERISA occupational plan) a non-subscriber sets up to pay defined medical and wage-replacement benefits to injured workers — similar to comp but on the employer's own terms. It's usually paired with employer's liability insurance that responds if a worker rejects the plan and sues.
It can be for some employers with strong loss control, but not always. Non-subscription removes capped, predictable comp benefits and exposes the employer to uncapped negligence lawsuits with no common-law defenses — a single verdict can erase years of premium savings. The right answer depends on your trade, loss history, and GC requirements.
Sometimes, if the GC accepts a non-subscriber program with adequate employer's liability limits and a waiver of subrogation. But many subcontracts require workers' compensation by name, which a non-subscriber plan may not satisfy. Read the insurance exhibit before bidding — you may need a subscribing policy.
Acolite is a licensed brokerage, not an insurer. We place both subscribing Texas workers' comp and non-subscriber occupational plans paired with employer's liability limits structured to meet a GC's $1M/$1M/$1M and waiver-of-subrogation requirements, with appointed carriers, subject to underwriting. We can also read your GC's insurance exhibit and tell you which path clears it.
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