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Texas Workers’ Compensation Law Update

An August 2013 court decision by a federal appeals court brings attention to the impacts of Texas being one of two states in the country that allows companies to opt out of the state’s workers’ compensation system. In the case, Mary A, Ernewayn v. Home Depot U.S.A., Inc., Mary A. Ernewayn, a Home Depot employee in Texas filed sued against Home Depot in Texas state court, alleging that the company was negligent. Ernewayn claimed she suffered neck and back injuries while operating a lumber cart in a Home Depot store. Home Depot sought to remove the case to federal court based on the fact that the company had opted out of the Texas workers’ compensation system.

In August 2013, however, a federal appeals court panel denied the company’s request to defend itself from a workers’ compensation claim in federal court. More specifically, the federal court affirmed the lower court’s finding that even though Home Depot did not subscribe to the Texas state workers’ compensation system, the state’s workers’ compensation law still limited the number of common law defenses the company could assert.

The Opt-Out System in Texas

Most states require employers to carry a workers’ compensation insurance policy to cover any costs such as lost income or medical bills should an employee become injured while at work. This means that, in most states, if someone is injured on the job, he/she can file a claim. If the claim is approved, the employee is entitled to payment of his/her medical bills and compensation to cover lost wages and disability.

Until this year, Texas was the only state to permit employers to “opt-out” of the state’s workers’ compensation system. However, earlier year this Oklahoma became the second state to pass an opt-out law. As the only “opt-out” states in the country, employers in those states are not require by law to participate in the states’ workers’ compensation program. Where an employer has opted out of the state workers’ compensation system, an injured worker only has the right to sue for civil damages. Notably, however, in Texas, public employers and employers that enter into a building or construction with a governmental entity must still provide workers’ compensation.

Employers who choose to opt-out of Texas’s workers’ compensation system must take various steps:

1) Non-subscribing employers must file forms with the Division of Workers’ Compensation (DWC) at the Texas Department of Insurance regarding their decision to become or continue operations as a Texas non-subscriber.

2) These forms must be filed both at the time the company elects to become a non-subscriber and on an annual basis each year the company chooses to continue as a non-subscriber.

3) Employers must provide written notifications to employees and post notices in the workplace regarding the company’s status as a non-subscriber.

A report issued by the Texas Department of Insurance in December 2012 revealed that fewer Texas employers were opting to leave the state’s workers’ compensation system. In fact, the number of “non-subscribers” decreased to 33% (approximately 113,000 employers) in 2012, the second lowest percentage since 1993. The non-subscription rate amongst large employers (such as Home Depot) was only 17% in 2012. While proponents of the opt-out system claim that it provides adequate compensation to injured employees at a reasonable cost to Texas employees, as well as improved return-to-work rates, opponents of the system say it allows employers to not pay compensation to injured employees that is desperately needed.

Despite the opt-out system in place in Texas, opt-out compensation is still a benefit that is provided by most Texas employers. If you have suffered an injury that occurred at your workplace, the San Antonio Workers’ Compensation attorneys at Carabin Shaw can assist you in working through this complicated area of law in order to receive compensation from all possible sources. Contact us today at 1-800-862-1260.


Workers Compensation Resources for Employees / Injured Employees, Texas Department of Insurance

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