Editorial · June 13, 2017
Workers Compensation Insurance: What Employers Must Carry
Workers compensation insurance is a state matter, so the rules for what you must carry depend on where your employees work. Texas, for one, lets private employers choose. To learn what applies to you, start with your own state's workers compensation agency.
This guide explains what the coverage does, why the rules differ, and how a small employer can get a firm answer.
What workers compensation insurance does
Workers compensation is a state-regulated insurance system. It gives covered employees income and medical benefits if they are hurt on the job or get a work-related illness. The benefits are meant to pay medical bills and replace part of the pay a worker loses while recovering.
It also protects the employer. The Texas Department of Insurance explains that coverage limits an employer's liability if an employee brings a suit for damages. In plain terms, a worker who gets benefits through the system usually cannot also sue the business for the same injury. That trade is the heart of the whole idea.
Note that the state agency does not pay the claim. In Texas, for example, the state's workers' compensation division regulates the system and helps settle disputes, but benefits are paid by insurance companies, by employers approved to self-insure, or by approved groups of employers.
Why the rules differ by state
There is no single national rule for private employers. The U.S. Department of Labor says so directly. Its Office of Workers' Compensation Programs runs four federal programs for specific groups of workers. These are the Federal Employees' Compensation Program, the Longshore and Harbor Workers' Compensation Program, the Black Lung Benefits Program, and the Energy Employees Occupational Illness Compensation Program.
Everyone else is handled by the states. The Department of Labor tells people hurt on the job while working for a private company, or for a state or local government, to contact their state workers' compensation board. So if you run a shop, a restaurant, or an office, the federal programs probably do not decide your duties. Your state does.
Because each state writes its own law, details can differ. These can include which workers count as employees, which kinds of businesses must be covered, and what the penalties are. Do not copy what a friend in another state does. Check your own.
Texas lets most private employers choose
Texas lets most private employers choose. The Texas Department of Insurance states that private employers in Texas can choose whether or not to carry workers' compensation insurance.
Employers who skip coverage are called nonsubscribers. They are not free of duties. The state says a Texas employer without coverage must report its non-coverage status to the Division of Workers' Compensation. It must also report work-related injuries and occupational diseases. An employer that fails to do so commits an administrative violation and may face penalties.
Opting out is a business choice with real risk. Anyone considering it should talk with a licensed insurance agent or an attorney first.
How to find out what applies to you
Use these steps, in this order.
- Find your state agency. Search for your state's workers' compensation board, commission or division. Most post plain guides for employers on their sites.
- Count who works for you. List full-time staff, part-time staff and anyone you pay regularly. Some states treat helpers and some contractors as employees, so do not leave people off the list because of a label.
- Ask the agency in writing. A short email stating your business type, your state and your headcount gets you an answer you can keep on file.
- Call a licensed insurance agent. An agent can tell you what policies are sold in your state and what they cost. Get quotes from more than one.
- Ask about other routes. Texas, for one, recognizes employers that are approved to self-insure and groups of employers that self-insure together.
Keep a copy of your policy and the date it starts. If you hire a new worker or move into a new state, check again.
What to do if someone is hurt
Act fast and keep records. Get the worker medical care first. Then write down what happened, when, and who saw it. Report the injury to your insurer and to your state agency if your state requires it.
The deadlines differ by state. In Texas, an employer with coverage must report all known occupational disease and any work-related injury that causes more than one day of lost time. Other states set their own timelines, so learn yours before an accident happens, not after.
Training and safety help too. Fewer injuries mean fewer claims. The Texas division, for instance, runs a safety hotline for reporting unsafe conditions and offers return-to-work guidance, which helps hurt employees get back to work safely.
The short version
Workers compensation insurance pays for job injuries and shields the employer from many lawsuits. States, not Washington, set the rules for private employers. Texas lets most private employers opt out, but they must still report. Whatever your state, ask the state agency, get it in writing, and keep your policy current.