Short answer: no. Texas is the only state that lets most private employers opt out of workers’ compensation. But if you’re a contractor, the state’s rule barely matters, because the general contractors, project owners and commercial customers who hire you will require it before your crew sets foot on site. In practice, Texas contractors carry workers’ comp to win work, not because Austin makes them.
What Texas law actually says
Under the Texas Workers’ Compensation Act, private employers can choose to be a “subscriber” (they carry a workers’ comp policy) or a “non-subscriber” (they don’t). Non-subscribers must file an annual notice with the Texas Department of Insurance, Division of Workers’ Compensation, and post a notice to employees. There are exceptions where coverage is mandatory: public employers, contractors on government construction projects, and certain motor carriers and other regulated businesses.
So a private plumbing, roofing or electrical contractor working on private jobs is legally allowed to go without it. That’s the part everyone has heard. What they haven’t heard is what it costs them.
Why contractors carry it anyway
Three reasons, in order of how often they come up in our office:
- General contractors require it. Nearly every GC in Texas writes a comp requirement into the subcontract and asks for a certificate of insurance before you start. No certificate, no job. This is the number one reason a contractor calls us about workers’ comp.
- Non-subscribers lose their legal defenses. If you opt out and an employee is hurt, they can sue you for negligence, and Texas law strips you of the common-law defenses an employer would normally have (contributory negligence, assumption of risk, fellow-servant rule). One serious injury can be a six- or seven-figure claim with no policy behind you.
- Government and commercial work demands it. Any state, county, city or school-district project requires coverage for every contractor and subcontractor on the job. Many large commercial owners follow the same rule.
“I’m an LLC with no employees. Do I need it?”
If you truly have no employees and you’re not required by a contract, no. But two things trip people up. First, the GC may still require a comp certificate even for an owner-only sub, because their own policy or their customer demands it; some carriers will write an owner-only policy for exactly this situation. Second, the moment you hire your first helper, even part time, you have an employee and the exposure above applies. If you’re about to hire, the cleanest path is to bundle workers’ comp with payroll so the premium is calculated from real wages each pay period, with nothing big due up front. We cover that on our Texas workers’ compensation insurance page.
What it costs in Texas
Workers’ comp premium is based on your payroll and the class code for the work. Roofing, framing and anything at height sit at the expensive end; electrical, plumbing and HVAC sit lower; office staff are cheap. Rates are quoted per $100 of payroll and vary widely by carrier, which is why shopping it across many carriers matters more for comp than for almost any other policy. A small trade crew with $150,000 in payroll might see anything from a few thousand dollars a year to well into five figures depending on the trade and the carrier’s appetite.
Two ways to keep the number sane: make sure every employee is assigned to the right class code (a helper doing cleanup shouldn’t be rated as a roofer), and use pay-as-you-go so you’re never paying an estimate up front and never getting a surprise bill at the year-end audit.
Subcontractors and the 1099 question
If you hire subs who don’t carry their own comp, your carrier can charge you for their payroll at audit, because in a claim they may be treated as your employees. The fix is to collect a certificate of insurance from every sub before they start and keep it on file. If a sub is owner-only with no coverage, talk to us; there are ways to structure it so you’re not carrying their exposure.
What to do next
If a GC is asking for a comp certificate, or you’re about to hire, send us your name, phone and trade on the workers’ comp page and we’ll quote it across our carriers and tell you what the certificate will look like. If a job needs it by Monday, say so; same-day certificates are normal for us.
Source: Texas Department of Insurance, Division of Workers’ Compensation, employer resources.