Texas is the only state in the US that does not require most private employers to carry workers' compensation insurance. Whether your LLC needs it depends on the type of work you do and your risk tolerance — but opting out means losing major legal protections if a worker is injured on the job.
Quick reference
| Detail | Info |
|---|---|
| Required for most private employers? | No — Texas is a voluntary workers' comp state |
| Required for government contractors? | Yes — by law if the contract involves public projects |
| Who oversees it? | Texas Department of Insurance, Division of Workers' Compensation (DWC) |
| If you opt out (nonsubscriber) | You lose standard legal defenses in workplace injury lawsuits |
| Filing if you opt out | Must notify DWC and post required notices to employees |
Step 1 — Understand whether workers' comp is optional for your LLC
Most Texas private employers can choose whether or not to carry workers' compensation insurance. There is no state law requiring it for private-sector businesses — unless:
- Your LLC has a contract with a Texas governmental entity (city, county, state agency) to perform building or construction work — workers' comp is required by Texas Labor Code § 406.096
- Your LLC is in a regulated industry where a licensing or permit requirement mandates coverage
If neither applies to you, carrying workers' comp is a business decision.
Common mistake: Many new business owners assume Texas follows the same rules as other states. It doesn't. Texas is genuinely the outlier here.
Step 2 — Understand the consequences of not having it (nonsubscriber status)
If you choose not to carry workers' compensation (called being a nonsubscriber), you give up important legal protections:
Defenses you lose in employee injury lawsuits:
- Contributory negligence — you can't argue the employee was partly at fault
- Fellow servant rule — you can't argue a coworker caused the injury
- Assumption of risk — you can't argue the employee knew the job was dangerous
This means that if an employee is injured and you're uninsured, a lawsuit is likely to succeed. Texas courts have awarded substantial damages in nonsubscriber cases.
What you keep: Employees still must prove actual negligence — nonsubscriber status alone doesn't guarantee you lose a suit, but it removes your strongest defenses.
Step 3 — If you opt out, notify DWC and your employees
As a nonsubscriber, you have two legal obligations:
a) File an annual notice with TDI/DWC Report your nonsubscriber status to the Texas Department of Insurance each year. Do this online at tdi.texas.gov.
b) Post notice to employees You must post a written notice in your workplace informing employees that you do not carry workers' compensation insurance. TDI provides the required notice form. You must also give each employee written notice on or before their first day of work.
Failure to post or give notice is a separate violation and can expose you to additional liability.
Step 4 — If you want coverage, how to get it
If you decide to carry workers' compensation insurance (which Ortholo encourages you to discuss with an insurance professional):
- Purchase a workers' comp policy from a private insurance carrier licensed in Texas
- Or join the Texas State Office of Risk Management (SORM) if you're a public employer
- Notify your employees that you are a covered employer
Once covered, injured employees go through the workers' comp claims process rather than suing you directly for injuries — which is typically faster and limits your liability.
Step 5 — Government contractors must comply separately
If your LLC bids on contracts with Texas state agencies, cities, counties, or other governmental entities for building or construction services, coverage is mandatory under Texas Labor Code § 406.096. The governmental entity will typically require proof of coverage before awarding the contract.
FAQ
Is workers' compensation required in Texas?
For most private employers, no — Texas does not mandate workers' compensation coverage. However, government contractors performing building or construction work are required to have it. All private employers who opt out must notify the Texas Division of Workers' Compensation and post required notices.
What happens if a Texas nonsubscriber employee gets hurt?
The employee can sue you directly in civil court. As a nonsubscriber, you cannot use the standard defenses of contributory negligence, fellow servant rule, or assumption of risk. Jury verdicts in Texas nonsubscriber cases can be significant.
Can my LLC be sued if I don't have workers' comp in Texas?
Yes. If you are a nonsubscriber and an employee is injured, they can file a civil lawsuit against your LLC. The lack of workers' comp removes key legal defenses. Your personal assets could also be at risk depending on your LLC's structure and whether the corporate veil is respected.
Do Texas workers' comp rules apply to independent contractors?
No. Workers' compensation in Texas applies to employees, not independent contractors. However, misclassifying an employee as a contractor doesn't change your legal exposure — if a worker is actually an employee under Texas law, you remain subject to the same rules.
How do I notify the state that I'm not carrying workers' comp?
File an annual reporting statement with the Texas Department of Insurance, Division of Workers' Compensation. You can do this online at tdi.texas.gov.
Not sure what else your Texas LLC owes?
Most business owners are surprised by how many filing obligations they have. Ortholo's free compliance checker shows you everything you owe, when it's due, and what happens if you miss it — personalized to your entity.
Last verified: 2026-06-08
Sources: Texas Department of Insurance — Workers' Compensation, Texas Labor Code § 406.096
Related guides: Texas employer requirements when you hire your first employee · Texas unemployment insurance tax filing