Workers’ comp for Texas trucking companies: elective, but not optional in practice

Labor Code 406.002 says it plainly: except for public employers and as otherwise provided by law, an employer may elect to obtain workers' compensation insurance coverage. An employer who elects coverage is subject to the Texas Workers' Compensation Act. One who does not is a nonsubscriber.

The trade is old and simple:

• With coverage, the insurance carrier pays benefits for a compensable injury without regard to fault (406.031). An employee of a covered employer generally waives the right to sue the employer at common law for work injuries unless the employee gives written notice within five days of starting work or of learning the employer obtained coverage that they want to keep those rights (406.034).
• Without coverage, your employees keep their right to sue you, and you lose important defenses.

A standard workers' comp policy also includes employer's liability coverage, which defends and pays suits by employees that fall outside the comp benefit system. Nonsubscribers do not have that unless they buy a separate program.

Labor Code 406.033 applies to suits by an employee who is not covered by workers' compensation, for injuries or death in the course and scope of employment. In that suit, it is not a defense that:

1. the employee was guilty of contributory negligence;
2. the employee assumed the risk of injury or death; or
3. the injury or death was caused by the negligence of a fellow employee.

The employer may still defend on the ground that the employee intended to bring about the injury, or was intoxicated. The employee must still prove negligence by the employer or its agent acting within the scope of employment. And the statute restricts waivers: an employee cannot waive the cause of action before an injury, and a post-injury waiver is valid only if conditions in the statute are met, including timing and the employee's knowledge of its effect.

For trucking this matters because driver injuries are not only highway crashes. Falls from trailers and cabs, strains from tarping and securement, dock injuries and fueling incidents are all workplace injuries. A nonsubscriber facing a driver's injury suit has no employer's liability policy unless it bought a nonsubscriber program, and its auto and general liability policies typically exclude injury to its own employees. Have an employment attorney review any nonsubscriber plan.

Texas intrastate for-hire carriers. Transportation Code 643.106 requires a motor carrier registered with TxDMV whose primary business is transportation for compensation or hire between two or more municipalities to protect its employees with either workers' compensation or department-approved accidental insurance. Accidental coverage must provide at least $300,000 in medical expenses for at least 104 weeks, $100,000 for accidental death and dismemberment, 70 percent of pre-injury income for at least 104 weeks, and a $500 maximum weekly benefit. See occupational accident insurance.

Contracts. Many shipper contracts and some broker agreements require workers' compensation with statutory limits and employer's liability, sometimes with a waiver of subrogation. A nonsubscriber may not be able to sign those contracts as written. See shipper contract insurance requirements and waiver of subrogation.

Drivers based in or working in other states. Other states have their own workers' comp laws, which may reach drivers who live or regularly work there. Texas law extends Texas benefits to an employee injured in another jurisdiction if the injury would be compensable in Texas and the employee has significant contacts with Texas or the employment is principally located here (406.071). Interstate fleets should confirm with their agent which states their policy needs to list.

Texas has rules written specifically for motor carriers:

• An owner-operator is defined as an independent contractor (406.121(4)).
• An owner-operator and the owner-operator's employees are not the carrier's employees for workers' comp purposes if they have a written agreement in which the owner-operator assumes the responsibilities of an employer (406.122(c)).
• A carrier and an owner-operator may agree in writing that the carrier will provide comp coverage, and the carrier may deduct the actual premium from what it owes the owner-operator (406.123(c), (d)).

Workers' comp auditors and courts look at the facts, not only the label. If owner-operators drive company-owned tractors, have no written agreement, or work only for you under your direction, the independent contractor status can be challenged. See occupational accident vs workers' comp and leasing owner-operators insurance.

If you elect not to carry coverage, Texas still requires notices:

• To the Division of Workers' Compensation: Labor Code 406.004 requires a written notice that you elected not to obtain coverage. TDI says nonsubscribers file between February 1 and April 30 each calendar year, and also after hiring a first employee and after ending a Texas workers' comp policy.
• To employees: 406.005 requires notice to each new employee at hire, a posted notice at conspicuous locations, and notice to employees within 15 days when coverage is obtained, terminated or cancelled. TDI says the notice must be posted in English, Spanish and any other language needed.
• Injury reports: TDI says nonsubscribers with five or more employees must report work-related injuries, illnesses and deaths with more than one day of lost time.

Failing to comply with 406.004 or 406.005 is an administrative violation.