Workers' Compensation Insurance
Workers' compensation covers medical costs and lost wages when an employee is injured on the job, and it limits your exposure to being sued over that injury.
Comp Is Optional in Texas
In Texas, a private employer can choose whether to carry workers' compensation: under Labor Code § 406.002(a), an employer "may elect to obtain workers' compensation insurance coverage," except public employers and as otherwise provided by law. Going without it has consequences in both directions.
Source: Tex. Labor Code § 406.002
When It Isn't Optional
State or local government building and construction contracts require it for every employee on the project. A private contract, lease, or general contractor agreement can require it too, regardless of what state law allows.
Source: Tex. Labor Code § 406.096
What Going Without It Costs You
As a non-subscriber you must file a notice of no coverage with the Texas Department of Insurance's Division of Workers' Compensation through its Employer E-File system, notify employees in writing, post notice at the workplace, and file annually. You also give up the common-law defenses comp normally provides, which means an injured employee can sue you directly for negligence.
Sources: TDI Division of Workers' Compensation, non-subscriber notices and Employer E-File · Tex. Labor Code § 406.033
What It Doesn't Do
It doesn't fix misclassification — if an auditor decides your 1099 workers were employees, you owe the premium and you carry the injury exposure.
If you carry workers' comp, you as a sole proprietor, partner, or corporate officer are covered by it unless you're specifically excluded by endorsement. Check which way yours is written.
Sources: Tex. Labor Code § 406.121 · Tex. Labor Code § 406.097 · Tex. Labor Code § 406.122
The Audit Trap
Payments to uninsured subcontractors get added to your rating basis. Collect certificates before work starts and check that they were active on the dates worked.
Questions People Ask
Is workers' comp required in Texas?
Not for most private employers. It is required for every employee on state or local government building and construction contracts, and a private contract or lease can require it too.
Does calling my workers 1099 avoid workers' comp?
No. The test turns on how the work is actually controlled. A written agreement matters too, but it isn't sufficient on its own.