Should Your Texas Hotel Be a Workers' Comp Nonsubscriber?

For most Texas hotels, the answer is no. Texas is the only state where private employers can choose not to carry workers' compensation, and some businesses do save money by opting out. But a nonsubscribing hotel loses its most important legal defenses in employee injury lawsuits, takes on uncapped liability, and is very likely to breach its franchise agreement. For a franchised property, the decision is usually made for you.

Here is how nonsubscription works, what it really costs, and when it might make sense.

Is workers' compensation required in Texas?

No. Under Texas Labor Code Section 406.002, workers' compensation coverage is elective for most private employers. Employers who carry it are called subscribers. Employers who opt out are called nonsubscribers. Some employers, such as certain public entities and contractors on government projects, have separate requirements, but a privately owned hotel can generally choose either path under state law.

What does a subscribing hotel get from workers' comp?

The main benefit is protection from lawsuits. Workers' compensation is a trade: injured employees receive medical care and wage benefits regardless of fault, and in exchange, workers' comp becomes their exclusive remedy against the employer. Under Texas Labor Code Section 408.001, a subscribing employer generally cannot be sued by an injured employee for negligence. There is a narrow exception that allows surviving family members to pursue gross negligence claims in a work-related death.

For a hotel, that matters. Housekeepers, maintenance staff, and kitchen workers have real injury exposure: lifting, slips on wet floors, chemicals, and repetitive strain.

What does a hotel give up as a nonsubscriber?

A nonsubscriber can be sued directly by an injured employee, and it defends that lawsuit at a disadvantage. Under Texas Labor Code Section 406.033, a nonsubscribing employer may not argue that:

• The employee's own negligence caused the injury (contributory negligence)
• The employee knowingly accepted the risk (assumption of risk)
• A coworker's negligence caused the injury (the fellow-servant rule)

In practice, that means a housekeeper who slips on a floor she mopped herself can sue the hotel, and the hotel cannot point to her carelessness as a defense. The employee still has to prove the employer was negligent, but the damages are not limited to a benefit schedule. Juries can award pain and suffering, and in some cases punitive damages.

What are the reporting requirements for nonsubscribers?

Opting out is not just a matter of not buying a policy. Texas nonsubscribers must:

• File DWC Form-005, the Employer Notice of No Coverage, with the Texas Department of Insurance, Division of Workers' Compensation every year between February 1 and April 30
• Post notice of non-coverage where employees can see it
• Give written notice to each new employee
• Report certain workplace injuries and illnesses to the Division of Workers' Compensation

Missing these filings can bring administrative penalties.

Does my hotel franchise agreement require workers' comp?

Very likely. Most hotel franchise agreements and brand standards list workers' compensation and employers' liability among required coverages. Opting out can put you in default with the brand, which is a much larger problem than the premium savings. Management agreements and loan documents often carry the same requirement. Read all three before considering nonsubscription.

If a hotel does opt out, what insurance should it carry?

A responsible nonsubscriber does not go bare. Common structures include:

• Nonsubscriber employer's liability insurance. Covers defense and damages when an employee sues for a workplace injury.
• Occupational accident coverage. Pays medical and wage benefits to injured employees regardless of fault, similar to what workers' comp would provide.
• A written injury benefit plan. Many nonsubscribers formalize benefits through a plan document, which should be reviewed by an attorney.

Pricing these properly requires an honest look at your injury history and payroll, not just a comparison to your workers' comp premium.

When could nonsubscription make sense for a hotel?

It is most often considered by independent, non-franchised properties with strong safety programs, good claims history, and no lender or contract requirement for workers' comp. Even then, the decision should weigh the savings against a single serious injury lawsuit. One back injury verdict can erase years of premium savings.

Frequently asked questions

Can a Texas hotel cover some employees and not others?

Workers' compensation in Texas generally applies to all employees of a subscribing employer. Partial approaches raise legal questions that should go to an attorney.

Can a nonsubscriber switch back to workers' comp?

Yes. An employer can buy a workers' comp policy and notify the Division of Workers' Compensation. Coverage applies to injuries going forward, not past ones.

Does nonsubscription lower my experience modification factor?

No. Nonsubscribers do not have a workers' comp experience mod, because they are outside the system. If you later return, carriers will look closely at your injury history during the gap.

Talk it through before you decide

Nonsubscription is a legal and financial decision, not just an insurance one. If you own a hotel in Guadalupe, Comal, or the surrounding counties and you are weighing it, send us your franchise and loan insurance requirements and your last five years of injury history. We will tell you honestly whether opting out makes sense for your property. Call 830-303-8300 or visit our hotel insurance page.