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.
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.
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.
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:
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.
Opting out is not just a matter of not buying a policy. Texas nonsubscribers must:
Missing these filings can bring administrative penalties.
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.
A responsible nonsubscriber does not go bare. Common structures include:
Pricing these properly requires an honest look at your injury history and payroll, not just a comparison to your workers' comp premium.
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.
Workers' compensation in Texas generally applies to all employees of a subscribing employer. Partial approaches raise legal questions that should go to an attorney.
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.
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.
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.