For the most part, every state in America other than Texas has eliminated work injury lawsuits. The way they did this was by forcing employers within their borders to participate in a workers' compensation program. Said programs all follow the same formula: the employer gets immunity from a lawsuit, the injured worker loses the right to sue and "gains" formulaic benefits, kind of like the way unemployment benefits work. But in Texas, many injured workers still retain the right to sue over a work injury. But why is it like that?
Answer: Texas is the only state that allows companies to opt out of participating in the workers' compensation program. When that happens, employees retain their common law right to sue their employer for work injuries.
If Participating in the Workers' Compensation Program Eliminates Lawsuits, Why Don't All Texas Companies Join?
Workers' compensation programs all function the same way. Companies are forced to accept responsibility for all work injuries, irrespective of who was at fault for causing said injuries, but the companies get immunity from work injury lawsuits. In other words, "agree to always be responsible for SOME compensation, and you won't ever get sued and have to pay major compensation."
This sounds like a great deal for companies, so why don't they all take advantage of it? There are a couple reasons why companies don't subscribe to workers' comp.
First, workers' comp coverage is expensive. Some companies value highly the immunity from lawsuits that comes with participation in the workers' comp program. They pay the expensive premiums and breathe a little easier knowing their workers can never sue them. Other companies, however, aren't willing to pay for the luxury of lawsuit immunity. They would rather just avoid the expense of participating in the workers' comp program and instead just take the risk that a worker could one day sue them.
Is that a smart move? Well, it depends. Take our firm as an example. We have opted out of workers' comp for the majority of our 30+ year existence. This has allowed us to avoid paying workers' comp premium payments. Sure, one of our employees could get injured and sue us, but we have never once had a single work injury occur in several decades. Had we opted into the workers' comp program and paid $1,000 a month for workers' comp coverage, we would have paid roughly $350,000 in workers' comp premiums for no reason. In our shoes, the risk of getting sued by an employee is incredibly low, so it makes sense to opt out of workers' comp coverage and take the risk.
Second, some companies want to provide their workers with better benefits than what the workers' comp system provides. Take Walmart as an example. They are non-subscribers to the workers' compensation program. Instead, they have invented their own injured worker benefit plan. They know their workers can still sue them (as we have proven in our many lawsuits against Walmart), but they try to avoid lawsuits by paying fairly generous benefits to injured workers. Whereas the Texas workers' comp program will pay and injured worker 70% of his wages while recuperating, Walmart's private benefit plan will pay him 90% of his wages. Now, when a worker suffers catastrophic injuries, they'll still need to sue to get fair compensation. But for the bulk of workplace injuries at Walmart, their benefit plan satisfies the worker's needs. Companies like Walmart regard the benefits paid by the workers' comp system as insultingly low, and they claim to want better for their employees.
Third, some companies are strategically proficient enough that they can balance the risks based on changes in their environment. Suppose a company has good data on work injuries, trends in the costs of medical care, a strong understanding of the law, a good lawyer on retainer, and some skilled business leaders who can adequately assess the risk. Such a company can deftly opt into and out of the workers' comp program, thereby assuming and then avoiding workers' comp premium payments as the need arises. A little short on cash? Switch to being a non-subscriber for a year and free up the money that would have been spent on workers' comp premiums. Have a dangerous project coming up (say, building a bridge over a ravine), then opt back into the workers' comp program and avoid the increased risk of a workplace fatality lawsuit.
In summary, sometimes for employers not participating in workers' comp. and taking that chance of paying for an unlikely lawsuit is the sensible decision. But, this is only possible in Texas.
Why Does Texas Allow Employers to Opt-out of the Workers' Compensation Program?
Now that we understand why some employers don't want to participate in the workers' compensation program, let's go into why the state of Texas allows companies to opt-out out of it.
In Texas, companies get to choose whether they participate in the workers' comp program (and are therefore always liable for SOME compensation but can never be sued) or whether they opt out (and can still be sued). Companies who opt out are called non-subscribers.
Why are Texas businesses the only ones able to opt out of workers' comp?
Lawmakers in Texas have two main goals with respect to TX work injury law:
- Provide injured workers with minimal benefits.
- Lower the cost of doing business in Texas.
In a perfect world, in the eyes of a Texas lawmaker, all work injury lawsuits would be eliminated by forcing every Texas company to participate in the workers' comp program, same as any other state.
The problem for this plan is that many companies in Texas don't want to be forced to participate in the workers' comp. program. These companies–that is, non-subscribers–have lobbied to be able to keep their right to opt out of the workers' compensation program.
They understand that by opting out of the workers' comp program they lose immunity from worker lawsuits; but they have decided to take the risk of being sued by a worker. They have analyzed the risks and determined that the cost of participating in the workers' comp system isn't worth it.
And the Texas legislature doesn't like that.
Thus, what has emerged is a set of rules that shield companies who opt into the workers' comp program by giving them immunity from worker lawsuits, simultaneously making it surprisingly easy for the injured workers of non-subscribing companies to sue their employers.
Think about that for a second. The lawmakers want EVERYONE to participate in the workers' compensation program, and when a company has the audacity to opt out, lawmakers have removed many of the historic legal shields that companies use to defend against lawsuits, thus making non-subscriber companies vulnerable to a lawsuit.
And for you, the injured worker, that is nothing short of awesome.
While the Texas legislature is busy waging policy wars against companies that don't want to participate their pet program, injured workers like you get to reap the benefits of the controversy.
If you would like to discuss a work injury lawsuit with a Texas non-subscriber attorney, feel free to call us any time for a free consultation.