The Texas Workers’ Compensation System

A Guide for Injured Workers

If you think about it, it's a little scary that most employees' only understanding of how workers' comp supposedly works is learned through word of mouth... from non-lawyers. For instance, a lot of injured workers are pretty sure they can sue because they know a guy who did, or they just know they'll get their medical bills covered because that's what someone in HR told them.

Well, frankly, that kind of vague understanding isn't good enough. If you're an injured worker, then it’s crucial to know exactly how the law works. The good news is that this is the right place to find out. Our lawyers have represented hundreds of injured workers in our more than 30 years of practice, and we decided to write this guide to the Texas workers' compensation system to help injured workers understand how the workers' compensation system works and what benefits injured workers are entitled to.

Most importantly, we know that the best explanation is one that's in plain English and easy to use. With that in mind, we organized this guide to only use legal jargon when absolutely necessary and broke it up into easy to digest chapters for readers who may have a specific question.

What Is Workers' Compensation Coverage?

George Washington never skipped a silver dollar across the Potomac River. The modern image of Santa Claus wasn't created by Coca Cola. It's not the seeds in a chili that make it spicy. There are no shortage of myths that people repeat as the truth every day, but aren't actually true. To the list of "myths people repeat so often they believe they're true," you can probably add everything people think they know about the workers' compensation system.

Simply put, the workers' compensation system is an alternative compensation system that lawmakers designed to replace work injury lawsuits and with a type of no-fault benefit plan. There are no "workers' compensation lawsuits."

Instead, the workers’ compensation program handles cases more like how a person would file a claim for unemployment benefits or disability. The workers' compensation system is, for all intents and purposes, a work injury welfare program.

Not so long ago, work injury cases were treated in exactly the same fashion as car accident cases, slip-and-falls, or any other personal injury case. That is to say, back before the workers’ comp laws were created, injured workers could sue their employees and be awarded compensation by proving to a jury that their injury was caused by the employer’s negligence.

However, when the law treated work injury cases exactly like any other type of personal injury case, there were a few inherent problems:

  • Suing one's employer was incredibly awkward.
    • The employer was able to intimidate and outlast the injured worker, which gave the company an advantage in court.
    • Employers often retaliated against injured workers who sued them.
  • Not all injuries are an employer's fault. Courts are good at determining fault and making the at-fault party pay, but what happens when an employee is hurt through no fault of the employer? Should the boss still pay? On one hand, the employee did get hurt while trying to benefit the company, so does that mean that the employee should be paid even if it was the employee's fault? But on the other hand, it wasn't literally the employer's fault, so should they really have to pay? It's understood that companies have a duty to protect their employees, but how exhaustive must they be in fulfillment of this duty? Do employers even have to protect employees from themselves?
  • Companies want to do business in states where they don't have to worry about being sued, so work injury lawsuits were believed to be bad for the Texas economy (this is highly debatable).

While there were some legitimate shortcomings associated with using courts and lawsuits to resolve work injury cases, the biggest reason the workers' comp system was enacted, thereby eliminating work injury lawsuits, was that employers got tired of being sued, even when they deserved it.

The reality is that building a system that is both completely fair for workers and protects their rights, while also being cost effective for companies when it comes time for them to pay for their mistakes, is a difficult goal.

Ultimately, Texas lawmakers enacted the earliest workers’ compensation laws several generations ago. In doing so they removed an employee's right to sue an employer when the employer was negligent, and replaced it with a state-run compensation plan in which injured workers could file for "benefits." Or to put it another way, we traded an at-fault system for a no-fault system, and injured workers lost their right to a trial by jury along the way.

How Does the Workers' Compensation System Work?

The workers’ compensation system has a few key features (some good, some bad). If an employee is injured:

  1. They can no longer sue the company they work for. The only legal remedy is the employee's right to file for work injury benefits.
  2. Workers' compensation cases are "no-fault" cases, meaning, that a determination of fault has no bearing on the case. Simply being on the job at the time of the accident (barring a few exceptions) entitles the employee to benefits. Reading between the lines, it doesn't matter if the employer was very negligent, only kind of negligent, or not negligent at all. Having a "good case" is essentially meaningless in workers' comp law; injured workers are either eligible for benefits or they're not. Forget about legal arguments. Getting workers' comp benefits is more like filing a tax return than a court case. There are only a very few defenses to a workers' compensation claim that employers can use to fight your case. Otherwise, the assumption is that the employee will receive benefits merely because the injury happened on the job.
  3. The benefits workers receive are not based on merit or actual losses the way it works in a personal injury case. For instance, if someone gets hurt in a typical car wreck and sustains $10k in property damage, $10k in medical bills, $10k in lost wages, and $10k in pain and suffering, their case is worth $40k. On the contrary, in a workers' comp case, the actual cash value of the employee's losses has no bearing on the amount of benefits that they receive. Benefit pay is based on a one-size-fits-all formula with a built-in maximum payout.
  4. If the injured worker cannot pass a drug test, they cannot receive benefits. Period.
  5. Workers can't use their own doctors. They can only obtain medical attention from doctors who are approved by the workers' comp board (Guess who those doctors typically side with in a dispute).
  6. There are no settlements.
  7. There are no jury trials, or any trials, really.
  8. Injured workers cannot be fired for filing a workers' comp claim.
  9. A definitive answer was provided concerning the rights of injured workers who suffered an out-of-state-work-injury.
  10. If an injured worker disagrees with the benefits they are receiving, or if they have a problem with a ruling made by the workers' comp board, their only option is to appeal it to the workers' comp board. There is no right to take the case to trial if the worker feels he or she has been denied their rights under the workers’ comp system.
  11. Injured workers have their rights dictated according to whether or not the employer opts into workers' comp. If the employer opts in, all of the above applies to the worker's case. If the employer opts out, a different set of rights applies. I don't know about you, but the idea of an employer (or anyone outside of lawmakers and the court) determining what my rights are doesn't sit well with me, but that’s the reality for Texas workers.

Clearly, our state's workers' comp system has a few positive elements for employees, such as the fact that employees theoretically get paid without much of a fight. But overall it largely benefits the employer (i.e., the employer is impervious to lawsuits; they don't have to pay fair and merit-based compensation to injured workers; there's no one to appeal bad decisions to outside of the workers' comp system, etc.).

Now, you may be wondering if one can simply opt out of the workers' compensation system. Technically, employees can preemptively opt out before an injury ever occurs, but Texas law allows the employer to fire them on the spot for doing so. So, in actual fact, you're more or less stuck with workers' comp benefits if the employer chooses to participate in the workers' comp program.

Lastly, it's worth pointing out that workers' comp is kind of an odd duck in the sense that it, as a system, is a marriage between private insurance carriers and a state-run agency, the Texas Department of Insurance Division of Workers' Compensation.

The way this works is that private insurance carriers sell workers’ comp insurance plans to employers. The money paid in and out of the system is based on an actuarial model, just like any other type of liability or casualty insurance plan. However, it's an incredibly low-risk endeavor for the insurance carriers, because the payouts are typically so small. But since the likelihood of an employee filing a claim is relatively high, the premiums carriers charge can be incredibly pricey for employers.

The takeaway here is that a workers' comp claim is a claim made against an insurance carrier who never really has to pay you very much, and the government is also intimately involved, so you can imagine how needlessly bureaucratic the whole process can be (hint: this is why so many people hire workers' comp lawyers even though the benefits are supposed to be paid automatically and without a fight).

What Benefits Does the Workers' Compensation Program Provide?

Now that we've (hopefully) adequately explained what workers' comp is, let's turn our attention to the benefits that injured workers can receive. As mentioned, there are no workers' comp settlements or lawsuits (except in the case of fatal accidents caused by gross negligence), and injured workers only have the right to file for certain types of benefits. Here are a few things that everyone needs to know about benefits:

  • Workers' comp benefits are statutory benefits, meaning that they are set by statute (written law), so they are not at all negotiable.
  • Any aspect of the workers' compensation claim process that may be open to interpretation is ultimately decided by the workers' compensation commissioner. He has the final say in all matters. He may as well be called the "workers' compensation king," for that matter.
  • Benefits come in four flavors: Medical Benefits, Income Benefits, Death Benefits, and Burial Benefits.

Here's how they work:

Medical Benefits

Theoretically, all medical bills are paid by the workers' comp carrier. In practice, however, the carrier and the Texas Department of Insurance exercise a great deal of control over the medical care injured workers receive. The working model is basically one of, "If we're going to pay for your medical treatment, we get to choose when, where, and how it's done." Consequently, they require workers to see a workers' compensation-approved doctor. In cases of emergency, victims can be treated by any doctor, but once they're released from emergency care, the insurance carrier calls the shots.

There is no dollar-value limit on medical care workers can receive. However, most injured workers who hire an attorney do so because they feel the comp insurance carrier is trying to deprive the injured worker of necessary medical attention. Think about that for a second. The law entitles employees to all the medical care they need, with no cap on how much medical attention they can receive. However, the insurance carrier and/or the workers' comp. commissioner have to approve any procedures. So if they don't think a surgery, prescription drugs, or physical therapy, is needed, they can deny it.

Income Benefits

There are several facts that are true of all income benefits. They are:

  • There are several distinct categories of Income Benefits. They all sound similar, yet they are all quite different from one another.
  • Rather than just paying injured workers what they used to get paid prior to the injuries, our lawmakers decided to pay workers a portion of what they used to earn, subject to arbitrary limits.
  • Income Benefits are usually paid in weekly checks, though one of the categories of Income Benefits is paid monthly by default. Theoretically, however, all Income Benefits can be paid monthly if you ask for this special consideration and the commissioner approves it (though there's no real benefit to this that we've ever seen).
  • All income benefits are formulaic. Each category of income benefits has its own formula, which is explained below.
  • There is a maximum amount paid out for all Income Benefit types.
  • There are two general metrics used in calculating Income Benefits:
    • Average Weekly Wage—which is just your average pay and benefits earned over the last 13 weeks. If a worker doesn't have 13 weeks of work history, then those administering the workers' compensation plan are permitted to use the pay rate of a worker who performs a similar job to the injured worker. There is a separate formula used to calculate the Weekly Average Wage for part time employees.
    • State Average Weekly Wage (SAWW) —This metric is 88% of the weekly wage that the average Texan earns, and then their benefits are calculated off of that figure. For 2023, the State Average Weekly Wage for Texas is $1,111.55. For workers who make more than that, the SAWW serves as a cap on their benefits. The workers compensation program will never pay more than the State Average Weekly Wage. Injured worker gets paid off of the lesser amount between the SAWW and their salary plus benefits. No matter what, they're not going to pay anyone more than 88% of what an average Texan earns.
    • These metrics form the building blocks of all Income Benefits. All of the income benefits will pay some percentage (such as 70%) of a worker's Average Weekly Wage, up to some percentage of the State Average Weekly Wage (which itself is only 88% of what the average Texan earns).
  • Income Benefits do not start accruing until the 8th day of your injury. In other words, the carrier does not have to pay you for the first 7 days you are unable to work, unless your injury prevents you from earning money for 14 days or more.
  • It's important to understand that the goal of the workers' comp insurance carrier is not to pay compensation, rather, it's to help workers obtain what is called Maximum Medical Improvement (MMI). MMI is a bit of a confusing subject, but, basically, when a worker reaches MMI, they have gotten as well as can be expected. When they have improved medically as much as is possible, they may either be 100% back to their old self or they may only be partway there. Either way, if they’re as good as they can be, that’s called Maximum Medical Improvement. The difference between 100% recovery and MMI is called impairment. Impairment is quantified by the workers' compensation carrier as a percentage called the Impairment Rating. So if an injured worker has a 2% Impairment Rating, that means that their injuries improved to 98% of your former well-being. It's easiest think of Maximum Medical Improvement and Impairment Rating as being synonymous to "graduation" and "diploma." In school, when you graduate you are issued a diploma. In workers' compensation, when you reach Maximum Medical Improvement you are issued an Impairment Rating. Again, getting you well enough that you can be said to have obtained Maximum Medical Improvement and therefore can be issued an Impairment Rating is the entire goal of the Texas workers' compensation system, so all of the Income Benefits are structured around this milestone.

The Texas Workers' Compensation Program Provides Four Types of Income Benefits

  1. Temporary Income Benefits - The amount you get paid to between the time of your injury and when you are evaluated for Maximum Medical Improvement, have collected 104 weeks of benefits (starting with the 8th day after your injury), or are reassigned to a job making your average weekly wage before the injury.
    • Paid weekly.
    • Calculated as 70% of your Average Weekly Wage if you can't work, or if you can work on light duty, it's calculated as 70% of your lost wages (difference between average weekly wages and what you're earning now).
    • Not to exceed 100% of State Average Weekly Wage.
  2. Impairment Income Benefits - The amount you are paid for permanent injuries, after you have obtained Maximum Medical Improvement. This is almost like a settlement (just barely, though), wherein you are paid an amount based on the severity of your injuries, though the payout is still based on a contrived formula and subject to severe limitations.
    • Paid either in a lump sum (caution: accepting lump sum payment can limit your other benefits) or the total value is calculated and then paid weekly.
    • Calculated as 70% of your Average Weekly Wage, multiplied times three weeks for every 1% in impairment you are estimated to have by a workers' comp doctor. For instance, if you have a 5% Impairment Rating, you will get 3 weeks of pay times 5 points of impairment (15 weeks of pay), paid at the rate of 70% of your Average Weekly Wage.
    • Not to exceed 70% of State Average Weekly Wage.
  3. Supplemental Income Benefits - After you have reached Maximum Medical Improvement and have obtained an Impairment Rating, it is assumed that you can return to the workforce. However, your injuries may keep you from earning as much as you used to. Supplemental Income Benefits are designed to "fill the gap" between what you used to earn and what you earn now.
    • Paid monthly.
    • Calculated as 80% of the difference between 80% of your Average Weekly Wage (prior to injury) and what you earn now, if you earn anything currently. That figure is then multiplied by 4.35 weeks (the average amount of weeks in a month).
    • No, that’s not a typo. The formula really is “80% of 80%...”
    • Only eligible if you have 15% or greater Impairment Rating, you did not take Impairment Income Benefits in a lump sum payment, you are unemployed or earning less than 80% of your Average Weekly Wage, and you can prove that you are actively seeking employment.
    • You must frequently re-apply for Supplemental Income Benefits.
  4. Lifetime Income Benefits - These are long-term benefits paid if you have suffered certain very specific catastrophic injuries, such as the loss of multiple limbs.
    • Paid weekly.
    • Calculated as 75% of your Average Weekly Wage, increased 3% per year for inflation.
    • Not to exceed 100% of State Average Weekly Wage.
    • Lifetime Income Benefits used to be paid to the surviving family members if an injured worker died. Now, if the worker dies from a cause unrelated to their injury, the benefits get turned off.

Death Benefits

  • If, and only if, the death was caused by gross negligence, the family of the decedent can sue the employer for punitive damages, which is handled in a normal court case, not through the workers' compensation benefit plan.
  • If a worker is killed on the job or dies later from an injury or sickness acquired on the job, and the death is caused by anything other than gross negligence or intentional acts, then workers' compensation Death Benefits are the only option for recovery.
  • Paid only to certain legal beneficiaries. These are paid to:
    • a surviving spouse (unless they remarry, with certain exceptions),
    • minor children (until age 18, with certain exceptions),
    • children less than 25 years old who are enrolled in an accredited college or university,
    • dependent grandchildren,
    • other dependent family members, or
    • non-dependent parents (but only when there are no surviving eligible dependent family members).
  • Paid weekly.
  • Calculated as 75% of the deceased worker's Average Weekly Wage.
  • Not to exceed 100% of State Average Weekly Wage.

Burial Benefits

  • Burial Benefits are technically payable to whoever paid for the funeral expenses, rather than being paid to surviving heirs. However, it's most common that the surviving heirs are the ones who pay for the funeral. That said, we've seen numerous scenarios where the company who is responsible for the employee being killed will volunteer to pay for the funeral expenses as a gesture to the decedent's family, only to then turn around and ask workers' comp to reimburse them for the funeral expenses. That, o