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Overview of Texas Workers' Compensation Law - How It Works and What it Does

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 30 years of practice, and we decided to write this complete overview of Texas workers' compensation law to help injured workers understand our state's comp system.

We'll start by explaining the big-picture elements, such as what workers' comp really is, then we'll address some of the misconceptions and myths about workers' compensation coverage. And, finally, we'll delve into the specifics of what type of benefits, payouts, settlements (if any), and long-term care injured workers are eligible to receive.

But before we get started, it's important that we point out that the following information is specific to Texas law only. Texas work injury law is different than most states for one very important reason: not all employers are required to subscribe to Texas workers' compensation coverage. Only about half of injured workers in Texas are covered by a workers' compensation plan.

The other half of workers are employed by companies who opt out of workers' compensation coverage altogether. Such companies are know as "non-subscribers" (since they choose NOT to subscribe to workers' compensation coverage), and non-subscriber work injury law is 100% different than workers' comp law.

If you were hurt on the job and your employer DOES NOT have workers’ comp coverage, visit our Texas non-subscriber work injury law overview page. If you're not sure if your employer has workers' comp coverage or if they are a non-subscriber, click this link to figure out whether your employer has coverage.

If you're curious to learn which type of claim is more financially beneficial to injured workers, this link will take you to an article that explains the difference between non-subscriber and workers' compensation claims.

Questions answered on this page:

  • What is the workers' compensation system?
  • How does workers' compensation work?
  • What are the different types of benefits available under the Texas Workers' Compensation System?
  • Who can qualify for workers' comp benefits under Texas law?

What exactly is workers' compensation coverage?

Virtually everyone has seen the film The Matrix. While the movie was best known for introducing the world to new methods in cinematography and fight choreography, the part that really blew everyone's mind was a notion central to the plot: everything we think we know about the world is actually wrong.

Fortunately, this article won't undermine your entire notion of existence, but you may still probably be shocked by the next sentence. Everything people think they know about workers' comp is probably a myth.

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

Instead, workers’ comp cases are handled more like 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 / 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 Constitutional right to a trial by jury along the way.

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

  • 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.
  • 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.
  • 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.
  • If the injured worker cannot pass a drug test, they cannot receive benefits. Period.
  • 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).
  • There are no settlements.
  • There are no jury trials, or any trials, really.
  • Injured workers cannot be fired for filing a workers' comp claim.
  • A definitive answer was provided concerning the rights of injured workers who suffered an out-of-state-work-injury.
  • 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.
  • 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).


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
    • Facts true of all Income Benefits:
      • 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 earned over the last 13 weeks. There is a separate formula used to calculate the Weekly Average Wage for part time employees.
        • State Average Weekly Wage. If a worker doesn't have 13 weeks of work history, or if they earn a lot of money, the insurer basically calculates the worker’s Income Benefits based on what a "typical" Texan earns. The metric used is 88% of the weekly wage that the average Texan earns, and then their benefits are calculated off of that figure. An injured worker gets paid off of the lesser amount. Just to be clear, the State Average Weekly Wage gets used in one of two ways. Either someone doesn't have work history or they earn too much money, and they use this figure as if it were the amount they typically earn. But they also use it as the "ceiling" when calculating 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.
      • 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.
    • 4 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.
        • 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 (read this article to find out which family members can receive workers' comp death benefits).
    • 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, of course, is technically acceptable and within the rules, though a bit grotesque at the same time.
    • Paid as a one-time check to reimburse the payor for the actual costs of the funeral expenses.
    • Not to exceed $6,000.

Filing a Claim - How to do it and how long you have.

Filing a claim should be a fairly simply process. In most cases, a worker tells their employer, their employer will contact the insurance carrier, and the carrier will take over from there. That said, we get calls all of the time from injured workers who simply can't seem to get past their employer's roadblocks. For instance, the employer stalls the injured worker and/or tries to coerce them into not filing the claim. Often times, the employer will offer to pay the employee under the table. Naturally, that's all very problematic, for a few reasons:

  • First, the employer is obligated to report to the insurance carrier any injuries resulting in any worker missing more than one day of work. The idea at work here is that the insurance carrier has the right to know what's potentially coming their way in terms of future claims and they need to be able to assess the risk of insuring the employer. So just the same way that your car insurance carrier wants you to tell them about every ticket or minor incident (so they can properly assess your insurability), the workers' comp carrier has a lawful right to know what it going on injury-wise with their insured customer, your employer.
  • Second, workers' comp claims have a limited shelf life. If you wait too long to file your claim, the claim can expire. There are two components to the question of "How long do I have to file a claim?":
    • You are required to notify the employer within 30 days of the accident (the time frame is different if the injury date is ambiguous, such as with a job-acquired disease or hearing loss).
    • You have one year from the date of the injury to file a claim with the Texas Department of Insurance Division of Workers' Compensation. The assumption is that when you notify your employer, they tell the carrier who then tells the Division. Sometimes employers do not follow this rule, so we always advocate that you or your lawyer should contact the Division directly, just to play it safe.
    • If these deadlines are not properly addressed, Texas law allows the workers' comp carrier and employer to disavow any obligation to pay for your injuries.

Follow this link to read some more about filing a Texas workers' compensation claim

Why Workers Often Hire a Workers' Comp Attorney

When we explain to injured workers how the Texas workers' compensation system works (namely the part about it being designed to pay automatic benefits), many workers wonder why they need an attorney. It's a fair question, and the answer is fourfold:

  1. As you can see, the rules of the Texas workers' comp system are incredibly convoluted. The most obvious advantage to having an attorney is that competent lawyers have handled cases like yours dozens or hundreds of times. So, in effect, you're paying for someone who knows what they're doing to handle all of the paperwork, tell what to do, when and where to go, how to do it, etc. So, if for no other reason, having a lawyer is the safe bet because it keeps you from getting lost in an obscenely bureaucratic system.
  2. The concept of "automatic benefits" is a ridiculous overstatement. True, the supposed idea behind the workers' comp system is that it creates a system of automatic benefits that you can get without the need for litigation. But the cold, hard reality of our workers' comp system is that employers and their insurance carriers can and often do abuse it. Having a lawyer means that you've got a watchdog who will make sure the employer doesn't keep you from getting what the law says you should get.
  3. There are subjective elements of the benefit system that can be disputed and fought over. For instance, if you have permanent injuries and you are issued a Maximum Medical Improvement rating of 2% when you really should have gotten an MMI of 10%, that can result in a significant loss of income for you. Your lawyer will be able to argue that the MMI was understated by the doctor, which may put considerably more money in your pocket.
  4. If your case is heavily disputed, then it must be tried in a disputed benefits hearing before the workers' comp board, which is much like any other type of trial in the sense that you'll greatly benefit from representation.

If you would like to discuss your case with one of the highly qualified Texas workers' compensation attorneys of Grossman Law Offices, call for a free consultation 24 hours a day at (855) 326-000.

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