Insight: An Agent Resource

Nonsubscription - The Texas Option: Questions and Answers

Q: Does Texas law require employers to carry workers' compensation insurance?
A: No. Texas does regulate a system of workers' compensation insurance that employers can purchase coverage through. Those who do so are called subscribers. However, the state also allows employers to be what is known as a nonsubscriber, which allows employers to craft benefit plans outside the state system specific to their business if desired.

Q: How difficult is it to become a nonsubscriber?
A: It is a simple process: File an annual Form DWC-5 http://www.tdi.texas.gov/forms/dwc/dwc005nocov.pdf with the Texas Department of Insurance, post the required nonsubscriber notice on your bulletin board in English and Spanish, and advise employees of your decision.

Q: Are there many nonsubscribing employers in Texas?
A: Nearly one in four employers (22 percent) in Texas were nonsubscribers of the Texas workers' compensation system in 2010. They employed about 18 percent of the Texas workforce.

Q: How does being a nonsubscriber differ from being a purchaser of workers' compensation?
A: It is generally easier for nonsubscribers to eliminate fraudulent claims. Employers that subscribe to the state system are prohibited by law from choosing a doctor to send injured workers to. Nonsubscribers face no such prohibition and find that direction of employees is a key fraud-fighting tool.

Second, subscribers are prohibited from being involved in the claims process unless they are a qualified self-insurer in Texas. Nonsubscribers may be as involved as they desire.

Third, injured employees generally receive better care from pre-approved medical providers, occupational accident specialist and acute care providers. There are enhanced return to work and light duty programs in place.

Fourth, nonsubscribers can require employees to prove their injuries happened during the course and scope of employment. Conversely, for a subscriber to deny a claim, the employer must be able to prove the employee was not injured during the course and scope of employment, which is especially difficult on alleged non-witnessed injuries.

Fifth, employee benefits under workers' compensation cannot be changed. Nonsubscribers can tailor benefits to fit the needs of their employees: Weekly benefits can be increased (up to $1,000 under our plan) and various lump-sum death benefits may be provided.

Sixth, workers' compensation is the sole remedy for occupational injuries for subscribers. Nonsubscribers fall within the general tort system similar to your general liability exposures. There are other differences, but we consider the above to be the most significant.


Defining Arbitration and Mediation: Part One

This is the first of a three-part series on arbitration and mediation. Subsequent articles will define the process and details of each separately.

Most disputes between workers and employers can be resolved between the parties. However, there are situations that require a third party to decide or assist the parties in resolving these disputes. Most Texas nonsubscriber employers use dispute resolution programs to resolve disputes. The two most prevalent processes are arbitration and mediation. These are two separate processes that unfortunately get confused by some.

Most nonsubscribers use arbitration in their employee benefit programs. Under Texas law, the employee has the right to sue their employer for negligence, if the employer is not a subscriber to the Texas Workers' Compensation system. However, Texas allows employers to opt out of workers' compensation, and arbitration can be a venue that replaces the court room.

Under current Texas law, if someone wants to sue an employer for an alleged wrong doing, they can file suit in the Texas county in which they reside, the county where the incident occurred, or the county where the employer's principal business is located. This would result in the fact finder/decision maker for the dispute between the parties being a jury panel of six or 12 people.

Arbitration is designed to provide the same result as a case litigated in court: a decision on the facts of the case presented by both the plaintiff and defendant in which a decision maker will decide in favor of one of the two parties. However, with arbitration the fact finder/decision maker is not a jury, but one person, the arbiter. The arbiter's ruling is final and both parties agree to honor the ruling.

Mediation is not a formal proceeding or a final ruling/decision on a disputed matter. Mediation is simply a meeting between the disputing parties to discuss the resolution of a dispute. This dispute resolution process has been used by the courts and arbiters for years. It is an informal process presided over by a mediator agreed upon by both parties. It is an effective way to determine if there is common ground that can be reached between the parties.

Most mediations result in settlement, although both parties sometimes must retreat from their pre-mediation presumptions. A common refrain from mediators is "If I do my job correctly, both parties will not be happy when they leave. No doubt one party will be upset because they did not receive/get the amount of money they expected, the other party will be upset because they had to pay more than they wanted."

Mediation finds common ground, but it may not be at the point either party expected. So, it is critical that both parties enter mediation with the goal of trying to get the matter resolved, if possible. If the parties are unable to resolve the matter at mediation, then litigation will continue and parties will be in a position of having a court or arbitrator decide the matter. Noteworthy, most judges and arbites now require parties to mediate a case before a trial and/or arbitration takes place.

Arbitration and mediation are both cost effective and provide solutions for handling disputes. Arbitration is a formal litigation process that results in a binding decision. Mediation is an informal process that both parties agree to and is an effort to resolve the dispute without having to continue the litigation process either in court or through arbitration.


Young Workers and Workplace Safety

A recent study by the National Institute for Occupational Safety and Health found that young workers suffer on-the-job injuries at a disproportionate rate compared to more experienced workers. Most of these younger workers are employed in the retail sector. NIOSH has created new guidance for employers to use in safeguarding younger workers. Whether you're in the retail industry or not, we strongly suggest that these guidelines become a part of a company's safety program. They are likely to be used by plaintiff lawyers as evidence for standard of care in case a young employee is injured.

For an overview of the NIOSH study, click here.

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