Business Owners: Beware of the Second Notice Trap!

As a business owner, you have plenty to worry about. But did you know you may be violating the Workers’ Compensation Act without even realizing it?

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Texas is the only state that does not mandate employer participation in the state’s workers’ compensation system. Unlike other states, an employer may participate in the workers’ compensation system or choose to forego workers’ compensation insurance altogether.  However, many employers are unaware that, even if the company elects to participate in the workers’ compensation system, the employee of a subscribing employer has the individual right to waive coverage at the time of hire.

The Texas Workers’ Compensation Act (the “Act”) allows an employee (or beneficiaries) to be compensated if the employee suffers from a work-related injury. It tends to attract employer participation because it places a significant limitation on the employer’s liability if an employee is injured on the job. This “limitation” on the employer’s liability is that the injured employee is only allowed one remedy – either workers’ compensation insurance or common law rights of action.

All Texas employers must comply with certain notice requirements imposed by the Act.  For employers who maintain workers’ compensation coverage, the employer must first notify employees in writing and by posting a notice that the workers’ compensation coverage exists.  However, employers have an additional notice responsibility after this first notice to the employee.

Under the Administrative Code (and NOT the Labor Code or Workers’ Compensation Act) employers are further required to give each new (or newly-insured) employee notice of the employee’s right to opt out of coverage.  The notice is required to include the following statement:

“You may elect to retain your common law right of action if, no later than five days after you begin employment or within five days after receiving written notice from the employer that the employer has obtained coverage, you notify your employer in writing that you wish to retain your common law right to recover damages for personal injury. If you elect to retain your common law right of action, you cannot obtain workers’ compensation income or medical benefits if you are injured.”[1] More