Texas Workers' Comp Disclosure Rules for New Hires

Texas stands apart from nearly every other state when it comes to workers' compensation. While most states mandate that employers carry this coverage, Texas allows businesses to choose whether to provide it. That freedom, however, comes with a catch. If you employ people in the Lone Star State, you carry a legal obligation to disclose your workers' comp status to every new hire. Failing to do so can trigger fines, legal liability, and a breakdown of trust with your workforce. Understanding exactly what you must tell new hires, and when, is not just a compliance exercise. It is a foundational step in protecting your business and your team.

The rules are detailed in the Texas Labor Code, and they apply whether you have one employee or one thousand. The disclosure must be made in writing, and it must clearly state whether you provide workers' compensation insurance. You must also explain how an injured employee can report a work-related injury. This is not a suggestion or a best practice. It is a statutory requirement, and the Texas Department of Insurance (TDI) takes enforcement seriously.

The Core Disclosure: What the Law Requires

Texas Labor Code Section 406.005 is the cornerstone of this obligation. It requires every employer who hires an employee to provide written notice about the employer's workers' compensation coverage status. This notice must be given to each new hire on or before the employee's first day of work. The communication must be in plain language that the employee can understand, and it must be signed by the employee to acknowledge receipt.

The notice itself must cover two critical pieces of information. First, it must state whether the employer has elected to obtain workers' compensation insurance coverage. Second, it must inform the employee about the right to report a work-related injury and explain the proper procedures for doing so. Many employers use the official TDI notice form, but you are not required to use that specific document. You can create your own, as long as it contains all the legally required information and is provided in writing.

When You Must Provide the Notice

Timing is everything when it comes to this disclosure. The notice must be provided on or before the date the employee begins work. That means you cannot wait until the end of the first week, the first pay period, or the end of a probationary period. The notice must be in the employee's hands before they perform any work for your company. This includes part-time employees, temporary workers, and even family members who are on the payroll.

If you are a contractor or subcontractor working on a project, you may also need to provide this notice to employees of subcontractors if you are considered a general contractor under Texas law. The rules create a shared responsibility in the construction chain. In our guide on Texas surety bonds for subcontractors, we explain how overlapping obligations work in practice. The key takeaway is that you should verify your status and ensure every worker on your site receives the proper notice, regardless of whose payroll they are on.

New Hires vs. Rehires

The requirement applies to each new hire. If you rehire an employee who previously worked for you, you must provide a new notice, even if they signed one during their prior stint. The law treats each hire as a separate event. If an employee transfers from one entity to another within a corporate family, that transfer may trigger the notice requirement if the employing entity changes. When in doubt, provide the notice. It costs little time and protects you from significant penalties.

What Happens If You Do Not Provide the Notice?

The consequences of failing to provide this notice can be severe. If your business does not carry workers' compensation insurance, and an employee is injured on the job, the lack of proper notice can expose you to a personal injury lawsuit. In that lawsuit, you lose several key legal defenses. The employee does not need to prove negligence on your part, and you cannot use defenses like contributory negligence or assumption of risk. This is a dangerous position for any business owner.

Even if you do carry workers' compensation coverage, failing to provide the notice can result in administrative fines from TDI. The state can assess penalties for each violation, and repeated violations can lead to more serious enforcement actions. Beyond the legal and financial exposure, there is a reputational cost. Employees who are not informed about their rights may feel misled, which can damage morale and increase turnover.

Key Information to Include in Your Notice

Your written notice should be comprehensive and unambiguous. While the law sets the minimum requirements, a well-crafted notice can also serve as an educational tool for your workforce. Before you draft your document, consider including the following elements to ensure full compliance and clarity:

• Your legal business name and the name under which you do business, if different.
• A clear statement of whether you carry workers' compensation insurance, including the policy number and carrier name if applicable.
• A statement that you are a nonsubscriber if you do not carry coverage, along with a description of any benefit plan you provide for work-related injuries.
• Instructions for reporting a work-related injury, including the name and contact information of the person to notify.
• The employee's right to seek medical treatment and any limitations on physician choice under your policy or plan.

Including these details reduces confusion and ensures that your employees know exactly what to expect if an accident occurs. It also demonstrates that you take their safety and well-being seriously. After the employee signs the notice, keep a copy in their personnel file. You should retain these records for at least the duration of the employment relationship, and ideally longer, to protect yourself in the event of a dispute.

Nonsubscriber Obligations and the Importance of Transparency

If you choose not to carry workers' compensation insurance, your disclosure duties become even more significant. As a nonsubscriber, you must provide a notice that clearly states your status. You must also inform employees that you are liable for damages only if you are found negligent. This is a critical distinction from a subscriber, where fault is not an issue. The notice must be signed by the employee, and you must keep the signed form on file.

Transparency is your best defense. If an employee is injured and later claims they did not know about your coverage status, a signed notice is your primary evidence. Courts in Texas have upheld the validity of these notices when they are properly executed and clearly worded. If you are a nonsubscriber, you may also want to explain what benefits you do provide, such as a workplace injury benefit plan. This plan can offer medical benefits and wage replacement, but it is not the same as workers' compensation. Employees should understand the difference.

How to Distribute and Track the Notice

Creating the notice is only half the battle. You also need a reliable system for distribution and tracking. The most common approach is to include the notice in your new hire onboarding packet. You should go over it with the employee, answer any questions, and then have them sign and date the form. Make sure the employee signs in ink or uses an approved electronic signature method if you are onboarding remotely. The date of the signature is important because it proves the notice was provided on or before the first day of work.

For businesses with high turnover, such as construction companies or restaurants, it can be tempting to rush through this step. Resist that urge. A small investment of time during onboarding can save you from a major legal headache later. If you work with a professional employer organization (PEO) or a staffing agency, confirm that they are handling this notice requirement on your behalf. The ultimate responsibility, however, still rests with you as the employer of record.

Common Mistakes to Avoid

Even well-intentioned employers make errors when it comes to this disclosure. One common mistake is providing the notice verbally during the interview or orientation. A verbal notice does not satisfy the statutory requirement. The notice must be in writing. Another mistake is using a generic notice that does not accurately reflect your coverage status. If you change carriers or decide to become a nonsubscriber, you must update your notice immediately. Using outdated forms can lead to confusion and legal exposure.

Employers also sometimes forget to collect the signed copy from the employee. The law requires that the employer obtain a signed acknowledgment. If you hand out the notice but never get it signed, you have not fulfilled your obligation. Finally, do not forget about remote or mobile workers. If you have employees who are hired online or who work in the field, you must still find a way to provide the written notice and obtain a signature, even if it requires using a digital document platform.

The Role of Your Insurance Agent

Your commercial insurance agent can be a valuable partner in navigating these requirements. A knowledgeable agent can help you understand the difference between being a subscriber and a nonsubscriber, and they can explain the implications for your specific business model. They can also help you secure the right workers' compensation policy if you choose to be a subscriber. If you are looking for coverage, you can request a free quote from a licensed Texas agency that specializes in commercial policies. An agent who understands Texas-specific rules can also review your notice forms and ensure they are compliant.

For professional services firms, the line between employee and independent contractor can sometimes blur. Misclassification is a significant risk, and it can affect your workers' comp obligations. If you misclassify an employee as a contractor, you may fail to provide the required notice, and you may also face penalties for failing to carry coverage. If you are unsure about the status of a worker, consult with your agent or an employment attorney. In our guide on Texas consultants E&O coverage, we discuss similar risk scenarios that require careful attention to contract details and professional duties.

Best Practices for Compliance in 2026

Looking ahead, the regulatory environment in Texas is unlikely to change dramatically, but businesses should still review their practices annually. A best practice is to audit your new hire paperwork at the start of each year. Confirm that your notice form is current, that your carrier information is accurate, and that your signature collection process is reliable. If you have multiple locations or operate in different states, remember that this specific rule applies to employees working in Texas. Out-of-state employees may have different requirements.

You should also train your human resources staff and your hiring managers on the importance of this step. They are the ones on the front lines, and they need to understand why the notice is not just another piece of paper. Make it a part of your standard operating procedure. Consider adding a checklist item in your HR software that flags whether the signed notice has been collected. This simple step can prevent accidental oversights.

Ultimately, the requirement to tell new hires about workers' comp coverage is about more than just legal compliance. It is about setting clear expectations and building a relationship of trust with your employees from day one. When you are transparent about how injuries will be handled, you reduce anxiety and create a safer, more communicative workplace. Whether you are a subscriber or a nonsubscriber, the act of providing this information shows that you respect your employees and their right to know how they are protected. Take the time to get it right, and you will protect your business, your people, and your peace of mind.