Texas Notification Requirements and Administrative Violations Provisions

Do You Know the Rule?

Those who read the most recent case file found that a possible administrative violation wasn't enough for a Texas worker to get around the exclusive remedy affirmative defense that prevented him from bringing a negligence suit against the employer.

What follows are the rules in Texas related to notification and administrative violations regarding workers' compensation insurance in the Lone Star State, as presented by the court in Lane v. Odle, Inc., 2024 WL 3897109 (Tex. App. 08/22/24).

Notification

In Texas, under Labor Code Section 406.004(a), an employer who does not obtain workers' compensation insurance coverage in Texas “shall notify the division in writing, in the time and as prescribed by commissioner rule, that the employer elects not to obtain coverage.” Id. § 406.004(a).

Under Section 406.006(a), an insurance company from which an employer has obtained workers' compensation insurance coverage “shall file notice of the coverage and claim administration contact information with the division not later than the 10th day after the date on which the coverage or claim administration agreement takes effect, unless the commissioner adopts a rule establishing a later date for filing.” Id. § 406.006(a).

The required notice “shall be filed with [Department of Workers' Compensation] in accordance with Section 406.009,” which requires DWC to collect and maintain this information and to monitor compliance. Id. §§ 406.006(b), .009(a), (d).

Notice that an employer has become a subscriber “shall be filed with the board's Austin office by certified mail or in person within 30 days of the effective date of the policy and the notice must be completed in detail,” with things like the employer's FEIN, the insurance policy number, the policy's effective date, and the insurance company's complete name. 28 Tex. Admin. Code § 43.5. Likewise, insurance carriers are also required to notify DWC of workers' compensation insurance coverage. Id. § 110.1(d)–(e) (2013).

Administrative Violations

Chapter 415 of the Labor Code governs administrative violations by employers, insurance carriers, and employees, among others. See Tex. Lab. Code Ann. §§ 415.001–.008. “A reference in [the Labor Code] or other law ... to a particular class of violation, administrative violation, or penalty shall be construed as a reference to an administrative penalty,” which may not exceed $25,000 per day per occurrence; each day of noncompliance constitutes a separate violation. Id. § 415.025.

The administrative-violation scheme is part of the legislature's overarching framework to implement the workers' compensation system's goals. See id. § 402.021(a)(1)–(4). In implementing these goals, the legislature has expressed its intent that the state workers' compensation system “promptly detect and appropriately address acts or practices of noncompliance with [the TWCA] and rules adopted” under the act. Id. § 402.021(b)(7).

An employer commits an administrative violation if, among other things, it does not notify DWC in writing on the agency-prescribed forms that it has elected not to obtain coverage, Tex. Lab. Code Ann. § 406.004(a)–(b), (e), or if it does not notify each employee about whether it has workers' compensation insurance coverage, id. § 406.005(a)–(e). See also id. § 408.063(a)–(c) (failing to timely file wage statement after notice of injury), § 409.006(a)–(c), (e) (failing to comply with injury record-keeping requirements), § 411.032 (failing to meet certain reporting requirements).

Likewise, a workers' compensation insurer may commit a variety of administrative violations, including failure to timely file notice of coverage and claim administration contact information with DWC, see id. § 406.006(a)–(c), failure to provide claims service as required by the TWCA or to designate a representative to act as its agent before DWC, see id. §§ 406.010(a)–(b), (d), .011(a)–(b), or failure to maintain or provide TWCA's required accident prevention services or to use those services in a reasonable manner to prevent injury to its policyholders' employees, see id. § 411.068. See also id. §§ 409.021(a), (e), .022(c), .023(a), (c), .024(a)–(b) (addressing administrative violations relating to benefits payments).

Both employers and insurers commit an administrative violation if they fail to identify or confirm coverage status and claim administration contact information. Tex. Lab. Code Ann. § 406.009(d)–(e). All the administrative violations pertaining to coverage elections are subject to Labor Code Chapter 415's administrative penalties. Id. § 406.012. The Labor Code also sets out some criminal penalties, including a Class A misdemeanor or state jail felony for fraudulently obtaining workers' compensation insurance coverage. Id. § 418.002 (stating offense is a misdemeanor if the premium avoided is less than $2,500 and a state jail felony if the premium avoided is $2,500 or more); see id. §§ 411.034(a)–(d), .105, 413.043(a)–(b) (other misdemeanor offenses), § 414.006(a) (providing that DWC may refer cases to other agencies for further investigation or institution of appropriate proceedings).

Unless otherwise stated, no Labor Code administrative violations and penalties provide a private cause of action, and allowing parties to pursue remedies that circumvent DWC's exclusive procedures and remedies in the first instance “would undermine the workers' compensation system's careful benefits-determination and claims-resolution processes.” Mouton v. Houston ISD, No. 01-22-00205-CV, 2023 WL 4065602 (Tex. App.06/20/23) (citing Accident Fund Gen. Ins. Co., 543 S.W.3d 750 (Tex. 2017).

DWC may seek sanctions when an insurer fails to accurately pay benefits and fails to timely or accurately report claim data. Tex. Pol. Subdivisions Joint Self-Ins. Fund, 681 S.W.3d 491 (Tex. App. 2023). That is, the workers' compensation system “creates a level of certainty for employees by ensuring that an employer's violation of the State's various administrative rules and regulations will not deprive workers of the benefits under the system,” and the administrative and civil penalties will not cause a company to forfeit its “subscriber” status. Exxonmobil Corp. v. Kirkendall, 151 S.W.3d 594 (Tex. App. 2004).

"A person commits an administrative violation if the person ... intentionally and knowingly obtains or maintains: ... workers' compensation insurance from an insurer that is not authorized to engage in business in this state.” Tex. Ins. Code Ann. § 2051.152(a)(2)(A). The penalty attached to this administrative violation is “not to exceed $5,000,” and each day such an administrative violation occurs or continues is a separate violation. Id. § 2051.152(b)–(c).

Case Examples

Some Texas courts have addressed the interplay between administrative violations and the TWCA's employer protections. 

Becon Constr. Co. v. Alonso, 444 S.W. 3d 824 (Tex. App. 2014). The employees argued that because the general workplace plan had not complied with certain TDI administrative rules, their employers could not rely on TWCA's exclusive-remedy defense. The employers replied that TDI's administrative rules were directory, not mandatory, and that TDI had not created an administrative penalty stripping entities of the exclusive-remedy defense provided by the legislature in the TWCA for violation of the regulations. The court observed that because neither the TWCA nor the administrative rules described a penalty for violating those rules, the employees' interpretation would discourage employer participation in the workers' compensation scheme and “might prevent some employees who would otherwise be covered by insurance from being covered under these types of policies due to the violation of regulations.” The court concluded that the proper penalty for those administrative violations should be left to TDI when it did not appear “that the [l]egislature intended for these types of violations to strip employers of defenses or to cause employees to lose the benefits of their coverage.” 

Hand & Wrist Ctr. of Hous., P.A. v. SGS Control Servs., Inc., 409 S.W.3d 743 (Tex. App. 2013). The court noted that Labor Code Section 409.005, which required an employer to notify its insurance carrier of employee injuries requiring absence from work for more than one day, did “not provide that if the employer fails to comply it has forfeited its protections under the [TWCA].” Instead, such a failure is an administrative violation that allows DWC to assess administrative penalties. In reaching this conclusion, the court relied on Regaldo v. H.E. Butt Grocery Co., 863 S.W. 2d 107 (Tex. App. 1993) and Wesby v. Act Pipe & Supply, Inc. 199 S.W. 3d 614 (Tex. App. 2006), both of which construed an earlier version of the TWCA to conclude that the statutory scheme is not one of waiver when it explicitly provides for noncompliance penalties. 

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