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New Texas Bill Would Require Workers Compensation in Construction

This year at the Texas Legislature, two lawmakers — one in the House and one in the Senate — are proposing a bill that requires construction contractors to opt into the state worker’s compensation system. The bill is likely destined to fail. But even if it passed, it wouldn’t solve the state’s bigger problem: misclassification of employees.

SB 305 (Sen. Sarah Eckhardt)
HB 776 (Rep. Armando Walle)

What is Workers Compensation?

Workers compensation is designed to be a somewhat cookie cutter process to get injured workers paid to cover medical and other costs. It results in lower payouts than a big civil lawsuit win, but the payment is more certain. The process is more bureaucratic than adversarial. There’s no trial, just an application. You’re injured? You’re covered? Then you get paid. 

Texas is one of only two states in the country that allow businesses to “opt out” of the state worker’s compensation program. When a company opts out, it means that when workers get injured, the only thing they can do to recover costs is sue their employer. And if the employer is doesn’t have the funds, then there’s no money at all to cover the costs of injury. 

Worker’s Comp in the Texas Construction Industry

Lack of worker’s compensation is a particularly serious problem for workers in the construction industry, where onsite injuries are relatively common. Many construction contractors opt out of workers’ comp to save on the cost of premiums and keep bids low. As a result, when workers are injured, they end up in hospitals receiving uncompensated care — so ultimately the hospitals (and the local governments that subsidize them) foot the bill. As do the workers themselves, who often end up deeply in debt.

The Shortcomings of SB 305 and HB 776

So would passing this bill help make sure injured construction workers get covered?

Unfortunately, not really. The bill requires contractors to get coverage for their employees. But the vast majority of contractors in Texas classify a huge percentage of their onsite workers as “contractors” as opposed to employees — even though many are, by the legal definition, technically employees. Contractors do this for a variety of reasons, including saving on employment taxes and, not least of all, to be able to hire people without investigating their immigration status. 

To be clear: misclassification of employees as contractors is illegal. But it is a widespread practice.

These bills, if passed, may well result in coverage for more people in the construction industry. But their impact will be severely limited by the number of employees in the industry who are unlawfully misclassified.

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