Question: Does our workers compensation policy cover our employees if we hire or send them to work in states other than Texas?
If you hire or send employees to work in states other than Texas – or think you might do so in the future – your workers compensation coverage may need a do-over.
When an employee is injured in another state, he or she may have the option of claiming benefits under Texas law or under the law of the state where the injury occurred, depending on the law in the state of injury. If benefits are higher in the other state, you could be in for a major headache if appropriate coverage is not in place. To provide coverage for an employee claiming benefits under the workers compensation law of another state, either your Texas workers compensation policy must be amended or another policy must be obtained in the other state.
This potential coverage problem exists when you send an employee from Texas to work in other state, and even more so when you (or one of your supervisors) hires a worker to help with a job in another state even on a temporary basis.
Employees Eligible for Texas Benefits
To understand the potential problem, it might be helpful to first review Texas law to see who is eligible to claim workers compensation benefits under Texas law even though they are injured in another state.
The extraterritorial coverage provision of the Texas Workers’ Compensation Act applies to employees injured outside Texas (including a foreign country) during their employment. According to the law, Texas benefits can be awarded if these employees have had “significant contacts” with Texas or if employment was “principally located” in Texas.
The law states that an employee has had significant contact with Texas if they were hired or recruited in Texas and either were injured within one year of the date of hire or worked in Texas for at least ten working days during the 12-month period preceding the date of an injury. It seems clear, then, that an employee hired by a Texas-based company to work full-time in another state could still collect benefits in Texas if they meet one of those tests.
The law considers employment to be principally located in Texas if the employer has a place of business in Texas where employees regularly work or if the employees reside in and spend a substantial part of their working time in Texas. If an employee’s work requires regular travel between Texas and another state, the law permits a written and notarized agreement signed by both the employee and employer, specifying the complete address where employment is principally located.
Even though an injured employee might be eligible for the benefits prescribed by Texas law, the employee might also be eligible for the benefits prescribed by the law of the state where they were injured. If those benefits are significantly better and the injury is severe, you can be sure the employee (or his lawyer) will consider making a claim for those benefits.
Employees NOT Eligible for Texas Benefits
The Texas Workers Compensation Act does not apply to an employee hired outside Texas while working at a location outside Texas. Such an employee would be subject to the workers compensation law of the state where either the hiring or the injury occurred, meaning the employee would be eligible for the benefits prescribed by that state.
Potential Cost to You
Your company may have to pay benefits out of pocket if an employee is injured in another state unless your workers compensation policy specifically covers such benefits. In addition, authorities in the other state may assess fines and penalties against your company if you haven’t secured workers compensation coverage under that state’s laws. And at least one state – New York – requires employers to purchase special disability insurance on employees.
The following chart demonstrates why an injured employee who is eligible for Texas benefits might choose to make a claim for benefits in another state.
Benefit Payable for Permanent Total Disability:
Percent of Average Weekly Wage
Duration of Payments
Maximum Benefit Payable
(As of August 1, 2014)
|66 2/3 %Lifetime$760||70%15 years$801||66 2/3 %Lifetime$619||66 2/3 %Lifetime$1,067.25|
The solution to this problem is a properly designed workers compensation policy that provides coverage in all states* or in specific states where you know you will be sending or hiring employees. The latter solution requires you to identify those states at the beginning of each policy period and then remember to call your agent if you begin work in another state during the policy period. Obviously, the first solution is superior.
Talk to your agent about obtaining workers compensation coverage in other states where you do business or intend to do business in the future.
* There are three special situations that require other solutions. If any of these apply to you, contact your agent.
- Four states require employers to purchase workers compensation insurance from a state “fund” and do not permit employers to provide private workers compensation coverage: North Dakota, Ohio, Washington and Wyoming.
- Special coverage may be needed for employees who travel to foreign countries on business.
- Employees who work on or around navigable waters are subject to federal workers compensation laws such as the Longshore and Harbor Workers’ Compensation Act. Special coverage is required.
This article was prepared and made available to your agent by the Independent Insurance Agents of Texas, which is solely responsible for its content. Please read your insurance policy. If there is any conflict between the information in this article and the actual terms and conditions of your policy, the terms and conditions of your policy will apply. The Independent Insurance Agents of Texas is a non-profit association of more than 1,500 insurance agencies in Texas, dedicated to helping its members succeed, in part by providing technical resources that explain insurance policies sold to their customers