Non-subscribers Violate State Reporting Laws

Workers’ Compensation Non-subscribers Violate State Reporting Laws

For more information contact Allen Cooper, (512) 474-0007 ext. 208

Noncompliance with state reporting requirements is widespread among non-subscribers to Workers’ Compensation insurance. In Texas, Workers’ Compensation insurance is optional for any employer, and an estimated 37 percent of Texas employers, with 1.7 million employees, do not carry Workers’ Compensation Insurance. Texas non-subscribers must meet two legal reporting requirements: A non-subscriber must submit a form annually (the DWC-5), which notifies the state that the company is a non-subscriber, and to post a notice for employees and provide written notice to new hires.[1] A non-subscriber must also notify the state whenever there is a workplace injury that requires an employee to miss more than one day of work.[2] Open Records requests conducted by the Equal Justice Center show that noncompliance is widespread among non-subscribers and that the state Division of Workers’ Compensation is making no effort to enforce these requirements.

Findings:

1. Violation of the non-subscriber annual reporting requirement is widespread.

State records show that 76,961 employers have allowed their workers’ compensation coverage to lapse without submitting the required DWC-5 form. An additional group of employers have submitted the DWC-5 form at some point in the past, but not in the current year as required by law.[3]

2. Non-subscriber workplace injuries are underreported

Non-subscribers are also required to report workplace injuries that result in more than a day of missed from work using the DWC-7 form. Underreporting of workplace injuries appears to be widespread. In 2005 non-subscribers, who employ 23 percent of the private sector workforce, reported 8,641 lost-time injuries, and the majority of the forms submitted had incomplete information. [4] By contrast, subscribers to workers’ compensation insurance, who employ 77 percent of the private sector workforce, reported more than 122,000 workplace injuries.[5] Underreporting is the only plausible explanation for such a wide discrepancy.[6]

3. No Administrative penalties have been levied against violators.

Employers who fail to submit a DWC-5 form or make the required postings of non-coverage, or fail to report workplace injures as required, are subject to administrative penalties, but the open records request revealed that since the year 2000 no administrative penalties have been collected for noncompliance.[7] Division of Workers Compensation staff stated that enforcement of these requirements was not a priority for the agency, and was not given significant resources.

Conclusion and Recommendations

Non-compliance with reporting requirements is widespread among non-subscribers. The following actions should be taken:

1) The Texas legislature should require non-subscribers to provide more information about workplace injuries and medical treatment and benefits provided. Non-subscribers should be required to report every injury which a) requires one or more days of lost work, b) a change in work assignment, c) medical treatment beyond first aid, or d) any medical diagnosis of a significant occupational injury or disease.

2) For each injury reported, the non-subscriber employer should also be required to report the benefits provided to injured workers. The following information should be reported: a) total medical cost of treating accident, b) cost of medical treatment paid for or provided by employer, c) total lost time by employee, d) cost of salary replacement paid by employer, and d) cost of any other settlement paid by the employer.

3) Texas should enforce current reporting requirements on non-subscribers. The enforcement department of the state Division of Workers Compensation should levy a fine of $500 against all employers listed in its own database that have allowed coverage to lapse without submitting the required DWC-5 form, and those who have submitted the DWC-5 in previous years but not in the present year.

4) The Texas legislature should authorize the Division of Workers Compensation to penalize non-subscribers who fail to report injuries and the Division should launch an enforcement campaign.

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[1] 28 Texas Administrative Code 110.1 and 110.101

[2] Texas Labor Code 411.032.

[3] Texas Department of Insurance, Division of Workers’ Compensation, Open Records Request # 56532, “Subscriber CD Containing Both Old Mainframe Version & New Texcomp Version,” October 31, 2006.

[4] Texas Department of Insurance, Division of Workers’ Compensation, Open Records Request #56533, “Totals Count of TWCC-7 (DWC-7) List of Records with all Confidential Data Redacted,” November 15, 2006..

[5] Texas Workers’ Compensation System Data Report, June 30, 2005, p. 1.

[6] Inexplicably, injury reporting requirements are different for non-subscribers and subscribers. Non-subscribers must report injuries resulting in two or more lost days, while subscribers must report injuries resulting in one or more lost days. But this difference is not enough to account for the difference.

[7] Texas Department of Insurance, Division of Workers’ Compensation, Open Records Request # 57120, November 14, 2006.