On April 22, the House Business and Industry Committee met to take up interim charges related to the voluntary nature of workers’ compensation in Texas as well as the issue of misclassification of employees.
According to Rod Bordelon of the Texas Department of Insurance, around 80% of employees in the state are covered by workers’ comp policies. Texas is the only state with an entirely voluntary system. Although many employers in the state do not subscribe to the workers’ comp program, a large number of non-subscribers provide alternative occupational benefits to their employees. Many committee members’ questions focused on the cost shifting issue when no coverage is provided. Many times when employers do not fund employee coverage and an employee is injured, they are taken to emergency rooms and care is provided through charity care programs; in these situations the cost of care is borne by the hospital and to some degree, taxpayers.
Another issue the state is facing is the misclassification of employees as contractors, or payroll fraud. According to Stephanie Gharakhanian of the Workers’ Defense Project, at least 40% of construction workers are misclassified as contractors which results in $7 billion in unreported wages in the state. When workers are misclassified the employee pays no payroll tax or unemployment insurance for these employees and many times they earn less wages and receive less job training. This places a burden on the system and is a detriment to the workforce, according to builder Stan Marek.
View the HillCo client report from this hearing.