Lessons Learned From Texas Nonsubscription

By: | January 31, 2014 • 4 min read
Bill Minick is president of PartnerSource, a risk management consulting firm specializing in workers’ compensation alternatives. He can be reached at [email protected]

As an alternative to traditional workers’ compensation offered in Texas, nonsubscription has provided new opportunities for innovation and accountability in addressing work-related injuries. But in the absence of the normal Texas workers’ compensation dispute resolution process, nonsubscribers rely on the Employee Retirement Income Security Act (“ERISA”) and U.S. Department of Labor claim regulations to resolve benefit disputes. Any denial of nonsubscriber benefits may be appealed to a designated fiduciary, and any further challenge may be filed in state or federal district court.


Injured workers can also pursue a tort liability claim that the nonsubscribing employer negligently caused the injury. These liability claims are subject to state law and a jury trial, unless the employer has implemented an alternative dispute resolution (“ADR”) program. The most common ADR approach for negligence claims is arbitration, which can include creative features that have helped make the Texas nonsubscriber option a nationally-recognized risk management success.

Proponents of arbitration may cite lower administrative and defense costs as advantages of arbitration over state court litigation. But Texas nonsubscribers typically choose arbitration because of process speed, as well as privacy and confidentiality of issues and parties. Well-drafted arbitration agreements have also helped nonsubscribers avoid “wildcard” jury verdicts and actually win on matters where there was no liability. Challenging the notion that arbitrators just “split the baby”, we see defense verdicts in the vast majority of cases. And, where an arbitration award is made in favor of the plaintiff, we find most of these decisions and the amounts awarded to be fair.

Nonsubscribers are also able to appropriately influence the process through careful drafting. That exercise of influence has clear boundaries prescribed by Texas and federal courts to “keep employers honest” in the development of the arbitration program. Forward-thinking employers utilize program design features such as:

  • Requiring specific arbitrator credentials. For Texas nonsubscribers, many dispute resolution programs state that the arbitrator shall be knowledgeable in the areas of personal injury and/or employment law, ensuring that the decision maker has some subject matter expertise, which supports more predictable outcomes.
  • Identifying the geographic area from which an arbitrator (or panel) shall be selected, thereby avoiding areas of the state with known bias.
  • On interstate transportation-for-hire employees who are otherwise exempt from the Federal Arbitration Act, adopting a voluntary arbitration program and offering incentives like a higher level of wage replacement benefits or a larger death benefit in exchange for an agreement to arbitrate. Alternatively, employers can draw from the employee benefits world, developing a “passive” agreement to arbitrate that requires specific employee action to opt out.
  • Using common law principles, like direct benefits estoppel, to eliminate an employee’s ability to take advantage of the generous benefits offered in the injury benefit plan, but reject the arbitration provision that is incorporated within it.

Other lessons learned:

    • Don’t get too fancy. Focus on fairness. Imposing unfair fees, skewing discovery or other features in favor of the employer, or burdensome travel requirements will backfire and benefit no one.
    • Spend resources developing an effective communication strategy. Texas law generally does not require an at-will employee’s signature to an arbitration agreement. But if an employer cannot demonstrate an employee was aware of the dispute resolution policy, they will fight it and it will be found unenforceable. Disclosure can be done with a training acknowledgement form or an electronic acknowledgement through computer-based learning.

  • Integrate your dispute resolution program into your occupational injury plan. In a recent Texas Court of Appeals case, the court found the nonsubscribing employer’s arbitration agreement unenforceable because the injury benefit plan, which was properly communicated to the employee, did not contain any reference to the separate arbitration document intended to address negligence liability claims. The employer could not otherwise prove the employee received notice of the arbitration policy, so the Court held no valid agreement to arbitrate existed. See Big Bass Towing, Co., v. Akin, 409 S.W.3d 835 (Tex.App.-Dallas 2013, no writ).
  • Translate. If covered employees have a native language other than English, consider translating the arbitration agreement.

Texas nonsubscription has moved from the “wild west of workers’ compensation” to a widely-accepted way of doing business. Over the past two decades, this alternative to workers’ compensation has achieved better medical outcomes for hundreds of thousands of injured workers, and saved billions of dollars on occupational injury costs. Innovative dispute resolution techniques and lessons like those above have supported this success and can now be adapted to other risk management situations.

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]