Does Alabama require workers’ compensation insurance?
Five. Alabama requires workers' compensation once a business regularly employs five or more people, full-time or part-time, counting corporate officers, under Code of Alabama 25-5-50. A business that builds new single-family homes is covered from the first employee. Corporate officers and LLC members can exempt themselves by filing a written certification with the insurance carrier, but they still count toward the five. Alabama has no state fund and no state-issued waiver certificate.
Updated . Written by Andre Beukers, principal at Redoubt, a commercial insurance agency in Salt Lake City, not a government office.
How many employees before Alabama requires workers' comp?
An Alabama employer has to carry workers' compensation once it regularly employs five or more employees in any one business. Full-time and part-time workers both count, and so do the officers of a corporation. The exception is a business that builds, or works on-site building, new single-family detached homes: it is covered from the first employee. Employers of domestic employees, farm laborers, and casual employees are outside the requirement.
Code of Alabama 25-5-50 also takes some workers out of the count entirely: a licensed real estate agent working under a licensed broker, a product demonstrator under a qualifying written contract, and certain sports officials. Code of Alabama 25-5-1 says a motor common carrier operating under a certificate of public convenience and necessity is not the employer of an owner-operator or leased operator under contract to it.
Source: Alabama Workers' Compensation Division, Insurance Requirement Information, checked .
Which owners, officers, and family members are exempt in Alabama?
A corporate officer or an individual LLC member can elect to be exempt from coverage by filing a written certification with the employer's insurance carrier, under Code of Alabama 25-5-50(b). The exemption takes effect the first day of the next month and stays in place at renewals with the same carrier until revoked. An exempt officer or member still counts toward the five-employee threshold, and the exemption does not relieve the business of covering everyone else.
Code of Alabama 25-5-1 defines an employee as a person in the service of another under a contract of hire, so a sole proprietor or partner is not their own employee. An officer or member who wants coverage back can revoke the exemption at the end of the calendar year; revoking mid-year takes an affidavit that no work injury happened in between.
Source: Code of Alabama 25-5-50, checked .
What happens to a Alabama employer with no workers' comp?
An Alabama employer that is required to carry coverage and does not is guilty of a misdemeanor, with a fine of $100 to $1,000, under Code of Alabama 25-5-8(e). It is also liable for twice the compensation that would otherwise have been paid for an employee's injury or death. The state can ask a court to stop the violation, and the court can add civil penalties of up to $100 a day; buying coverage afterward is not a defense.
Source: Code of Alabama 25-5-8, checked .
Who enforces workers' comp in Alabama?
The Workers' Compensation Division of the Alabama Department of Workforce administers the law and enforces the coverage requirement. It runs compliance inspections, regulates individual and group self-insurers, audits and enforces claim payments, and mediates disputes. The Alabama Department of Insurance regulates the carriers and approves their rates, not the employers.
The department's own site says the Alabama Department of Labor is now the Alabama Department of Workforce, and the Code of Alabama uses the new name. Pages at adol.alabama.gov may still say Department of Labor.
Source: Alabama Workers' Compensation Division, checked .
Where do Alabama employers buy coverage?
Alabama is a private-market state with no state fund. The Workers' Compensation Division lists the ways to cover the obligation: a policy from an approved commercial carrier, the assigned risk pool administered by NCCI for employers carriers decline, a group self-insurance fund, or individual self-insurance for employers that meet the financial tests. The pool takes an application through an agent after two carriers have declined.
Source: Alabama Workers' Compensation Division, Coverage Options, checked .
Who sets the class codes and rates in Alabama?
Alabama is an NCCI state. The National Council on Compensation Insurance files Alabama's voluntary loss costs, assigned risk rates, and rating values, and the Alabama Department of Insurance holds a public hearing before approving each filing. Class codes and experience mods come from NCCI; each carrier files its own rates built on those loss costs.
Source: Alabama Department of Insurance, NCCI filing hearing notice, checked .
Is there an exemption or waiver form in Alabama?
Alabama has no state-issued waiver or exemption certificate. The filings run through the carrier and the Department instead: a corporate officer or LLC member exempts themselves with a written certification filed with the employer's carrier, and an employer under five employees, or a farm or domestic employer, can opt in to the law by filing written notice with the Department of Workforce and posting a copy at the business. An employer that withdraws must tell each employee in writing and post a notice that coverage is not available.
Source: Code of Alabama 25-5-50(a), checked .
Sorting out Alabama workers' comp for your business
Tell Redoubt what the business does, who works in it, and what the Alabama requirement in front of you says. We will say whether a policy, a waiver, or an exclusion fits.
This is general insurance information, not legal advice or a coverage determination. Statutes, agency instructions, policy forms, and the facts of the business control.
Workers’ comp requirements in every state
Each state page gives the employee threshold, the owner and officer exemptions, the penalty for going without, the rating bureau, the market, the enforcing agency, and the exemption filing, each with its statute or agency source.
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The hub, and the Alabama pages that go deeper
Alabama workers’ comp FAQ
Do I need workers' comp in Alabama with four employees?+
Usually not. Code of Alabama 25-5-50 applies to an employer that regularly employs five or more, counting part-time workers and corporate officers. The exception is building new single-family homes, which is covered from the first employee. A business under five can still opt in by written notice to the Department of Workforce.
Do exempt corporate officers count toward Alabama's five-employee threshold?+
Yes. Code of Alabama 25-5-50(b) says an officer's or LLC member's exemption does not change their status as an employee when counting toward the threshold. Three employees plus two exempt officers is five, and the business has to cover the three.
How does an Alabama LLC member opt out of workers' comp?+
By filing a written certification of the election with the business's workers' comp carrier, under Code of Alabama 25-5-50(b). It takes effect the first day of the following month. There is no state waiver form to file with the Department of Workforce.
Is a leased owner-operator the motor carrier's employee for Alabama workers' comp?+
Not for a motor common carrier operating under a certificate of public convenience and necessity: Code of Alabama 25-5-1 says that carrier is not the employer of an owner-operator or leased operator under contract to it. An owner-operator who regularly employs five or more people is an employer under 25-5-50 in their own right.
What happens if my Alabama business has no workers' comp and someone gets hurt?+
Beyond the misdemeanor and the $100 to $1,000 fine, Code of Alabama 25-5-8(e) makes an employer that should have carried coverage liable for twice the compensation the injured worker would otherwise have received.