Alabama HR Compliance Guide for Employers
Alabama HR compliance for small businesses: E-Verify mandate, workers' comp rules, at-will employment, payroll tax, and onboarding requirements.
Alabama HR Compliance
Mandatory E-Verify for all employers, workers' comp at 5 employees, Non-Compete Act 2015, no state minimum wage, at-will employment with few exceptions
Alabama is one of the most employer-friendly states in the country: no state minimum wage, no paid sick leave requirement, no state OSHA (workplace safety) plan, and one of the narrowest sets of at-will employment exceptions anywhere. This guide covers what Alabama does require of you, from the first hire to the final paycheck, so you can see where the real legal exposure sits.
Two obligations create serious legal exposure for employers who overlook them. One is a universal E-Verify mandate that applies to every private employer from the first hire. The other is workers' compensation, which kicks in at five employees (at any headcount for builders of new single-family homes) and carries double-compensation penalties for violations.
For small businesses in Alabama, the compliance environment is simpler than in states like California or Connecticut, but it is not regulation-free. Federal law serves as the primary baseline for wages, overtime, and anti-discrimination. State law adds E-Verify, a pro-employer non-compete framework, and two paid leave obligations that frequently surprise employers. FirstHR helps Alabama employers track E-Verify checks and new hire reporting deadlines as onboarding tasks.
What Makes Alabama Unique for Employers
Alabama defers to federal law for most wage, leave, and anti-discrimination requirements, but a handful of state-specific rules distinguish it from neighboring states. The quick reference below collects the numbers; the paragraphs after it explain the rules that set Alabama apart.
E-Verify is the most distinctive Alabama requirement. While most states make E-Verify voluntary for private employers, Alabama's Beason-Hammon Act mandates enrollment for every employer with one or more employees. Only four states reach every private employer this way, each under its own statute: Alabama, Arizona, Mississippi, and South Carolina. Every other state with a mandate ties it to headcount, state contracts, or a business license.
Cities and counties cannot add wage or leave rules of their own. State preemption at Ala. Code §25-7-41 blocks any Alabama city or county from setting wages, leave requirements, or benefit mandates for private employers.
The Birmingham minimum wage story shows how strong that law is. According to the Eleventh Circuit's account in Lewis v. Governor of Alabama, the Birmingham City Council adopted a $10.10 minimum wage ordinance on February 23, 2016, and the mayor signed it the next day. On February 25 the Legislature passed HB 174 and the Governor signed it as Act 2016-18, voiding the ordinance after a single day.
Alabama's at-will doctrine is stricter than in most states. Courts have explicitly declined to create a broad judicial public policy exception, as confirmed in Howard v. Wolff Broadcasting Corp., 611 So.2d 307 (Ala. 1992). Statutory exceptions are the only recognized deviations from at-will, and the list is short.
One name change requires attention: the Alabama Workforce Transformation Act (SB 247, Act 2024-115) renamed the Alabama Department of Labor the Alabama Department of Workforce (ADOW). The act took effect October 1, 2024, with full implementation required by October 1, 2025. Many online resources still reference the Department of Labor name; the current correct name is ADOW.
Alabama Employment Law Fundamentals
Alabama is an at-will employment state with a statutory, not common law, framework for exceptions.
At-will employment exceptions
Alabama courts have declined to expand at-will exceptions through judicial interpretation. The recognized exceptions are exclusively statutory:
| Exception | Statute | Coverage |
|---|---|---|
| Workers' comp retaliation | Ala. Code §25-5-11.1 | All employees; 'solely because' standard |
| Age discrimination retaliation | Ala. Code §§25-1-20 et seq. | Employers 20+; age 40+ |
| Wage history refusal (Clarke-Figures) | Ala. Code §25-1-30(c) | All employers; no retaliation against an applicant who declines to give wage history |
| Child labor reporting retaliation | Ala. Code §25-8-57(b) | All employers |
| Blacklisting | Ala. Code §13A-11-123 | Criminal offense; all employers |
| Public employee whistleblower | Ala. Code §36-25-24 | Public employees only |
| State employee protection | Ala. Code §36-26A-3 | State employees only |
The workers' comp retaliation exception at §25-5-11.1 is the most significant for private employers, but it uses a "solely because" standard that is extremely difficult to satisfy. Mixed-motive discharges, where workers' comp retaliation was one factor among several, generally do not meet the threshold. An explicit at-will disclaimer in an employee handbook is critical in Alabama to prevent any implied contract arguments.
Right-to-work: dual protection
Alabama has right-to-work protection at two levels. Ala. Code §§25-7-30 through 25-7-36 has been in effect since 1953. Alabama voters added right-to-work to the state constitution as Amendment 913 (Ala. Const. Art. I, §36.05) on November 8, 2016. According to the certified canvass of the Alabama Secretary of State, it carried 1,119,034 to 488,515, just under 70 percent of the vote.
Employers cannot require union membership, dues, or fees as a condition of employment. The enforcement route is private: Ala. Code §25-7-35 lets anyone denied employment or pushed out over union membership sue the employer directly for the damages they sustained.
Hiring and Onboarding in Alabama
Alabama new hire compliance centers on three requirements that distinguish it from most states: universal E-Verify enrollment, a seven-day new hire reporting deadline, and the Form A-4 state withholding certificate.
The seven-day new hire deadline comes from Ala. Code §25-11-5, and the filing method is set by regulation rather than by the statute. Under Ala. Admin. Code r. 480-1-1-.11, an employer with five or more employees has to register and file the data electronically unless the director grants a waiver.
E-Verify: the universal Alabama mandate
| Violation | Consequence (Ala. Code §§31-13-9, 31-13-15) |
|---|---|
| First violation (knowingly employing unauthorized worker) | Terminate unauthorized workers + 3-year probation with quarterly new hire reports to the local district attorney + business license suspension of up to 10 business days at the location where the work was done |
| Second violation | Permanent revocation of business license at the specific location |
| Third and subsequent violations | Permanent statewide business license suspension |
| Public contractor violation (§31-13-9) | Breach of contract (the contract may be terminated) + 3-year probation + license suspension of up to 60 days where the court finds a policy or practice of violations |
Background checks
Alabama has no statewide ban-the-box law for private employers. Employers may ask about criminal history at any stage of the hiring process. However, the Alabama Redeemer Act (2021) expanded expungement, and under Ala. Code §15-27-6 a person whose record was expunged does not have to disclose it on an employment application.
Some roles require more than a standard check. Fingerprint-based background checks are mandatory for positions in childcare, adult care, and foster care under Ala. Code §38-13-3 et seq., processed through the Alabama Law Enforcement Agency (ALEA, alea.gov).
Firearms in the parking lot follow a separate rule. Under Ala. Code §13A-11-90(b), an employer may not prohibit an employee from keeping a lawfully possessed pistol out of sight in a personal vehicle in the parking lot, and it may not take adverse action based solely on that firearm when the employee met the statute's conditions.
Child labor rules for employees under 18
Alabama child labor law requires a certificate for each location where anyone under 18 works: a Class I certificate for 14- and 15-year-olds and a Class II certificate for 16- and 17-year-olds. ADOW issues them at $15 per business location, and the certificate has to be posted in public view. A current child labor law poster also has to be on display at every location employing minors.
| Age group | While school is in session | When school is not in session |
|---|---|---|
| 14 and 15 | 3 hours on a school day, 8 hours on a non-school day, 18 hours in the week; no work before 7 a.m. or after 7 p.m. | 8 hours a day and 40 hours a week; no work before 7 a.m. or after 9 p.m. |
| 16 and 17 enrolled in a public or private school | No work after 10 p.m. or before 5 a.m. on a night preceding a school day | No state hour cap; federal hazardous-occupation limits still apply |
The younger group also gets a documented 30-minute break after five continuous hours of work. Act 2024-352 removed the school-signed eligibility to work form for 14- and 15-year-olds as of June 1, 2024. In its place the employer keeps its own list of every 14- or 15-year-old on the payroll, and the parent or guardian tells the school who the employer is.
Records for every employee 18 and younger stay on the premises: an employee information form, proof of age, and time records showing daily start times, end times, and break times. The certificate application and the full occupation restrictions are at workforce.alabama.gov/employers/child-labor.
Drug-Free Workplace Program
Alabama's drug-free workplace program under Ala. Code §§25-5-330 through 25-5-340 is voluntary, not mandatory. Employers who implement a qualifying program receive a 5% discount on workers' compensation insurance premiums. Requirements include a written policy, substance abuse testing, an employee assistance program (EAP), semiannual employee education (one hour), and supervisor training (two hours).
Certification runs through ADOW, with annual recertification for up to four years. Employers outside the program retain full discretion over their drug testing policies.
Wage and Hour Laws: Federal Rules Apply
Alabama leaves almost all wage and hour regulation to the federal FLSA (Fair Labor Standards Act). ADOW has no jurisdiction over private employer wage and hour matters.
Minimum wage and overtime
Alabama has no state minimum wage, so the federal $7.25 an hour is the only floor. According to the US Department of Labor, Alabama is one of five states with no minimum wage law of their own, alongside Louisiana, Mississippi, South Carolina, and Tennessee. Tipped employees get $2.13 an hour with tips covering the balance to $7.25.
No local minimum wage ordinance can be enforced against private employers under §25-7-41. Alabama has no state overtime law of its own either, so the FLSA governs: 1.5 times the regular rate for every hour over 40 in a workweek.
Overtime pay also carries a state tax history. The state income tax exemption for FLSA overtime wages expired on June 30, 2025. The legislature did not extend the exemption, so overtime wages are again subject to Alabama income tax withholding for every pay period from July 1, 2025 forward.
Overtime relief came back in a different form. According to the Alabama Department of Revenue, Act 2026-604 lets employees deduct the lesser of their overtime premium or $1,000 on their 2026 through 2028 returns. Payroll reports the premium in W-2 box 12 with code TT, and withholding does not change.
On the minimum wage itself, the federal rate governs in Alabama, and a handful of carve-outs sit under it. The Alabama minimum wage page sets out the exceptions that still apply, the tipped and youth rates, and the poster requirement.
Breaks, pay stubs, and pay frequency
Alabama has no state requirement for meal or rest breaks for adult employees. For minors under 16, a 30-minute break is required for shifts longer than five continuous hours under Ala. Code §25-8-38. Alabama has no pay stub requirement and no state pay frequency mandate. Both are governed by employer policy subject to FLSA's recordkeeping requirements.
Final paycheck and sales commissions
Alabama has no state final paycheck timing law for wages. The FLSA default applies: next regular payday, whether the separation was voluntary or involuntary. Payout of PTO (paid time off) at termination is governed entirely by your written policy.
Sales commissions are the exception for one group. Under Ala. Code §§8-24-1 through 8-24-3, a manufacturer, producer, importer, or distributor that pays a sales representative commission for soliciting wholesale orders must pay commissions due at termination within 30 days.
A covered business that misses the 30-day deadline owes three times the representative's damages plus attorney fees and court costs. That makes commission timing a serious financial risk for the Alabama businesses the statute covers.
Clarke-Figures Equal Pay Act (Ala. Code §25-1-30)
The Clarke-Figures Equal Pay Act, effective September 1, 2019, prohibits pay discrimination based on sex and race for equal work, and it is Alabama's most significant employment law enacted in recent years. Unlike the federal Equal Pay Act (EPA), which covers only sex, the Clarke-Figures Act explicitly includes race.
Pay differences are allowed when they rest on seniority, merit, production-based pay, or a bona fide factor other than sex or race. The statute of limitations is two years. Remedies include lost wages and interest, but not the liquidated damages (extra damages on top of back pay) available under the federal EPA.
Leave and Time-Off Requirements
Alabama mandates almost no leave for private employers. Two required paid leaves frequently surprise employers who assume Alabama has no leave obligations whatsoever.
| Leave Type | Employer Threshold | Duration | Key Notes |
|---|---|---|---|
| Jury duty (Ala. Code §12-16-8) | All employers | Duration of service | Full-time employees: employer pays regular wages. Cannot require use of vacation or sick time. Small employer relief: court auto-postpones second summoned employee at 5 or fewer FTE. |
| Voting leave (Ala. Code §17-1-5) | All employers | Up to 1 hour | No pay required by statute; reasonable notice; not available if the shift starts 2+ hours after the polls open or ends 1+ hour before they close. |
| Military leave (Ala. Code §31-2-13) | All employers including private | Up to 168 hours (21 days)/year | Paid leave for National Guard and reserves. Covers private employers, not just public. |
| Military extended leave (Ala. Code §§31-12-1 through 31-12-10) | All employers | State active duty or federally funded duty other than training | Federal USERRA and SCRA protections apply to Guard members called up in a war, armed conflict, or emergency proclaimed by the Governor or the President (§31-12-2). Weekend drill and annual training are excluded (§31-12-4). |
| Federal FMLA | 50+ employees within 75 miles | 12 weeks unpaid/year | 12 months + 1,250 hours eligibility; no Alabama equivalent. |
| Paid sick leave | No mandate | N/A | No Alabama requirement; all local mandates preempted by §25-7-41. |
| Domestic violence leave | No mandate | N/A | No Alabama law. |
| Bereavement leave | No mandate | N/A | No Alabama requirement. |
| School involvement leave | No mandate | N/A | No Alabama law. |
Jury duty: paid leave required
Ala. Code §12-16-8 requires employers to pay full-time employees their regular compensation during jury service. Employers cannot require employees to use vacation or sick time for jury duty. Anti-retaliation protection under §12-16-8.1 gives employees a private cause of action (the right to sue the employer directly) for actual and punitive damages.
Small employers get one useful break. If you have five or fewer full-time employees and a second employee is summoned for jury duty while the first is already serving, the court will automatically postpone the second employee's service.
Military leave: private employers must pay
Ala. Code §31-2-13 requires all Alabama employers, including private employers, to provide up to 168 hours (21 working days) of paid leave per year for National Guard and reserve members called to military duty. This is a state requirement above and beyond the federal Uniformed Services Employment and Reemployment Rights Act (USERRA).
Under §31-12-2, Guard members called to state active duty in a war, armed conflict, or proclaimed emergency also keep the reemployment protections of federal USERRA and the Servicemembers Civil Relief Act (SCRA).
Anti-Discrimination Rules: The Major Gap
Alabama has one of the most minimal state anti-discrimination frameworks in the country. Private sector employees depend almost entirely on federal law for discrimination protections.
| Law | Threshold | Protected Classes |
|---|---|---|
| Title VII | 15+ employees | Race, color, religion, sex (including SO/GI per Bostock), national origin |
| ADA | 15+ employees | Disability |
| ADEA (federal) | 20+ employees | Age 40+ |
| GINA | 15+ employees | Genetic information |
| PWFA (2023) | 15+ employees | Pregnancy, childbirth, and related conditions |
| Section 1981 (no threshold) | No minimum | Race and ethnicity |
| Alabama AADEA (state) | 20+ employees | Age 40+: direct circuit court filing, no EEOC charge required, jury trial available |
| Clarke-Figures Equal Pay Act (state) | All employers | Pay discrimination based on sex and race: covers race (unlike federal EPA which covers sex only) |
Alabama's State-Level Gap
Alabama has no comprehensive anti-discrimination statute covering race, sex, religion, national origin, disability, genetic information, or sexual orientation for private employers. There is no state civil rights agency with jurisdiction over private sector discrimination charges, so claims must go to the federal Equal Employment Opportunity Commission (EEOC).
The gap is particularly significant for employers with 15 to 19 employees. Federal law covers them for most protected categories, but no state anti-discrimination statute covers them for those categories.
Alabama has no statewide LGBTQ+ employment protection. Federal Title VII through Bostock v. Clayton County (2020) covers sexual orientation and gender identity for employers with 15 or more employees.
City ordinances are a separate question. The state preemption statute is written around wages, leave, and other employment benefits, so check the current code of each city where you employ people to see whether a local non-discrimination ordinance binds your business.
Workplace harassment claims in Alabama
Alabama has no state law prohibiting workplace harassment and no state agency that accepts harassment complaints, so harassment here is a federal claim. Title VII covers harassment based on race, color, religion, sex, and national origin at 15 or more employees. The Americans with Disabilities Act (ADA) covers disability-based harassment at 15, and the Age Discrimination in Employment Act (ADEA) covers age at 20.
The filing window is shorter than in most states. Because Alabama has no fair employment practices agency for the EEOC to defer to, an employee has 180 days from the conduct to file a charge rather than the 300 days available where a state statute covers the same practice. Alabama charges are handled through the EEOC Birmingham district office.
Below the federal headcount thresholds the claim does not disappear; it changes form. Employees bring harassment facts to state court as invasion of privacy and the tort of outrage (Alabama's name for intentional infliction of emotional distress), and negligent supervision and retention claims reach the employer directly.
Busby v. Truswal Systems Corp., 551 So. 2d 322 (Ala. 1989), let an invasion of privacy claim proceed against the employer on a sexual harassment record, and Alabama courts have since treated egregious sexual harassment as one of the few fact patterns that can support an outrage claim.
Alabama mandates no harassment prevention training, but the defense that federal courts recognize still has to exist before the complaint does: a written policy, a complaint route that does not run through the person being complained about, and documented follow-up on every report. An employer with none of those has nothing to show a court.
Alabama Age Discrimination in Employment Act (AADEA)
Ala. Code §§25-1-20 through 25-1-29 covers employers with 20 or more employees and employees age 40 and older, matching the federal ADEA threshold. The key distinction is procedural.
Section 25-1-29 states that a plaintiff is not required to pursue any administrative action or remedy before filing suit, so an employee may go straight to the circuit court of the county where they worked and ask for a jury. That is faster than the federal route, which starts with an EEOC charge.
Workplace Safety and Workers' Compensation
Alabama has no state OSHA plan and requires workers' compensation coverage at five employees, or at any headcount for builders of new single-family homes, with penalties that include both criminal liability and double compensation.
The Alabama workers compensation page has the detail: the headcount at which coverage becomes mandatory, who is excluded, where to buy the policy, the injury reporting deadlines, and what going without coverage costs.
Workers' Compensation (Ala. Code §25-5-1 et seq.)
Coverage is required when an employer has five or more employees, counting all full-time and part-time employees, corporate officers, and LLC members. Corporate officers and LLC members count toward the threshold but may individually elect to be excluded. Farm labor, domestic employees, casual employees, and municipalities with fewer than 2,000 residents are exempt.
Builders of new single-family homes get no small-employer exemption. Ala. Code §25-5-50(a) denies the under-five exemption to a business constructing, or assisting on-site in constructing, new single-family detached homes, so those builders need coverage at any headcount.
Coverage options include commercial insurance through the voluntary market or the assigned risk pool, a group self-insurance fund, or individual self-insurance, which according to ADOW's insurance compliance guidance requires a $5 million minimum net worth.
Injured employees must give the employer written notice within five days under Ala. Code §25-5-78; employers must report to the insurer and file with ADOW within their insurer's requirements. The statute of limitations for workers' comp claims is two years.
| Violation | Penalty (Ala. Code §25-5-8(e)) |
|---|---|
| Operating without required coverage | Criminal misdemeanor: $100 to $1,000 fine |
| Civil penalty (double compensation) | If worker is injured without coverage, employer owes twice what insurance would have paid |
| Injunction and daily civil penalty | The secretary may ask a court to enjoin the violation; the court may impose up to $100 per day of noncompliance |
OSHA: federal only
Alabama has no approved state OSHA plan. Federal OSHA covers all Alabama private sector workplaces through two area offices: Birmingham at (205) 731-1534 and Mobile at (251) 441-6131, split by county. State and local government workers are covered by neither federal OSHA nor a state plan, which leaves a real gap on the public side.
Free help is available separately from enforcement. Alabama on-site consultation gives small businesses a confidential safety review that is not shared with OSHA inspectors, and mining, boiler, and elevator inspections run through the Alabama Department of Workforce and its Inspections Division rather than through OSHA at all.
Required Workplace Postings
Alabama employers must display three state-required workplace posters plus the standard federal postings. The Alabama Department of Workforce publishes the whole set free, state and federal alike, as PDFs.
| Poster | Requirement | Source |
|---|---|---|
| Alabama Child Labor Law | All employers of anyone under 19 | Ala. Code §25-8-38(a); ADOW |
| Workers' Compensation Notice | All employers covered by WC (5+ employees, or any headcount for new single-family home builders) | ADOW (listed as required) |
| Your Job Insurance (UC Notice) | All UI-covered employers | ADOW (listed as required) |
| FLSA Federal Minimum Wage | All FLSA-covered employers | US DOL |
| OSHA Job Safety and Health Protection | All employers | Federal OSHA |
| EEO Know Your Rights | 15+ employees | EEOC |
| USERRA | All employers | US DOL |
| EPPA (Employee Polygraph Protection Act) | Most private employers | US DOL |
| FMLA | 50+ employees | US DOL |
Ala. Code §25-8-38(a) requires the child labor notice to be kept posted in a conspicuous place wherever anyone under 19 works. For remote workers, keep the physical posters at the primary worksite and give remote staff electronic access as well.
Employee Privacy and Data Protection
Alabama's employee privacy framework includes a data breach notification statute and one-party recording consent, with no personnel file access rights for private sector employees.
Alabama Data Breach Notification Act (Ala. Code §§8-38-1 through 8-38-12)
Alabama's data breach notification law, Act 2018-396, took effect June 1, 2018. The notification deadline is 45 calendar days from the date the breach is determined and the assessment concludes substantial harm is reasonably likely. Where harm is not reasonably likely, notice is not required, but the determination must be documented in writing and kept for five years.
Three other notice duties sit on top of that deadline. A third-party agent that discovers a breach in its own system has 10 days to tell the covered entity under Ala. Code §8-38-8. A breach reaching more than 1,000 Alabama residents goes to the Attorney General under §8-38-6, and the same 1,000 figure sends notice to the nationwide consumer reporting agencies under §8-38-7.
The penalty is $5,000 for each day of noncompliance, capped at $500,000 per breach, and there is no private right of action. Enforcement runs entirely through the Attorney General, whose office publishes the reporting form and instructions at alabamaag.gov/data-breach-notification.
Recording consent and privacy
Alabama is a one-party consent state for recording under Ala. Code §13A-11-30 et seq. One participant in a conversation may record without notifying others. Criminal eavesdropping by a third party is a Class A misdemeanor (up to one year and a fine of up to $6,000). Installing an eavesdropping device in a private place without permission is a Class C felony (one year and a day to 10 years, and a fine of up to $15,000).
Alabama has no law requiring employers to give employees access to their personnel filesand no social media privacy statute protecting employees from employers requesting passwords.
Termination and Separation
Alabama's separation rules are straightforward on final wages but complex on non-compete enforcement.
Non-compete agreements (Ala. Code §§8-1-190 through 8-1-197)
The Alabama Restrictive Covenants Act, effective January 1, 2016, transformed non-compete enforcement in Alabama. Before 2016, Alabama courts generally disfavored such agreements. After 2016, the statute creates presumptive reasonableness for agreements within certain time limits and requires identifiable protectable business interests.
| Agreement Type | Presumptively Reasonable Duration | Required Protectable Interest |
|---|---|---|
| Employee non-compete | Up to 2 years (presumptively reasonable) | Trade secrets, confidential customer info, specialized training investment |
| Customer non-solicitation (signed by an employee) | 18 months, or as long as post-separation consideration is paid, whichever is longer | Commercial customer relationships, goodwill |
| Sale of business | Up to 1 year (presumptively reasonable) | Business goodwill being sold |
| Partnership dissolution | No statutory time presumption | Partnership goodwill |
| Anti-piracy / no-hire (between businesses) | No statutory time presumption | An employee in a position uniquely essential to the business |
| Exclusive dealing agreements | No statutory time presumption | Commercial relationships |
The act also repealed former Ala. Code §8-1-1, the rule it replaced. Courts have authority to blue-pencil an overbroad non-compete, trimming the excessive terms, rather than voiding it entirely.
Under §8-1-191(b), job skills on their own are not a protectable interest; the employer must identify specific trade secrets, confidential customer relationships, or investment in specialized training. Customer non-solicitation agreements and no-hire agreements between businesses are also covered under the act.
WARN, COBRA, and continuation coverage
Alabama has no state mini-WARN Act. Federal WARN, the Worker Adjustment and Retraining Notification Act, applies at 100 or more employees with 60 days' advance notice.
Alabama has no mini-COBRA continuation coverage requirement. Employees of employers with fewer than 20 employees have no state continuation coverage right when they lose group health insurance; the Affordable Care Act (ACA) Marketplace is their option. For smaller employers managing benefits, that means no state continuation notice obligations.
Payroll and Tax Compliance
Alabama payroll compliance involves registrations with two separate agencies and an unusual income tax feature: Ala. Const. §211.04 lets resident employees deduct federal income tax from their state taxable income, and the Department of Revenue's withholding tables and instructions (January 2026) build that deduction into the withholding formula.
Alabama state income tax brackets
| Single/HoH/MFS Income | Rate | MFJ Income | Rate |
|---|---|---|---|
| Up to $500 | 2% | Up to $1,000 | 2% |
| $501 to $3,000 | 4% | $1,001 to $6,000 | 4% |
| Over $3,000 | 5% | Over $6,000 | 5% |
Alabama has a constitutional cap of 5% on individual income tax rates (Ala. Const. §211.01). Personal exemptions are $1,500 for single and married-filing-separately (MFS) filers and $3,000 for married-filing-jointly (MFJ) and head-of-household (HoH) filers. Dependent exemptions range from $300 to $1,000 based on gross income. Standard deductions are up to $3,000 for single filers and $8,500 for MFJ, phasing down as income rises.
For withholding, overtime is now taxed like any other pay. The overtime tax exemption that was in effect from January 2024 through June 30, 2025 was not renewed, and the Act 2026-604 deduction for 2026 through 2028, capped at $1,000 per taxpayer, is claimed on the employee's return and leaves withholding unchanged.
Unemployment insurance and payroll forms
| Form | Purpose | Deadline | Portal |
|---|---|---|---|
| A-4 | Employee withholding exemption certificate | At hire | revenue.alabama.gov |
| A-1 | Quarterly employer withholding return | Apr 30, Jul 31, Oct 31, Jan 31 | My Alabama Taxes (MAT) |
| A-6 | Monthly withholding return (more than $1,000 withheld in month 1 or 2 of a quarter) | Between the 1st and 15th of the following month | MAT |
| A-3 | Annual reconciliation + W-2s | January 31 (electronic required for 10+ W-2s) | MAT |
| Online registration | Withholding tax account registration (initial) | Before first payroll | MAT |
| UC-CR4 | Quarterly unemployment report | Quarterly | ADOW eGov portal |
UI liability is triggered when an employer pays $1,500 or more in wages in any calendar quarter or has at least one employee on some day in 20 different weeks. According to ADOW's employer FAQ, the taxable wage base is $8,000 per employee per year and a newly liable employer pays 2.70% until experience rating sets a rate based on the employer's own claims history.
Registration runs through two portals. Register for withholding at My Alabama Taxes (myalabamataxes.alabama.gov) before the first payroll, and apply for a UI account number through ADOW's eGov portal once wages have been paid for work in Alabama.
Wage garnishment limits and employer duties
A creditor garnishment in Alabama tops out at a quarter of an employee's pay. Ala. Code §6-10-7 exempts 75% of the wages, salaries, and other compensation of Alabama employees from levy for contract debts and tort judgments, and federal Title III of the Consumer Credit Protection Act sets the matching 25% ceiling on disposable earnings.
Disposable earnings are what is left after taxes and other legally required deductions, not after insurance premiums or retirement contributions. The federal floor decides the rest: nothing may be taken from the first 30 times the federal minimum hourly wage an employee earns in a week, which is $217.50 at $7.25 an hour.
Payroll therefore runs two calculations, a quarter of disposable earnings and the amount above that weekly floor, and withholds the smaller result rather than applying both, per US DOL Fact Sheet #30.
Support orders run on different math. Title III allows up to 50% of disposable earnings when the employee supports another spouse or child and 60% when they do not, with 5 percentage points more once support is over 12 weeks behind. A withholding order is not optional, and the employer is the party a court holds to it.
Firing over a garnishment is the expensive mistake. Title III prohibits discharging an employee whose earnings are garnished for any one debt, and the Alabama statutory at-will exceptions listed earlier do not cover garnishment, so the federal rule is the protection an employee here has. Withhold from the pay periods the order names, keep the paperwork with the payroll record, and change nobody's hours to shrink the deduction.
Alabama Employee Handbook Essentials
Alabama does not require employers to maintain an employee handbook, but the at-will doctrine's narrow exception framework makes an explicit disclaimer critically important.
Make the at-will disclaimer clear and conspicuous. Alabama courts strictly enforce at-will employment and will look for explicit language disclaiming any implied contract. Avoid language like "permanent employee" or any description of progressive discipline as the only path to termination. The disclaimer should state that employment is at-will and that either party may end it at any time, with or without cause or notice.
Beyond the disclaimer, several elements are required or strongly recommended for Alabama employers. Include an E-Verify compliance statement documenting your verification method. If you take part in the 5% premium discount program, add a drug-free workplace policy, since the program requires a written one. If you use non-compete and restrictive covenant agreements, set out guidelines for them.
Your leave and injury policies need Alabama specifics: workers' compensation reporting procedures that include the 5-day employee notice deadline, a military leave policy noting the Alabama requirement for paid leave of up to 21 days per year for all private employers, and a jury duty policy confirming paid leave for full-time employees.
Two more policies round out the handbook: an equal pay policy addressing Clarke-Figures Act compliance, and a parking lot firearms policy that follows the state rule protecting a lawfully possessed pistol kept out of sight in an employee's personal vehicle.
City and Local Requirements
Alabama's preemption statute at Ala. Code §25-7-41 is among the strongest in the country, blocking local wage, leave, and benefit mandates for private employers. Ala. Code §25-7-45(c) adds that a city's power to regulate wages, leave, or benefits cannot be inferred from home rule status (a city's broad self-government authority) or any other general power.
Birmingham
Birmingham has no minimum wage of its own. The city adopted a $10.10 ordinance on February 23, 2016, the mayor signed it on February 24, and Act 2016-18 voided it on February 25, 2016. The ordinance was in force for one day.
Birmingham employers still need to watch city rules that sit outside wages, leave, and benefits, because the preemption statute is written around those three subjects. For other local rules, including non-discrimination ordinances, check the current Birmingham city code rather than relying on a summary of what it covers.
Huntsville and Montevallo
No local wage, leave, or benefit mandate can apply to private employers in Huntsville or Montevallo, because §25-7-41 voids any such city ordinance. Local non-discrimination rules are a separate question from that preemption, so confirm each city's current code for sexual orientation and gender identity coverage rather than relying on a secondhand list.
Montgomery and other cities
Montgomery, Mobile, and every other Alabama city fall under the same preemption on wages, leave, and benefits. Ala. Code §25-7-43 carves out a city's rules for its own employees, so a city can set personnel policies for its own workforce, but those policies do not reach private employers.
For a business with locations in several Alabama cities, state preemption under §25-7-41 means one set of wage, leave, and benefit rules statewide.
Alabama vs. Federal vs. Georgia
Alabama and Georgia are neighboring Southeastern states with similar employer-friendly frameworks. The key differences center on E-Verify, workers' comp thresholds, income tax structure, and state continuation coverage.
| Parameter | Alabama | Federal | Georgia |
|---|---|---|---|
| Minimum wage | No state law ($7.25 federal) | $7.25/hr | $5.15 state rate; $7.25 federal for FLSA-covered employers |
| E-Verify | Mandatory: ALL employers (1+) | Federal contractors only | Mandatory: more than 10 employees, as a business license condition |
| Workers' comp threshold | 5+ employees (any headcount for new single-family home builders) | N/A | 3+ employees |
| At-will exceptions | Extremely narrow; no judicial public policy exception | Default at-will | Default at-will (O.C.G.A. §34-7-1) |
| Anti-discrimination (state) | Age only (AADEA: 20+) + equal pay (all employers) | Title VII (15+), ADA, ADEA, GINA | Disability (15+), age, and sex-based pay statutes; state FEPA covers public employers only |
| LGBTQ+ state protection | None (federal Bostock at 15+) | Title VII post-Bostock | None (federal Bostock only) |
| Non-compete | Presumptively reasonable 2 years; blue pencil | No federal law | Reasonableness test; blue pencil |
| Right-to-work | Constitutional (Amendment 913, 2016) + statutory | States' choice | Statutory |
| Paid sick leave | None; local preempted | None | None |
| State income tax (top rate) | 5% (progressive 2%/4%/5%) | N/A | 4.99% flat, effective January 1, 2026 |
| Data breach notification | 45 days; $5,000/day penalty | Sector-specific federal | No specific day deadline |
| Final paycheck (discharge) | No state law; FLSA: next regular payday | No federal deadline | No state law; FLSA default |
| Mini-COBRA | None | COBRA 18 months (20+) | State continuation: rest of the month plus 3 months (O.C.G.A. §33-24-21.1) |
Alabama's mandatory universal E-Verify requirement is the most significant distinction from Georgia. Georgia reaches private employers with more than 10 employees, and it does so through the business license: O.C.G.A. §36-60-6 makes an E-Verify affidavit a condition of getting or renewing the occupation tax certificate. Alabama's workers' comp threshold of five employees is also higher than Georgia's three-employee threshold.
Alabama Employment Law Timeline
Alabama's most significant recent legislative activity covers non-compete reform, the Birmingham preemption, constitutional right-to-work protection, the data breach law, the agency renaming, and the overtime tax exemption along with the deduction that replaced it.
Frequently Asked Questions
Is E-Verify mandatory for all employers in Alabama?
Yes. All Alabama employers with one or more employees must enroll in E-Verify under Ala. Code §31-13-15(b), a rule in force since April 1, 2012. Enrollment runs through the federal E-Verify program, and there is no small-employer exception.
Does Alabama have a state minimum wage?
No. Only the federal $7.25 per hour applies. Ala. Code §25-7-41 preempts any local minimum wage for private employers. Birmingham's $10.10 ordinance was void after one day in 2016.
When Do I Need Workers' Compensation Insurance in Alabama?
At five or more employees, including part-time workers, corporate officers, and LLC members, or from the first employee if you build new single-family detached homes. The penalty for non-coverage is double compensation for any injury plus criminal misdemeanor liability.
Can I enforce a non-compete agreement in Alabama?
Yes, since the Alabama Restrictive Covenants Act (the 2015 non-compete law, effective January 1, 2016). Agreements up to 2 years are presumptively reasonable with an identifiable protectable interest. Courts can blue-pencil overbroad terms. The Act names no exempt occupations, so the agreement has to fit one of the six categories §8-1-190(b) allows.
What anti-discrimination laws apply to Alabama small businesses?
Only two at the state level: the AADEA (age 40 and older, employers with 20 or more employees) and the Clarke-Figures Equal Pay Act (sex and race, all employers). All other protected categories are covered only by federal law at the applicable federal thresholds.
Does Alabama have a state law against workplace harassment?
No. Harassment claims in Alabama run on federal law: Title VII and the ADA at 15 or more employees, the ADEA at 20. Because there is no state deferral agency, the EEOC charge deadline is 180 days rather than 300. Under those thresholds, employees use Alabama tort claims instead.
Does Alabama require paid sick leave or FMLA-type leave?
No paid sick leave and no state FMLA. Federal FMLA applies at 50+ employees. Alabama does require paid jury duty leave and up to 21 days of paid military leave per year from all private employers, which many employers overlook.
What is the data breach notification deadline in Alabama?
45 calendar days from determining a breach occurred with reasonable likelihood of substantial harm. AG notice is required when a breach reaches more than 1,000 Alabama residents. Penalty: $5,000 per day, capped at $500,000. No private right of action.