Alabama Workers Compensation: Employer Requirements
Alabama requires workers compensation at five employees, and an officer who opts out still counts. Coverage, exclusions, deadlines and penalties.
Alabama Workers Compensation
Five employees turns the mandate on, an officer who signs off coverage still counts toward the five, and the employer, not the injured worker, picks the treating physician
A shop owner near Birmingham once walked me through his headcount to prove he did not need a policy. Four on the floor, plus himself and his brother as officers of the corporation who had both signed off coverage years earlier. He counted four. Alabama counted six.
That is the specific way this state catches small employers. The threshold is five, and the two moves owners make to get under it, part-time scheduling and officer exemptions, do not move the number at all. Everything else about Alabama workers compensation is straightforward. The counting rule is where the money is lost.
The general mechanics of this insurance, what it covers and how premiums work anywhere in the country, sit in our guide to workers compensation insurance. This page is Alabama only, and it runs alongside the broader Alabama HR compliance guide.
Who Has to Carry Coverage
Coverage becomes mandatory at five employees. The Alabama Department of Workforce answers the question in one sentence in its coverage FAQ: any business that has five or more employees, other than contractors, is required by law to have workers compensation coverage.
Ala. Code section 25-5-50(a) writes the same rule as an exemption. The compensation article does not apply to an employer who regularly employs less than five employees in any one business, to an employer of a domestic employee or a farm laborer, to an employer of a person whose employment is casual and not in the usual course of the business, or to a municipality with a population under 2,000.
One trade is cut out of that exemption. The under-five relief does not reach the business of constructing or assisting on-site in the construction of new single-family, detached residential dwellings, which is the exact wording the Department uses on its insurance requirement page. Residential homebuilding is the one Alabama trade where a headcount of four settles nothing.
Counting to Five
Part-time workers count, and so do the owners who run the company. The Department states that the term employee includes all full or part-time employees, officers of a corporation and members of an LLC. There is no waiting period and no seasonal grace: the question is whether you regularly employ five.
The officer exemption is where the arithmetic goes wrong. Ala. Code section 25-5-50(b) lets an officer of a corporation or an individual LLC member file a written certification with the employer's insurance carrier and be exempt from coverage. The same subsection then says the election does not otherwise change his or her status as an employee for the purpose of determining the threshold number of employees necessary to trigger the chapter.
Read that twice if you own the business. An officer who has opted out is not covered by the policy and is still counted when the state decides whether you needed one. Two owners plus three staff is five. The exemption also does not relieve the employer from continuing coverage for every other eligible employee.
Who Is Excluded and Who Opts In
Alabama excludes a defined list of workers and employers from the Act, and it lets several of those employers elect their way back in. An employer under the threshold, a farm-labor employer, an employer of a domestic employee or a small municipality may accept the article by filing written notice with the Department and posting a copy at the place of business.
| Worker or role | Alabama treatment | What the employer does |
|---|---|---|
| Sole proprietor | The employer, not an employee of the business | Outside the count and outside coverage. Ala. Code section 25-5-1(5) defines an employee as a person in the service of another under a contract of hire |
| Partner | The employer, not an employee of the business | Same treatment as a sole proprietor. Ask the carrier before assuming a partner can be added to the policy |
| Corporate officer or LLC member | An employee of the business, and counted | May be exempt from coverage by filing written certification with the carrier under section 25-5-50(b). The exemption never lowers the headcount |
| Domestic employees | The employer of a domestic employee is outside the Act | No policy required for household staff. The employer may elect in by written notice to the Department under section 25-5-50(a) |
| Farm laborers | The employer of a farm laborer is outside the Act | No policy required. A farm-labor employer may elect in on the same terms, then post a copy of the notice at the place of business |
| Casual labor | Outside the Act when the employment is casual and not in the usual course of the trade or business | Test the work against your usual course of business, not against the number of hours |
| Independent contractors | Not employees when genuinely independent | The label on the invoice does not settle it. Alabama courts look at the right of control over the work |
| Licensed real estate agent under a broker | Not an employee for purposes of the chapter | Section 25-5-50(h). Confirm the arrangement with your carrier before leaving an agent off the payroll audit |
| Product demonstrators | Not an employee where the statutory conditions are met | Section 25-5-50(i) requires a written contract stating the individual is not treated as an employee for federal tax purposes |
| Owner-operators and leased operators for a common carrier | The carrier is not deemed their employer | Section 25-5-1(4) excludes them where the carrier operates under a certificate of public convenience and necessity |
| Sports officials | Independent contractors, not employees | Section 25-5-50(j) covers officials at interscholastic, intercollegiate and sponsored amateur events |
| Small municipalities, federal and state government | Municipalities under 2,000 residents are outside the Act | Federal and state employees are covered by their own systems, not the Alabama Act |
| New single-family home construction | The under-five exemption does not apply to this business | Treat coverage as required and verify your status with the Workers’ Compensation Division |
Misclassification is the line that hurts small employers here, because it runs in both directions. Call an employee a contractor and you may be uninsured on a job site with a hurt worker and no policy behind you. The control questions that decide it are worked through in our explainer on what an independent contractor is.
Where to Buy the Policy
An Alabama employer buys from a private insurance carrier, and there is no state fund to buy from instead. Ala. Code section 25-5-8(a) requires that the insurer have its contract and plan of business approved in writing by the Commissioner of the Alabama Department of Insurance and be authorized to transact workers compensation business in the state.
The Department of Workforce lists the practical routes on its insurance requirement page: a commercial policy in the voluntary market, a policy through the assigned risk pool when carriers decline you, a group self-insurance fund, or individual self-insurance if you qualify. Employee leasing through a registered professional employer organization is a fifth arrangement small employers use, and those organizations register with the Department under Ala. Admin. Code r. 480-5-7-.01.
| Route | Who it fits | What it takes |
|---|---|---|
| Private carrier, voluntary market | Nearly every small employer | A policy from a carrier approved by the Commissioner of the Alabama Department of Insurance, placed through an agent |
| Assigned risk pool | Employers the voluntary market declines | Application through the plan administered by the National Council on Compensation Insurance. The plan is filed with the State Insurance Commissioner under Ala. Admin. Code r. 480-5-1-.07 |
| Group self-insurance fund | Members of a qualifying group | Coverage through a fund formed and operated under Ala. Admin. Code chapter 480-5-3 and regulated by the Department |
| Individual self-insurance | Large employers with audited financials | Net worth of at least $5,000,000, current ratio of at least 1.0 and positive net income for three years, on WCSI Form No. 1 filed at least 30 days ahead with a $500 fee |
| Individual self-insurance, after approval | Same | Specific excess coverage with a retention of $250,000 or greater, Guaranty Association security of at least $500,000, and claims administration by a competent administrator located in Alabama |
| Professional employer organization | Employers leasing their workforce | The organization registers with the Department under Ala. Admin. Code r. 480-5-7-.01. Get written confirmation of who carries the policy |
One Alabama-specific way to cut the premium is worth the paperwork. Ala. Code section 25-5-332 grants a five percent reduction in premium on every policy issued or renewed in the state where the insured has been certified by the Workers' Compensation Division as having a qualifying drug-free workplace program. Certification has to be renewed for each of the four years the discount runs, and the program has to meet the testing rules in Ala. Admin. Code chapter 480-5-6 rather than simply exist on paper.
What You Post and What You Hand a New Hire
Alabama handles employee notice through one poster, and there is no state workers compensation pamphlet you are required to hand a new employee on day one. Ala. Code section 25-5-290(d) requires the notice to be posted in one or more conspicuous places in your business.
The poster is the State of Alabama Workers' Compensation Information notice, Form WCC#1, published by the Workers' Compensation Division in English and Spanish. It is not a finished document when you print it. Two blanks on the face of it have to be filled in: your workers compensation insurance carrier and that carrier's telephone number.
The text does the work of a new-hire handout. It tells employees to notify the employer immediately if they are injured or contract an occupational disease, and it tells them the employer will advise which physician to see for authorized medical treatment. That second sentence is Alabama law, not a courtesy, and it is the reason the poster matters more here than in states where the worker picks the doctor.
| Notice | Authority | What it has to say |
|---|---|---|
| Workers’ Compensation Information poster, Form WCC#1 | Ala. Code section 25-5-290(d) | Posted in one or more conspicuous places, with the carrier name and telephone number filled in, plus the Division’s toll-free number 1-800-528-5166 |
| Notice of election to accept the Act | Ala. Code section 25-5-50(a) | An exempt employer that elects coverage files written notice with the Department and posts a copy of it at the place of business |
| Notice of withdrawal of coverage | Ala. Code section 25-5-50(a) | An employer withdrawing that election notifies each employee in writing and posts a conspicuous notice telling employees and applicants that coverage is not available |
| New hire handout | No Alabama requirement | The state prescribes no workers compensation pamphlet or signature form for new hires. The poster carries the notice duty |
| Federal job safety poster and OSHA Form 300A summary | Federal OSHA, separate obligation | Posted year round, with the 300A injury summary displayed February 1 through April 30 for covered employers |
Injury Reporting Deadlines
Two clocks run at once, and the employee's is shorter than most people expect. Ala. Code section 25-5-78 requires written notice to the employer within five days of the accident, and it bars compensation entirely unless written notice is given within 90 days of the accident or the death.
Your own clock is 15 days. Ala. Code section 25-5-4 requires the employer to keep a record of all injuries and to report to the Department, and Ala. Admin. Code r. 480-5-1-.01 sets the filing terms: WC Form 2 within 15 days for all injuries for which compensation is claimed or paid, including deaths, permanent disabilities and temporary disabilities exceeding three days.
| Step | Who acts | Deadline | Form or authority |
|---|---|---|---|
| Report the accident to the employer | Employee | Within five days. Written notice within 90 days of the accident, or of the death, or compensation is barred | Ala. Code section 25-5-78. Actual knowledge by the employer has been treated as equivalent to notice |
| Direct the employee to a physician | Employer | At the time of the accident | Ala. Code section 25-5-77. The employer selects the treating physician |
| Record the injury | Employer | All injuries, fatal or otherwise, for which compensation is claimed or paid | Ala. Code section 25-5-4 |
| File the First Report of Injury | Employer, carrier or third party administrator | Within 15 days of the injury and the employer’s knowledge of it, for deaths, permanent disabilities and lost time exceeding three days | WC Form 2, under Ala. Admin. Code r. 480-5-1-.01(1) |
| File the Supplementary Report | Carrier or self-insurer | Within 10 days of the first payment, of a 30-day period of nonpayment expiring, or of payments stopping | WC Form 3 |
| File the Claim Summary | Carrier or self-insurer | Within 10 days where possible and no later than 30 days after the final payment, and within 10 days of a settlement not approved by a court or ombudsman | WC Form 4 |
| Pay the waiting period | Carrier or self-insurer | No compensation for the first three days. The three days become payable with the first installment after 21 days if disability lasts that long | Ala. Code section 25-5-59 |
| Pay installments on time | Carrier or self-insurer | An installment unpaid without good cause for 30 days after it is due carries a 15 percent penalty added to it | Ala. Code section 25-5-59 |
| File a court complaint | Employee | Two years from the accident, or two years from the last compensation payment | Medical payments do not count as compensation for this deadline |
| Report a fatality or serious injury to OSHA | Employer | 8 hours for a fatality, 24 hours for an in-patient hospitalization, amputation or loss of an eye | Federal OSHA rules, a separate clock from workers compensation |
The OSHA row is the one small employers merge with the rest. Different agency, different form, different clock, and filing WC Form 2 does nothing to satisfy it. The federal reporting and recordkeeping duties are covered in our guide to OSHA requirements for employers.
Penalties for Going Without
Ala. Code section 25-5-8(e) makes failure to secure the payment of compensation a misdemeanor, punishable on conviction by a fine of not less than $100 and not more than $1,000. The fine is not the part that closes businesses.
The civil exposure is double. An employer required to secure coverage that fails to do so is liable for two times the amount of compensation that would otherwise have been payable for injury or death to an employee. On a serious injury that number is not a fine, it is the claim itself, doubled, paid out of the company.
| Violation | Exposure |
|---|---|
| Failing to secure the payment of compensation | Misdemeanor. Fine of not less than $100 and not more than $1,000 on conviction, under Ala. Code section 25-5-8(e) |
| An injury while required to be covered and uninsured | Liability for two times the amount of compensation that would otherwise have been payable for the injury or death |
| Continued or threatened violation of the insurance requirement | The secretary may seek an injunction, and the court may impose civil penalties of up to $100 per day. Subsequent compliance is not a defense |
| Operating below five employees with no coverage | Legal, but outside the exclusive remedy at Ala. Code section 25-5-52. An injured worker sues for damages instead |
| Knowingly false statements to obtain compensation | Class C felony under Act 94-653, carrying one to ten years and a fine of up to $5,000. It reaches any person, including an employer |
| Late or unpaid compensation installments | 15 percent added to any installment unpaid without good cause for 30 days after it becomes due |
The last exposure surprises owners of four-person companies who think being under the threshold is the safe position. It is legal, but the Act is what gives an employer the exclusive remedy shield, and an employer outside it faces an ordinary damages claim in which Ala. Code section 25-5-32 abolishes the three defenses employers historically leaned on: employee negligence, the negligence of a fellow employee, and assumption of risk.
What to Do When Someone Gets Hurt
The order matters, and in Alabama the first step is a decision most states leave to the worker. You name the physician. The Department states that the employer selects the treating physician at the time of the accident, so the moment of the injury is not the moment to start looking for a clinic.
The failure I see most often is not bad faith, it is memory. Nobody wrote down who was told, on what date, or which physician was offered. FirstHR keeps the incident record, the acknowledgement and the employee file in one place, so the dates that decide an Alabama claim are not sitting in a supervisor's phone.
What the Policy Pays
Alabama caps weekly benefits and moves the cap every July 1. The Secretary of Workforce determined the state average weekly wage for calendar year 2025 at $1,219.14, so for injuries occurring on and after July 1, 2026 the maximum compensation payable is $1,219.00 per week and the minimum is $335.00 per week.
| Benefit | Amount | Duration or limit |
|---|---|---|
| Temporary total disability | Two-thirds of the average weekly wage, capped at $1,219 per week for injuries on or after July 1, 2026, with a $335 minimum | No statutory cap on duration. Where the average weekly wage is below the minimum, 100 percent of it is paid |
| Waiting period | Nothing for the first three days after disability | The three days become payable with the first installment after 21 days if disability lasts that long |
| Temporary partial disability | Two-thirds of the wage difference, subject to the same maximum | Up to 300 weeks |
| Permanent partial disability | Subject to a maximum of $220 per week, scheduled or unscheduled | Scheduled injuries pay the weeks set by the schedule. Body as a whole runs to 300 weeks |
| Permanent total disability | Two-thirds of the average weekly wage, not to exceed the maximum in effect at the time of injury | Duration of the disability, with no cap on amount or length |
| Death benefits | 50 percent of the average weekly wage for one dependent, 66 2/3 percent for two or more, subject to the maximum and minimum | 500 weeks, reduced by any period of disability paid before death |
| No dependents at death | A one-time lump sum of $7,500 to the estate | Payable within 60 days of the death |
| Burial expenses | Up to $6,500 | Not reduced by private burial insurance the employee carried |
| Medical treatment | Reasonably necessary medical, surgical and chiropractic treatment, medicine, supplies and apparatus | No statute of limitations on medical benefits |
| Travel to treatment | $0.76 per mile effective July 1, 2026, the state travel rate | Mileage to and from medical and rehabilitation providers, under Ala. Code section 25-5-77(f) |
Those numbers are what the premium buys, and the premium itself is built on payroll and class codes rather than headcount, which is why the year-end audit can move the figure after the fact. Our guide to the workers compensation audit covers what the carrier checks. Payroll totals feed that audit, and Alabama pay rules sit in our Alabama minimum wage page.
Frequently Asked Questions
How many employees before Alabama requires workers compensation?
Five. The Department of Workforce states that any business with five or more employees, other than contractors, must have coverage, and Ala. Code section 25-5-50(a) exempts an employer who regularly employs less than five in any one business. The business of constructing new single-family detached residential dwellings is written out of that exemption.
Do part-time workers and corporate officers count toward the five?
Yes. The count includes full-time and part-time employees, officers of a corporation and LLC members. An officer who has filed an exemption certification with the carrier is not covered by the policy, but section 25-5-50(b) keeps that person in the headcount that decides whether the business needed a policy at all.
Where do Alabama employers buy the policy?
From a private carrier approved by the Commissioner of the Alabama Department of Insurance. There is no state fund. Employers the voluntary market declines use the assigned risk pool administered by the National Council on Compensation Insurance, and larger employers can join a group self-insurance fund or qualify to self-insure individually.
What does self-insurance require in Alabama?
A net worth of at least $5,000,000, a current ratio of at least 1.0 and positive net income for three years, evidenced by audited financial statements. The application goes in on WCSI Form No. 1 at least 30 days ahead with a $500 fee, and approved self-insurers carry excess coverage with a retention of $250,000 or greater plus Guaranty Association security of at least $500,000.
How fast does an injury have to be reported?
The employee gives written notice within five days, and no compensation is payable unless notice is given within 90 days of the accident or the death. The employer files WC Form 2 within 15 days of the injury and its knowledge of it, for deaths, permanent disabilities and lost time exceeding three days.
What happens if I have five employees and no policy?
Failure to secure coverage is a misdemeanor carrying a fine of $100 to $1,000, and the employer is liable for two times the compensation that would otherwise have been payable for the injury or death. The secretary may also seek an injunction, with civil penalties up to $100 per day and no defense for complying later.
Who picks the doctor after a work injury?
The employer selects the treating physician at the time of the accident. If the employee is dissatisfied and further treatment is required, the employee may ask for a change and is entitled to select a second physician from a panel or list of four that the employer chooses.
Injury paperwork is one piece of a wider state picture that also includes mandatory E-Verify, seven-day new hire reporting and Alabama's payroll rules. When you are done here, the rest of it sits in the Alabama compliance hub.