When is workers’ compensation required for an Alabama business?
Alabama requires most employers to carry workers’ compensation insurance once they regularly employ five or more people. Officers of a corporation and members of an LLC count toward that total; independent contractors are counted separately (Alabama Department of Labor; Code of Alabama Sec. 25-5-50).
Who counts toward Alabama’s five-employee threshold?
According to the Alabama Department of Labor, the count includes all full-time and part-time employees. If your company is incorporated or structured as an LLC, officers and members are included in that count as well. Independent contractors are treated separately from the employee count under Alabama law.
For example, a Huntsville landscaping business with three full-time employees and two regular part-time employees has reached the five-employee threshold and is required to carry workers’ compensation coverage, even though none of the five works full-time hours together.
How is Alabama’s threshold different from other states?
Alabama’s five-employee threshold is higher than some neighboring states use. Georgia, for example, requires coverage once a business reaches three employees. A business owner who has operated in another state should confirm Alabama’s own threshold rather than assume the same rule applies — the numbers are not interchangeable between states.
What does workers’ compensation actually cover?
Workers’ compensation covers an injured employee’s medical bills and a portion of lost wages while they recover. In exchange, it generally limits an injured employee’s ability to sue the business directly over the same workplace injury. A business that is required to carry coverage and does not takes on both the direct cost of any workplace injury and the loss of that liability protection.
How can an Alabama business confirm its workers’ compensation obligations?
A free coverage review with a licensed advisor can confirm whether the five-employee threshold applies to your business today, how your workers should be counted, and what coverage would cost for your specific headcount and industry.
See the Alabama insurance hub for the state’s other coverage requirements.