If your business has employees in the state of Alabama, you’ll need to make sure you adhere to Alabama’s Workers’ Compensation Insurance laws. Workers’ Compensation provides medical and financial benefits for employees who suffer work-related injuries or illnesses or for their survivors in the case of an employee death.

Who needs Workers’ Compensation Insurance in Alabama?

Alabama requires all employers with at least five employees total to obtain Workers’ Compensation Insurance. Businesses that construct or assist in the construction of single-family residential dwellings are also required to obtain Workers’ Compensation Insurance. In Alabama, an “employee” is generally defined as any individual who performs services for another under a contract of hire, express or implied, oral or written, and is not an independent contractor. 

The Alabama Workers’ Compensation Law (WCL) defines all of the requirements for Workers’ Comp in Alabama, and the Alabama Workers’ Compensation Division (WC Division) monitors, enforces, and administers the program. Ensuring your company is in compliance is critical, as there are serious penalties and fines for those who fail to abide by state regulations.

What employees are covered under Workers’ Compensation in Alabama?

Almost all workers are covered under Workers’ Compensation in Alabama. If you provide work or services for an employer, and you are not an independent contractor, you will likely be eligible for Workers’ Compensation Insurance. 

The following are categories of employees that are eligible for Workers’ Comp coverage:

• Full-time and part-time employees
• Interns and apprentices
• Minors
• Undocumented immigrants
• Corporate officers

The following are categories of employees that are generally excluded from Workers’ Comp coverage:

• Independent contractors
• Domestic workers
• Farm laborers
• Casual workers
• Volunteers (however, coverage may be purchased voluntarily for volunteer firefighters and rescue workers)

What Workers’ Compensation benefits do employees receive?

Under Workers’ Compensation in Alabama, employers are required to provide the following benefits to employees who are injured in the course of employment:

Medical Benefits

• Employers must pay for all necessary medical, surgical, and chiropractic treatment, including medicines, surgical supplies, crutches, prosthetics, and other necessary items.
• Employers may select the treating physician at the time of the accident. If the employee requires further treatment and wants to change physicians, the employee is entitled to choose another physician from a list of four physicians selected by the employer. 
• Injured employees must comply with reasonable requests for examination and accept medical services or physical rehabilitation. If they do not comply, benefits may be suspended.
• Injured workers will be reimbursed for mileage to and from medical and rehabilitation appointments at the same reimbursement rate as provided for official state travel. 

Temporary Total Disability Benefits

• Employers who are unable to return to work due to an injury are eligible to receive Temporary Total Disability (TTD) benefits while recovering. TTD benefits provide 66 and two-thirds percent of a worker’s average weekly wage pre-injury. 
• The WC Division determines maximum and minimum benefit amounts, which change yearly. For injuries that occurred from July 1, 2021, to June 30, 2022, the maximum was $983 per week and the minimum was $270 per week.
• There is no limit on the number of weeks TTD benefits are payable. 

Temporary Partial Disability Benefits

• An injured employee may be able to return to work in a partial or limited capacity while recovering. If the employee works fewer hours or receives lower wages during this time, he or she may be eligible for Temporary Partial Disability (TPD) benefits. TPD benefits provide 66 and two-thirds percent of the difference between a worker’s pre- and post-injury average weekly wage.
• The WC Division establishes minimum and maximum benefit amounts, which change yearly. For injuries that occurred from July 1, 2021, to June 30, 2022, the maximum was $983 per week and the minimum was $270 per week.
• TPD benefits are available for a maximum of 300 weeks.

Permanent Partial Disability Benefits

• If an employee recovers from an injury but suffers a permanent partial impairment, he or she may be eligible for Permanent Partial Disability (PPD) benefits.
• The amount and duration of PPD benefits vary depending on the type of injury and the severity of the disability. The WC Division maintains a schedule of injuries, which lists the percentage of average weekly wages to be paid and the number of weeks benefits will be paid.
• Schedule losses generally involve the loss of use of an upper extremity (arm, hand, finger), lower extremity (leg, foot, toe), back, or eyesight or hearing. Up to 100 weeks of benefits are available for serious disfigurements.
• For injuries that are not listed on the schedule of injuries, PPD benefits are available for a maximum of 300 weeks. 
• The WC Division establishes minimum and maximum benefit amounts, which change yearly. For injuries that occurred from July 1, 2021, to June 30, 2021, the maximum was $983 per week and the minimum was $270 per week.

Permanent Total Disability Benefits

• Employees who develop a permanent total disability and are unable to earn any wages may be eligible for Permanent Total Disability (PTD) benefits. 
• Permanent disability is presumed when a worker has lost sight in both eyes, lost both arms at the shoulder, or suffered any physical injury or mental impairment that completely and permanently incapacitates the employee from working. 
• PTD benefits provide 66 and two-thirds percent of a worker’s average weekly wage pre-injury, payable as long as the employee remains permanently and totally disabled and is unable to earn wages.
• The WC Division establishes minimum and maximum benefit amounts, which change yearly. For injuries that occurred from July 1, 2021, to June 30, 2022, the maximum was $983 per week and the minimum was $270 per week.
• There is no limit to the number of weeks that PTD benefits are payable.

Death Benefits

• Employers must pay up to $6,500 in funeral expenses for deceased employees. 
• A workers’ surviving dependents may receive up to 66 and two-thirds percent of the employee’s average weekly earnings, up to the maximum set by the WC Division. From July 1, 2021, to June 30, 2022, the maximum was $983 per week and the minimum was $270 per week. 
• Death benefits are payable for a maximum of 500 weeks but will be terminated in the case of a spouse remarrying or underage dependents turning 18. 
• If a deceased employee has no dependents, the employer must make a one-time payment of $7,500 to the employee’s estate. 

What are the penalties for breaking Alabama Workers’ Compensation laws?

Failure to adhere to the Workers’ Compensation laws set out by the WCL can result in significant fines and even imprisonment. In order to avoid any costly penalties, it’s important to consult the WCL or your insurer to ensure you are in compliance. Below are the major ways in which companies can be penalized:

Failure to Secure Coverage

• Businesses that fail to obtain workers’ compensation insurance may be subject to fines of up to $1,000 per employee for each day of noncompliance and a misdemeanor charge. 
• Businesses may be forced to close until they are compliant with Workers’ Compensation requirements. 

Failure to Pay Benefits

• Employers that fail to pay benefits within 30 days of the due date may be required to pay an additional 15 percent of the amount of the unpaid benefit. 
• Failure to pay benefits is also punishable by a misdemeanor charge and a fine of between $100 and $1,000. 
• Employers who do not pay compensation may be liable for two times the amount of compensation that would have been due to the employee. Civil penalties may be imposed up to $100 per day. 

How much does Workers’ Compensation Insurance cost in Alabama?

According to the National Academy of Social Insurance Workers’ Compensation Report (November 2020), the average employer cost for Workers’ Compensation in Alabama was $1.01 per $100 of covered wages. This figure is estimated across all insurers and all industries, so the cost to your particular business may vary.

How does the Workers’ Compensation claims process work in Alabama?

Employees who suffer work-related injuries must notify employers in writing within five days of the ancient. If the injury is not reported within the five-day period, employees may lose the ability to receive benefits that might have accumulated during that period. If the notification is not submitted within 90 days of an accident, the employee may forfeit the ability to receive Workers’ Comp benefits.

After learning of an injury, employers must submit a report to the WC Division within 15 days. Employers must provide injured employees with necessary medical care. Employers may select the initial physician to provide treatment for a work-related injury, but employees have the right to select a different physician for continuing treatment. Employers may require employees to choose their medical provider from a list provided by the employer. Employers or insurers must pay medical bills within 25 working days. 

Weekly benefit payments to eligible employees must begin within 30 days. Employers have the option of paying an injured employee’s regular wages during the period of disability, rather than paying Workers’ Compensation benefits. 

Alabama Workers’ Compensation Insurance Resources

• Alabama Department of Labor Workers’ Compensation Division
• Alabama Workers’ Compensation FAQ