Alabama Workers' Compensation When an Employer Closes

Employer Closure and Claim Responsibility

In Alabama, a closed employer does not automatically end a workers' compensation claim. The state's workers' compensation fund, administered by the Department of Labor, steps in to cover benefits when the employer can no longer pay because it has ceased operations or filed for bankruptcy.

Filing the Claim After Closure

Employees must still file a claim with the Alabama Department of Labor's Workers' Compensation Division within two years of the injury. The claim is filed against the employer's workers' compensation insurance policy, not the employer directly. If the employer's insurer is insolvent, the state fund becomes the payer.

Benefits Covered by the State Fund

The state fund provides the same categories of benefits as a private insurer: medical expenses, wage replacement (temporary total disability at 66 % of average weekly wage, capped at the state maximum), permanent disability, and death benefits. The amount and duration follow Alabama statutes, regardless of the employer's status.

How the State Fund Is Financed

The Alabama Workers' Compensation Fund is financed through assessments on active insurers and a levy on employers who maintain self‑insurance. When an employer closes, its unpaid premiums and any outstanding claims become the fund's responsibility, ensuring claimants are not left without coverage.

Steps for an Injured Employee

• Notify the employer of the injury in writing as soon as possible.
• Obtain a copy of the employer's workers' compensation insurance information.
• File a claim with the Alabama Department of Labor within two years of the injury.
• If the employer's insurer is unavailable, request that the claim be assigned to the state fund.
• Cooperate with the claims adjuster and provide medical documentation promptly.

Special Situations

If the employer filed for bankruptcy, the claim becomes an unsecured creditor claim, but the state fund still provides benefits up to the statutory limits. For employers that simply ceased operations without filing, the Department of Labor will investigate to determine the appropriate payer, often defaulting to the state fund.

Comparison of Payers