Unemployment Insurance Law Summaries
1-1700Alabama, Unemployment Insurance Law SummariesAlabama's unemployment insurance law is located in the Alabama Code of 1975, Title 25, Chapter 4, as amended; and in the Rules of the Alabama Department of Industrial Relations 480-1-3 to 480-4-4. The full text of the Alabama Unemployment Compensation Law is available beginning at Unemployment Insurance Reporter UI-AL 4101 .
DEFINITIONS
"Employer" means one who pays wages of $1,500 or more in any calendar quarter in either the current or preceding calendar year, or who employs at least one individual for some portion of a day in each of 20 different calendar weeks in either the current or preceding calendar year. Generally, an employer subject to the FUTA is automatically an employer under the Alabama law.
"Employment" means service that was covered employment prior to 1/1/72, and service performed on and after that date by any officer of a corporation, and any individual who, under the usual common-law rules for determining the employer-employee relationship, has the status of an employee. Services by certain agent-drivers or commission-drivers and traveling or city salesmen are covered, and services as an officer or member of the crew of an American vessel are covered if that vessel is managed and controlled within the state. For exclusions from the term "employment" see Exceptions, below.
Generally, "employee" means any individual employed by a covered employer in covered employment if a relationship of master and servant exists between the individual and employing unit.
"Wages:" Every form of remuneration paid or received for personal services, including the cash value of remuneration paid in any medium other than cash and back pay awarded as the result of an agreement, arbitration or court order on a retroactive basis. Also included are tips and gratuities of $20 or more per month reported as wages. For exclusions from wages, see below.
COVERAGE
Employers who pay wages of $1,500 or more in any calendar quarter in either the current or preceding calendar year, or who employs at least one individual for some portion of a day in each of 20 different calendar weeks in either the current or preceding calendar year, are covered. Generally, any employer or employment subject to the FUTA is automatically an employer under the Alabama law. See below for exceptions from covered employment.
Government and nonprofit employers. --Coverage is mandatory for services performed for state governmental entities and for nonprofit organizations exempt from income tax employing four or more individuals for some portion of a day in each of 20 weeks within either the current or preceding calendar year. Other government services are not covered.
Nonprofit organizations and governmental entities (other than the state) may finance benefit payments by the regular contributions method or the reimbursement method. Under the latter method, payments equal the full amount of regular plus one-half (full amount for governmental entities) the extended benefits paid to claimants. Payments are due within 20 calendar days after mailing. A surety bond or cash deposit is required from nonprofit organizations. A nonprofit organization electing to pay contributions after having made reimbursement payments is deemed to be chargeable with benefit wages for the period it was making such payments, and its benefit wages and payrolls for this period will be used in computing its benefit wage percentage.
The State of Alabama and governmental entities electing the reimbursement method pay a percentage of their average quarterly covered payroll, there being an adjustment at the end of each one-year to reflect actual benefit costs.
Agricultural and domestic employers. --Agricultural labor is covered if performed for an employer who employed 10 or more workers in such labor in each of 20 weeks in the current or preceding calendar year or paid cash remuneration of $20,000 or more for such service in any quarter of the current or preceding calendar year. When agricultural labor is supplied by a crew leader, the employing unit for which the services are performed is the employer of the crew members unless the crew leader is registered under the Farm Labor Contractor Registration Act of 1963, or substantially all of the crew members operate or maintain mechanized equipment that is provided by the crew leader. In either of these instances, the crew leader is the employer. Services performed prior to 1/1/84 by certain aliens are excluded.
Domestic service in a private home, local college club or local chapter of a college fraternity or sorority is covered if performed for an employing unit that paid wages of $1,000 or more for such service in any quarter of the current or preceding calendar year.
EXCEPTIONS
Wages. --The term "wages" does not include:
(1) Remuneration over $8,000 paid by employer to an individual with respect to employment during any calendar year. Wages for services in another state and wages paid by employer's predecessor included as part of first $8,000. If federal taxable wage base is increased, amount in Alabama will be increased accordingly.
(2) Payments to individual under plan or system established on account of retirement, sickness or accident disability, or medical or hospitalization expenses in connection with sickness or accident disability made by an employer after the expiration of six calendar months after the last month of the employee's employment.
(3) Certain other retirement payments.
(4) Payments from, to, or under trust or annuity plan exempt from federal income tax.
(5) Remuneration paid in any medium other than cash for service not in course of employer's trade or business.
(6) Stand-by pay to employee 65 or over.
(7) Dismissal payments that employer is not required to make.
(8) Payment of employees' unemployment or FICA tax without deduction from wages, in the case of domestic service in a private home or agricultural labor.
(9) Paid educational benefits that are excludible from employee income under Section 127 of the Internal Revenue Code.
Employment. --The term "employment" does not include the following (Sec. 25-4-10(b)):
(1) Service not in the course of employer's business, unless it is performed in any calendar quarter in which the remuneration is $50 or more by an individual "regularly employed" to perform that service.
(2) Direct sellers engaged in the trade or business of selling or soliciting sale of consumer products on a buy-sell or deposit-commission basis in the home or other than in a permanent retail establishment, if all remuneration for such sales is directly related to sales or output rather than hours worked.
(3) Commercial fishing services except salmon or halibut fishing and services for a vessel of more than 10 tons.
(4) Insurance agents wholly on commission basis.
(5) Newspaper and shopping news carriers under 18 years of age.
(6) Organizations exempt from income tax with respect to service performed in a calendar quarter if remuneration is less than $50.
(7) Product demonstrators engaged in the trade or business of demonstrating, exhibiting, or soliciting the purchase of food, food-related products offered for sale, or other consumer products offered for sale to any buyer on the premises of a grocery store, dry goods store, or similar retail establishment or trade show if the individual performs those services pursuant to a written contract between the individual and a person whose principal business is providing demonstrators to third parties for such purposes and the contract provides that the individual will not be treated as an employee for federal tax purposes.
(8) Railroad employees covered by the Railroad UI Act.
(9) Licensed real estate agents, if substantially all remuneration for services is directly related to sales or other output rather than hours of work and there is a contract stating that the agent is not an employee for federal tax purposes.
(10) Relatives, i.e., service performed by individual in employ of a son, daughter, or spouse, or by child under 21 in employ of parent.
(11) Service for a school, college, or university by a student in regular attendance, or by the spouse of that student if the spouse's employment is under a program of assistance to the student.
(12) Service by a student enrolled at a nonprofit or public educational institution in a full-time work-study program. Exemption not applicable if program established for employer or group of employers.
(13) Service for a hospital by a patient of the hospital.
(14) Service as an officer or member of the crew of a vessel that is not an American vessel.
(15) Student nurses and interns.
(16) Services performed by an individual committed to a penal institution (Sec. 25-4-10(b)(25)).
Nonprofit employers. --Services for nonprofit organizations and the state do not include the following:
(1) Church or organization operated primarily for religious purposes and that is either operated, supervised, controlled or principally supported by a church or convention or association of churches.
(2) Religious duties of a minister or member of a religious order.
(3) Patients performing services in a rehabilitation facility or sheltered workshop; provided, however, if an individual's employment is otherwise characterized as employment under the Act and the individual is performing work under the Javits Wagner O'Day Act or a similar set-aside program, the individual's employment will be considered employment under the Act as the date of written election.
(4) Individual receiving unemployment work relief or work training under program financed by federal agency or an agency of a state or political subdivision.
(5) Inmate of penal or custodial institution.
(6) Elected officials.
(7) Members of a legislative body or the state judiciary.
(8) Members of the State National Guard or Air National Guard.
(9) Temporary employees serving in case of fire, storm, snow, earthquake, flood or similar emergency --not applicable to permanent employees whose usual responsibilities include emergency situations.
(10) Individuals serving in major nontenured policymaking or advisory positions.
PROCEDURES
Base period. --First four of last five completed quarters preceding benefit year.
Benefit year. --1-year period beginning with week in which valid claim is filed.
Weekly benefit amount. --Amount computed as 1/24 of the average of wages paid in two highest base period quarters, less wages (if any) in excess of $15, rounded to nearest multiple of $1. Effective July 2, 2006, and thereafter, the maximum weekly benefit amount is increased to $230. Effective July 1, 2007, the maximum amount increases to $235. The minimum weekly benefit amount is $45 (Sec. 25-4-72).
Maximum total benefits. --Lesser of 26 times weekly benefit amount or one-third of base-period wages. Lump sum payments of wages in lieu of notice, dismissal or severance allowances or back pay awards are to be prorated over the periods to which they are made and are to be treated as though they had been paid in those periods. During certain periods of high unemployment, claimants may also receive extended benefits at their weekly benefit rate.
Benefit eligibility: Requirements. --
(1) Base-period wages of 1 1/2 times high-quarter wages;
(2) be able and available for work and making an active effort to secure work.
Claimant must also, after the beginning of his or her previous benefit year, have earned eight times his or her weekly benefit in previous benefit year.
An individual who fails to make an active effort to secure work because he or she is on jury duty will not be denied benefits.
No benefits may be paid to instructors, researchers, or principal administrators of an educational institution or to individuals employed in any other capacity in any educational institution during school vacation periods or paid sabbatical leaves based on service with such institution. Nonprofessional school employees may receive retroactive payments of benefits if after being given reasonable assurance of reemployment in a second year or term, no opportunity to work arises. Similar disqualifications apply during established and customary vacation periods and holiday recesses and in the case of an individual performing services for an educational institution while in the employ of an educational service agency.
Notwithstanding the disqualification for refusal of suitable work without good cause, no benefits may be denied to an otherwise eligible individual enrolled in an approved training course.
Benefits are not payable to professional athletes for periods between sport seasons if there is a reasonable assurance that the individual will perform services in both seasons.
Benefits are not payable to an alien unless he or she has been lawfully admitted for permanent residence, is otherwise permanently residing in the U.S. under color of law, or has been lawfully admitted for temporary residence under the Immigration Reform and Control Act of 1986.
Disqualifications Period. --
(1) Discharge from most recent bona fide work for misconduct connected with work --three to seven weeks and total benefits reduced accordingly.
(2) Discharge from most recent bona fide work for actual or threatened deliberate misconduct in connection with work after repeated warning --week in which disqualifying act occurs and until earns wages at least 10 times weekly benefit amount, and total benefits reduced by not less than six nor more than 12 times weekly benefit amount.
(3) Dishonest or criminal act connected with work --duration of unemployment, and benefit rights based on work left canceled providing timely notice filed.
(4) Voluntary leaving without good cause connected with work --(with certain exceptions) week in which disqualifying event occurs and until earns wages at least 10 times weekly benefit amount, and total benefits reduced by not less than six nor more than 12 times weekly benefit amount.
(5) Suspension as disciplinary measure or for misconduct connected with work --period of suspension (not more than four weeks) and total benefits reduced accordingly.
(6) Revocation or suspension of license or bond, etc., necessary for the performance of claimant's job and which claimant must supply --until license or bond, etc., has been restored to him or her and he or she has reapplied for job with former employer or has found another job, whichever occurs earlier.
(7) Refusal of suitable work without good cause --one to 10 weeks.
(8) Labor dispute --duration of dispute in active progress.
(9) Receipt of unemployment benefits under another law, wages in lieu of notice, dismissal or separation allowance or back pay award --period for which such payment is made.
(10) Receipt of retirement payments under employment contract or agreement or workers' compensation temporary disability benefits --unemployment benefits reduced by such payments.
(11) Receipt of, including application for, wage or subsistence allowance and other forms of remuneration, other than reimbursement for travel expenses, for a course of approved training --benefits reduced by amount of allowance.
(12) Work on federal or state work-relief projects or in self-employment --duration of services.
(13) Fraudulent misrepresentation in connection with claim --benefits reduced in current or subsequent benefit year by not less than four times the claimant's weekly benefit amounts, and not more than the maximum amount payable in a benefit year.
(14) Leave of absence due to pregnancy --if leave of absence extends beyond 10th week following termination of pregnancy, benefits may not be denied beyond such week providing claimant has given three weeks' notice of desire to return, is able to work, and has not refused reinstatement to suitable job.
(15) Receipt of governmental or other pension, retirement or retired pay, annuity or similar periodic payment based on claimant's previous work --reduction in weekly benefits if pension is provided under a plan maintained or contributed to by a base period employer and if the pension (except for social security or railroad retirement benefits) affects eligibility for or increases the amount of the pension. The amount of any social security or railroad retirement benefits will be reduced by 50% before any deduction in benefits is made.
WHAT THE EMPLOYER MUST DO
Pay the standard tax rate. --2.7%. Maximum possible basic rate is 6.8%. No employee tax.
Experience rates. --Employers who have not been subject to the law for a sufficient period of time to be entitled to experience rate pay 2.7%. Variations from standard rate are determined for each 12-month period beginning January 1 if employer's employment record was chargeable with benefit wages during the fiscal year immediately preceding such January 1. A construction contractor who is or becomes delinquent in the payment of contributions may be required to post bond or to make cash deposits to cover future taxes for a period of not less than one year.
Benefit ratio. --An employer's benefit ratio is a percentage obtained by dividing the total of its benefit charges to the three most recent fiscal years by that part of its total taxable payroll for the same period with respect to which contributions have been paid on or before July 31 next following such period. The benefit ratio of an employer who has not been chargeable with benefits through the last three fiscal years will be a percentage obtained by dividing the total of its benefit charges for the period throughout which the employer has been chargeable, but not less than the most recent preceding fiscal year, by that part of its total taxable payroll for the same period with respect to which contributions have been paid on or before July 31 next following such period. The employer's benefit ratio determines its rate under the applicable rate schedule.
Rate schedule. --The desired level of the fund for each year will be determined as 1.4 times the amount determined by multiplying the highest statewide total of payrolls of all contributing employers during any one of the three most recent preceding fiscal years by the highest benefits payroll ratio for any one of the 10 most recent fiscal years. If the fund balance on the computation date is 125% or more of the desired level, Schedule A, ranging from 0.2% to 5.4%, will be in effect. If the fund balance is equal to the desired level, but is less than 125% thereof, Schedule B, ranging from 0.35% to 5.4%, is in effect. If the fund balance is less than the desired level, but is at least 70% thereof, Schedule C, ranging from 0.5% to 6.1%, is in effect. If the fund balance is less than 70% of the desired level, Schedule D, ranging from 0.65% to 6.8%, is in effect. Note that for the period of 4/1/92 --3/31/08, rates in the above schedules are reduced by .06%.
Shared cost assessment. --An assessment to recover "shared costs" is in effect. Shared costs include benefit charges that cannot be effectively assigned to an employer's account because it has become inactive, the difference between the benefit charges of all employers assigned the maximum rate and the amount of contributions received from them, certain credits granted employers, benefit overpayments that have been declared uncollectible and have been waived, and delinquent contributions.
The shared ratio is determined by dividing the net shared cost for a fiscal year by the statewide total of taxable wages for the same year (excluding taxable wages paid by employers who are relieved from the shared cost assessment). The resulting quotient is adjusted to the nearest multiple of .001 and is the shared cost ratio. An employer assigned the minimum rate under Schedule A is relieved of the shared cost assessment, as is any employer whose account has not been charged with any benefits during the three immediately preceding fiscal years and who has been assigned the minimum rate under Schedule B.
For calendar quarters beginning April 1, 1992, and ending March 31, 2008, rates for contributing employers are generally adjusted downward by .06% through the use of an adjustment chart that appears in the law. This adjustment is a counterbalance to the additional tax that results from the special .06% assessment on wages that is imposed on contributing employers for the period of April 1, 1992, through March 31, 2008, by the Employment Security Enhancement Act. Employers that pay a rate of 5.4% or above that would be reduced to a rate of less than 5.4% by application of the adjustment, or that use reimbursement financing, or that have insufficient employment history to qualify for experience-rating are specifically exempt from the special assessment. Accordingly, these employers do not receive the .06% downward adjustment in their basic contribution rates.
Since the trust fund balance will be less than 70% of the desired level at the end of 2005, Schedule C of the tax table applies for calendar year 2006. The rates from Schedule C, including the 0.06% downward adjustment, are reflected below.
2006 Employer's Benefit Ratio Rate (%) 0.00--0.39 ................................................. 0.44 0.40--0.59 ................................................. 0.59 0.60--0.79 ................................................. 0.84 0.80--0.99 ................................................. 1.04 1.00--1.19 ................................................. 1.24 1.20--1.39 ................................................. 1.49 1.40--1.59 ................................................. 1.69 1.60--1.79 ................................................. 1.89 1.80--1.99 ................................................. 2.09 2.00--2.19 ................................................. 2.34 2.20--2.39 ................................................. 2.54 2.40--2.59 ................................................. 2.74 2.60--2.79 ................................................. 2.99 2.80--2.99 ................................................. 3.19 3.00--3.19 ................................................. 3.44 3.20--3.59 ................................................. 3.74 3.60--3.99 ................................................. 4.19 4.00--4.39 ................................................. 4.64 4.40--4.79 ................................................. 5.04 4.80--5.19 ................................................. 5.44 5.20--5.59 ................................................. 5.94 5.60--5.99 ................................................. 5.94 6.00--6.39 ................................................. 6.04 6.40--6.79 ................................................. 6.04 6.80--7.19 ................................................. 6.04 7.20 and over .............................................. 6.04
Newly liable employers assigned the 2.7% rate are not subject to either the ESA or the shared cost assessment.
An experience-rated employer that is delinquent in paying contributions and/or assessments in excess of $20, or delinquent in filing contribution or wage reports for any quarter prior to the four quarters of the immediately preceding calendar year, will be liable for a penalty rate equal to the maximum rate for the rate year, plus the shared cost assessment.
An additional tax based on a percentage determined by dividing the estimated interest owed by 95% of wages paid by all contributing employers during the immediately preceding calendar year may be required if interest accrues on federal advances to Alabama.
Nonprofit organizations and governmental entities (other than the state) may finance benefit payments by the regular contributions method or the reimbursement method. Under the latter method, payments equal the full amount of regular plus one-half (full amount for governmental entities) the extended benefits paid to claimants. Payments are due within 20 calendar days after mailing. A surety bond or cash deposit is required from nonprofit organizations. A nonprofit organization electing to pay contributions after having made reimbursement payments is deemed to be chargeable with benefit wages for the period it was making such payments, and its benefit wages and payrolls for this period will be used in computing its benefit wage percentage.
The State of Alabama and governmental entities electing the reimbursement method pay a percentage of their average quarterly covered payroll, there being an adjustment at the end of each one-year to reflect actual benefit costs.
SUTA dumping. --If an employer transfers its trade or business, or a portion thereof, to another employer and, at the time of the transfer, there is substantially common ownership, management, or control of the two employers, then the unemployment experience attributable to the transferred trade or business will be transferred to the employer to whom such trade or business is so transferred. The rates of both employers shall be recalculated and made effective January 1 of the calendar year in which such transfer or transfers occurred.
Whenever a person that acquires a trade or business is not an employer, the unemployment experience will not be transferred if the director finds that such person acquired the trade or business solely or primarily for the purpose of obtaining a lower rate of contributions. Instead, such person will be assigned the applicable new employer rate as provided by statute. In determining whether the trade or business was acquired solely or primarily for the purpose of obtaining a lower rate of contributions, the director will use objective factors which may include the cost of acquiring the trade or business, whether the person continued the business enterprise of the acquired trade or business, how long such business enterprise was continued, or whether a substantial number of new employee were hired for the performance of duties unrelated to the business activity conducted prior to acquisition.
If a person knowingly violates or attempts to violate the law related to determining the assignment of a contribution rate, or if a person knowingly advises another person in a way that results in a violation of such provision, the person will be subject to the following