Alabama employee separation can be a complex process—especially when navigating the specific requirements of Alabama state law. This guide and employee separation checklist outlines key components of employee termination laws in Alabama, including final paycheck requirements, separation notices, severance agreements, reporting employee termination, and withdrawing registration to do business in the state.
Alabama Employee Separation Checklist
- Provide final paycheck
- Issue separation notice
- Execute severance agreement
- Report termination
- Withdraw registration to do business
1. Final Paycheck Requirements in Alabama
Alabama does not regulate how and when final paychecks must be paid. However, it’s best practice to ensure departing employees are fully paid their earned wages in a timely manner. Employers who fail to pay wages to their separated employees can face civil penalties at least equal to the unpaid wages and can even be subject to criminal penalties, including jail time.
Additionally, Alabama law doesn’t require employers to pay out accrued but unused vacation time upon separation unless the employer has a policy requiring payout.
2. Firing Employees in Alabama
Alabama is an at-will employment state. This means employers can generally terminate employees for any reason, as long as it’s not discriminatory or in violation of employment laws.
Nevertheless, it’s crucial to understand both employer obligations and employee rights. After firing employees (for any reason) employers must provide a notice of the potential availability of unemployment benefits. Employers can comply with this requirement by informing employees of their rights and the process for claiming unemployment benefits.
3. Severance Agreements in Alabama
Employers executing claims releases with their employees must explicitly list the claims the employee is releasing under federal and state law. In Alabama, the state law claims that may be released include those under the Clarke-Figures Equal Pay Act (Ala. Code § 25-1-30) and the Alabama Age Discrimination in Employment Act (Ala. Code §§ 25-1-20 et seq.). It’s important to ensure that any release of claims only waives claims that may have arisen prior to the effective date of the agreement—not those that arise later.
Employers must also remember to review applicable federal employee termination laws. The NLRB’s 2023 McLaren decision and subsequent guidance from its General Counsel restrict the use of non-disparagement and confidentiality provisions in severance agreements.
4. Reporting Employee Termination in Alabama
If you have an employee with an Income Withholding for Support Order (IWO), you must report the employee’s termination as soon as possible to the child support agency, court, or attorney that issued the IWO. Employers can register for online reporting with the Office of Child Support Enforcement.
Additionally, employers can report an employee’s termination physically by completing the Notification of Employment Termination or Income Status section of the IWO and faxing or mailing it to the child support agency that issued it. The following information should be prepared:
- Employee Name
- Employee Case Identifier
- Last Known Home Address
- New Employer Address (if known)
- Date of Employee Separation
5. Withdraw Registration to do Business in Alabama
If an organization stops doing business in Alabama—such as when the organization separates from its last Alabama employee—it can formally withdraw its registration to do business in the state by submitting the proper form(s) to the Secretary of State. The forms required vary depending on the type of legal entity.
For-Profit Corporations and Non-Profit Corporations must file a Certificate of Withdrawal along with a Certificate of Compliance from Alabama’s Department of Revenue showing that the Corporation has paid all required state taxes. Corporations can request a Certificate of Compliance on the Department of Revenue’s website.
Limited Liability Companies (LLCs) must file a Certificate of Withdrawal along with a Certificate of Compliance from Alabama’s Department of Revenue showing that the LLC has paid all required state taxes. LLCs can request a Certificate of Compliance on the Department of Revenue’s website.
Stay Compliant with Alabama Employee Separation Requirements
Understanding the intricacies of an Alabama Employee Separation Agreement and its associated requirements is crucial for employers to ensure compliance and mitigate risks.
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