Alabama Independent Contractor Agreement Template
Alabama is a state where one sentence in the contract is the eligibility condition itself, and where a single marketplace clause decides two different acts.
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Introduction
An Independent Contractor Agreement is a contract between a business and a self-employed worker covering scope, payment, ownership of the work product, and how the engagement ends. Alabama has no general statute requiring one and prescribes no form, no wording for the document as a whole, and no notarization. It does something narrower and easier to miss. Four separate exclusions from unemployment coverage in Ala. Code 25-4-10(b) are conditioned on what a written contract actually says. Three of them, covering qualified real estate agents, direct sellers, and product demonstrators, use identical language: the services must be performed pursuant to a written contract, and that contract must provide that the individual will not be treated as an employee with respect to those services for federal tax purposes. The recital is the eligibility condition, not evidence of one, so an engagement that is independent in every practical respect still loses the exclusion if the sentence is absent. The fourth is the marketplace contractor exclusion at 25-4-10(b)(26), whose first of six cumulative conditions is a written agreement that the contractor is an independent contractor. That one reaches further than the unemployment chapter: Ala. Code 25-5-1(4) and 25-5-1(5) adopt the same exclusion by reference, so a single clause governs both unemployment insurance and workers compensation. Everything outside those categories runs on ordinary tests, and they are not the same test from act to act.
Key Things to Know
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Alabama is not an ABC test state for unemployment insurance, whatever some national summaries say. Ala. Code 25-4-10(a)(1)b. defines employment by reference to the usual common law rules applicable in determining the employer-employee relationship, and the chapter contains no burden-shifting clause and no presumption running either way. The narrowing work is done by the list of enumerated exclusions that follows.
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Three of those exclusions turn on a sentence. The qualified real estate agent exclusion at 25-4-10(b)(22), the direct seller exclusion at (b)(23), and the product demonstrator exclusion at (b)(24) each require that the services be performed pursuant to a written contract between the individual and the person for whom the services are performed, and that the contract provide that the individual will not be treated as an employee with respect to such services for federal tax purposes.
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The marketplace contractor exclusion at 25-4-10(b)(26)c. is cumulative, and the written agreement is only the first of six conditions. The platform must also refrain from unilaterally prescribing specific hours of availability, from barring the contractor from using a competing platform except while performing through its own, from restricting other occupations or businesses, and from mandating furnished equipment or tools essential to the work unless law or safety requires it, and the contractor must bear all or substantially all expenses.
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One clause, two acts. Ala. Code 25-5-1(4) and 25-5-1(5) each adopt the 25-4-10(b)(26) exclusion by reference, providing that a marketplace contractor is not an employee and a marketplace platform is not an employer for workers compensation purposes. A drafting condition written into the unemployment chapter therefore controls workers compensation coverage as well, which is the most easily missed feature of Alabama classification law.
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Outside the exclusions, workers compensation status turns on control. Alabama looks to the right of control, either actually exercised or reserved, and treats the reserved right as decisive rather than its actual exercise. Ex parte Curry, 607 So. 2d 230 (Ala. 1992), lists the factors as direct evidence of a right or exercise of control, the method of payment, whether equipment is furnished by the alleged employer, and whether the individual has the right to terminate.
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Alabama has enacted no state minimum wage or overtime law, so wage and hour claims run on the federal Fair Labor Standards Act and its economic realities analysis. A separate definitional provision in the local preemption article, Ala. Code 25-7-41(a)(5), defines an independent contractor as a self-employed individual who meets the Internal Revenue Service definition, and 25-7-41(b) bars counties and municipalities from mandating employment benefits not required by state or federal law.
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Some carve-outs do not depend on the paperwork at all. Ala. Code 25-5-1(4) provides that a common carrier by motor vehicle operating pursuant to a certificate of public convenience and necessity is in no event the employer of a leased-operator or owner-operator of a motor vehicle under contract to it. That is a flat statutory result for workers compensation and does not turn on how much control the carrier retains.
Key decisions before you file
Before you file a Independent Contractor Agreement in Alabama, a few decisions shape the document: which option to choose and what each one means. The Independent Contractor Agreement guide walks through them.
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Alabama Requirements for Independent Contractor Agreement
The qualified real estate agent, direct seller, and product demonstrator exclusions from unemployment coverage each require that the services be performed pursuant to a written contract between the individual and the person for whom the services are performed, and that the contract provide that the individual will not be treated as an employee with respect to such services for federal tax purposes. Without that sentence the exclusion is unavailable regardless of how the work is actually performed.
A marketplace contractor is not deemed an employee of a marketplace platform only where all six listed conditions apply, the first being that the marketplace contractor and the marketplace platform agree in writing that the marketplace contractor is an independent contractor with respect to the marketplace platform. The written agreement is a threshold condition, and the exclusion fails if any one of the other five conditions is not met.
The platform must not unilaterally prescribe specific hours during which the contractor must be available to accept service requests, must not contractually prohibit the contractor from using another platform except while performing services through its own, must not restrict the contractor from engaging in another occupation or business, and must not mandate furnished equipment or tools essential to the work unless law or safety requires it. The contractor must bear all or substantially all expenses, excluding automobile liability insurance premiums.
The Workers Compensation Act definitions of employer and employee each provide that, pursuant to Section 25-4-10(b)(26), a marketplace platform is not considered an employer and a marketplace contractor is not considered an employee for purposes of the chapter. The effect is that a written agreement condition located in the unemployment insurance chapter also governs workers compensation coverage, so the same clause has to be right for both acts.
Employment means service performed by any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee. There is no ABC test, no statutory presumption of employment, and no clause shifting the burden to the hiring business. Classification is decided by applying the common law rules and then checking the enumerated exclusions in 25-4-10(b).
Employee includes every person in the service of another under any contract of hire, express or implied, oral or written. Status turns on the right of control, either actually exercised or reserved, with the reserved right treated as decisive. The factors are direct evidence of a right or exercise of control, the method by which the individual received payment, whether equipment is furnished by the alleged employer, and whether the individual has the right to terminate.
In no event shall a common carrier by motor vehicle operating pursuant to a certificate of public convenience and necessity be deemed the employer of a leased-operator or owner-operator of a motor vehicle or vehicles under contract to the common carrier. The carve-out is absolute for workers compensation purposes and does not depend on the degree of control retained or on the wording of the contract.
Alabama has enacted no minimum wage or overtime statute, so wage and hour coverage and the classification question that goes with it are decided under the federal Fair Labor Standards Act and its economic realities analysis. The only state definition in this area sits in the local preemption article at 25-7-41(a)(5), which defines an independent contractor by reference to the Internal Revenue Service definition, and 25-7-41(b) preempts local ordinances mandating employment benefits.
The same three exclusions that require the federal tax recital also require that substantially all of the remuneration for the services be directly related to sales or other output rather than to the number of hours worked. Where the exclusion is being relied on, the fee provision should be drafted on a commission or per-unit basis, because an hourly or salaried payment term will defeat the exclusion even where the tax recital is present.
Frequently Asked Questions
In most states the written agreement is evidence that supports a classification. In Alabama, for four categories of worker, a specific contract term is the eligibility condition for an exclusion from unemployment coverage. Real estate agents, direct sellers, and product demonstrators fall outside employment under Ala. Code 25-4-10(b)(22) through (b)(24) only if their written contract provides that the individual will not be treated as an employee for federal tax purposes. Marketplace contractors need a written agreement stating independent contractor status under (b)(26).
Two things, and the statute states them in identical terms across all three categories. First, the services must be performed pursuant to a written contract between the individual and the person for whom the services are performed. Second, that contract must provide that the individual will not be treated as an employee with respect to such services for federal tax purposes. The exclusions separately require that substantially all remuneration be directly related to sales or other output rather than to the number of hours worked.
No. Ala. Code 25-4-10(a)(1)b. defines an employee as any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee. The phrases that mark an ABC test, such as free from control, customarily engaged, and independently established trade, do not appear in the section. Alabama is sometimes listed as an ABC state in national comparisons and that is a mistake worth checking before relying on it.
Through a cross-reference. The marketplace contractor exclusion sits in the unemployment chapter at Ala. Code 25-4-10(b)(26), but 25-5-1(4) and 25-5-1(5) adopt it by reference into the definitions of employer and employee for workers compensation. So the written agreement condition and the five operational conditions that go with it decide status under both acts together. Businesses that satisfy the conditions on paper but not in practice lose the exclusion twice over.
No. Alabama has enacted neither, so employers covered by the federal Fair Labor Standards Act pay the federal minimum wage and the classification question for wage and hour purposes is decided under the federal economic realities analysis rather than under any state standard. This matters because the economic realities analysis asks about economic dependence and is broader than the control test used for workers compensation, so the two can produce different answers on the same facts.
No. Nothing in Ala. Code 25-4-10 or 25-5-1 requires notarization, witnesses, a prescribed form, a font, or filing with a state agency. What the statute requires in the four exclusion categories is that the writing exist and that it contain the specified recital. Outside those categories there is no state requirement that the agreement be in writing at all, though a signed document remains the practical way to fix scope, payment, and ownership of the work product.
By the reserved right of control over the means and method of the work. Ex parte Curry, 607 So. 2d 230 (Ala. 1992), holds that the court looks to the right of control, either actually exercised or reserved, and that in the last analysis it is the reserved right rather than its actual exercise that provides the answer. The listed factors are direct evidence of control, the method of payment, who furnishes the equipment, and whether the individual has the right to terminate.
No. The recital is a necessary condition of the named exclusions, not a sufficient one. Each exclusion carries other requirements about how the worker is paid and how the work is done, and outside those categories the classification is decided on the facts under the common law control analysis or, for wage and hour purposes, under the federal economic realities analysis. Classification is fact dependent, and attorney review is an option where the exposure is significant.
For workers compensation purposes, Ala. Code 25-5-1(4) provides that a common carrier by motor vehicle operating pursuant to a certificate of public convenience and necessity is in no event deemed the employer of a leased-operator or owner-operator of a motor vehicle or vehicles under contract to the common carrier. That is a statutory carve-out that does not depend on the degree of control retained, and it applies to that act only rather than to unemployment insurance or to federal wage and hour law.