We write business insurance in Mississippi, Alabama and Tennessee, and this is one of the three or four questions we get most: do I have to carry workers’ comp yet?

The short answer is that all three states put the line at five employees. The useful answer is that all three define the five differently, and the differences are exactly where employers get caught.

First, the disclaimer, because it’s earned: this is general information, not legal advice. The state agencies are the authority on who has to carry coverage, and your specific facts can change the answer.

What each state actually says

Mississippi. The Mississippi Workers’ Compensation Commission states that all employers with five (5) employees regularly employed are required to provide workers’ compensation insurance coverage. Note the phrase regularly employed — the count isn’t a snapshot of who clocked in this morning.

One honest caveat about that citation. The live, fetchable Commission document stating the five-employee threshold is a 2013 fact sheet. We’re citing it as what it is — a 2013 publication — rather than dressing it up with a current date. Alabama and Tennessee both sit at five as well, which is corroborating but not confirming. Before you make a hiring or coverage decision on it, confirm the current rule directly with the Commission.

Alabama. The Alabama Department of Labor states that any business that has five (5) or more employees, other than contractors, is required by law to have workers’ compensation coverage. Those three words are doing a lot of work, and ADOL states only that — it does not spell the exemption out further on that page. If you’re a contractor, or you hire them, that’s a question for the Department, not for a rule of thumb.

Tennessee. The Bureau of Workers’ Compensation states that generally, Tennessee employers not in the construction or coal mining industry with five (5) or more full- or part-time employees are required to carry workers’ compensation insurance on those employees. Two things jump out: construction and coal mining are carved out and handled on their own terms, and Tennessee says plainly that part-time employees count.

Same number. Three different fences around it.

Why “we only have four employees” is a riskier position than it sounds

Four is one hire away from five. It’s also one definition away from five.

The count isn’t your gut feel about who’s full-time. Depending on the state and the facts, it can pull in part-timers, seasonal help, family members on payroll, and people you’ve been calling independent contractors who don’t actually meet the test for it. Tennessee’s own language says full- or part-time. Misclassification is the classic way a four-employee business turns out to have been a six-employee business the whole time.

And the exposure isn’t theoretical. U.S. private industry employers reported 2.3 cases per 100 full-time equivalent workers in 2024, down from 2.4 cases in 2023. That’s a small rate right up until it’s your employee, your medical bills, and — without comp — your business sitting directly in the path of the claim.

There’s a second reason to carry it before you’re required to. Contracts. General contractors, property managers and commercial customers routinely require workers’ comp regardless of what the state says, and “we’re under the threshold” doesn’t win you the job.

What counts as an employee

This is the part worth slowing down on. Broadly, the questions that decide it look like:

  • Who controls how and when the work gets done?
  • Who supplies the tools, the truck, the materials?
  • Is the person free to work for others, or effectively working for you full-time?
  • How are they paid, and are they on payroll?
  • What do the state’s own rules say about officers, owners and family members?

Different states weigh those differently, and the label on the paperwork is not the last word. If you’ve got a “1099 guy” who’s been on your crew every day for two years, get an answer in writing from the state before you assume he doesn’t count.

The state-line problem — and why Belmont sits right on it

Belmont is roughly ten miles from Alabama. Plenty of local businesses have a shop on the Mississippi side and regular work on the Alabama side, or crews that live in one state and work in the other.

Workers’ comp is a state system. Which state’s system applies depends on where the work is performed, where the employee was hired, where the business is domiciled — and those can point in different directions on the same crew. A business with employees on both sides of the line is potentially answering to two regimes with two sets of exemptions, and Alabama’s contractor language means the Alabama answer may not mirror the Mississippi one for the same worker.

The practical version: if any part of your operation crosses a state line, tell your agent that before the policy is written. Getting the states listed correctly on the front end is a great deal cheaper than discovering the gap when a claim is filed in the wrong state.

A Five-Step Threshold Check

  1. Count every person who performs work for you — full-time, part-time, seasonal, family — not just the ones on the full-time payroll.
  2. Review anyone classified as an independent contractor against the state’s actual test, not habit.
  3. Identify which states work is physically performed in, and where each employee lives and was hired.
  4. Read every contract you’ve signed for a workers’ comp requirement that applies regardless of your headcount.
  5. Confirm the current rule with the state agency — MWCC in Mississippi, ADOL in Alabama, the Bureau of Workers’ Compensation in Tennessee — and then build the policy to match.

Our workers compensation page walks through how we place coverage for employers in all three states, including businesses whose crews cross the line. If you have employees, this is usually required — and even when it’s not, it can save your business.

Coverage descriptions here are general and policy language governs. State requirements are set and interpreted by the state agencies.

Not sure which side of the threshold you’re on? Call or text 662-454-7831. We’ll walk your headcount and your work locations with you in plain English, then shop it across 20+ carriers. No runaround.