Can an Employer Pay Workers in Cryptocurrency?

Can an Employer Pay Workers in Cryptocurrency?

The recently elected mayor of New York City announced at the end of last year that his first three paychecks would be accepted as Bitcoin. When digging deeper into this announcement, it turns out that the mayor was automatically converting their paycheck into cryptocurrency via a third party before accepting the funds. This has raised many questions throughout the country, including in California, about whether an employer is allowed to pay their workers in cryptocurrency as this method of exchange becomes more popular. As an employee or employer, it is important to understand the laws regarding cryptocurrency and employment rights. To learn more, talk to an experienced California employment law attorney in your area today.

Paying U.S. Currency or Equivalents

While the idea of paying employees in cryptocurrency like Bitcoin or Ethereum may attract tech-savvy workers to an employer, that company runs the risk of violating wage and hour laws as well as federal securities laws. The issue is that the law has not entirely caught up to the cryptocurrency industry, which leaves substantial room for potential violations of the law if this issue is not handled properly by an employer.

The Fair Labor Standards Act (FLSA) governs wage and hour issues like minimum wage, overtime, and other payment-related issues for employees. Under the law, workers are required to be paid in cash or another negotiable instrument payable at par. In order to comply with the FLSA, the U.S. Department of Labor that enforces the Act does allow companies to pay employees in foreign currencies so long as the amounts paid in that foreign currency meet the necessary thresholds for the FLSA if converted at the time of payment to U.S. currency using the exchange rate listed at the time of payment. However, the law is currently unclear whether cryptocurrency is held to the same standard as foreign currencies of other countries. If so, employees could be paid in cryptocurrency, but if not the employer risks violating sections of the federal FLSA.

State laws must also be followed when employers pay employees. In California, state law prohibits an employer from paying workers with any instrument that acknowledges indebtedness unless it is negotiable and payable in cash on demand. The same law also prohibits an employer from paying employees in any type of scrip, coupon, cards, or other redeemable instrument other than money. It remains unclear at this point whether cryptocurrency meets these requirements of California law. Many states also mandate that employees must be able to access their wages without fees, costs, or other encumbrances, so if the cryptocurrency market imposes any of these on converting their currency to a fiat currency there could be legal compliance issues. To learn more as either an employee or employer, talk to a knowledgeable employment law attorney today.

Talk to a Lawyer Now

Cryptocurrency is one of the biggest game-changers in the financial market, and there are many legal questions that come with this new form of global currency. To learn more, call or contact a lawyer in your area today.