I read an interesting article by Justin Brown and Lisa Schreter of Littler Mendelson about the usage of cryptocurrency as a way of paying employees. As if those of us who advise management did not have enough headaches, this nuance adds another unneeded and unwelcome chore to our tasks. As the article notes, cryptocurrency is a “digital peer-to-peer payment system secured and verified through private codes housed on an encrypted public ledger called blockchain, without the use of banks or any other financial institute.” As professional athletes (Odell Beckham, Jr.) and others are being paid in this manner, it seems like it is only a matter of time before employers everywhere will either want to pay or be asked by their workers to pay them in cryptocurrency. This demands a heightened awareness of the pros and cons of this protocol.

The issue is whether it is permissible under the FLSA to pay workers in this manner. Wages must be paid “in cash or negotiable instrument” according to the FLSA. As the article notes, States often have stricter requirements, such as California, which prohibits payment in “scrip, coupon, cards, or other thing redeemable, in merchandise or purporting to be payable or redeemable otherwise than in money.” As cryptocurrency is obviously not cash or otherwise negotiable in this country, employers may run into all kinds of problems (e.g. Wage Payment laws) if they seek to pay hourly or salaried employees with cryptocurrency.

There have been no laws passed (that I know of) in the wage-hour arena addressing this issue. While cryptocurrency is becoming more exchangeable for dollars, there are still many unknowns about this exchangeability and state Departments of Labor may not take a liberal view on its propriety. Therefore, as the Littler article notes, it is safer to pay “straight” wages in traditional American dollars.

It will be harder to use cryptocurrency to pay hourly workers. As this currency fluctuates over time (or from hour to hour, minute to minute) it may be difficult to ascertain the regular rate of pay. This will affect overtime calculations, PTO time and similar matters. If the value of the currency was less on the given day when the employee worked either a regular shift or overtime, a re-calculation would be required. Multiply that single re-calculation by the dozens/hundreds that may be necessary and the scope of the potential administrative burden becomes evident. It would also pose a problem for exempt workers if their weekly salary in a given week fell below the FLSA required minimum (i.e. $684 per week) based on fluctuations.

The Takeaway

The article makes the point, and I agree, that the use of cryptocurrency should be confined to bonuses. There, the problems of the currency not being sufficient as to undermine the minimum wage or overtime laws do not arise and an adjustment, if needed, may be effected more readily. We may be using this currency to pay worker wages and salaries in the (near or distant) future but that will not be until the potential problems and risks for employers are remedied.

Don’t hold your breath…

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