Can You Pay Your Employees with Bitcoin?

In forward-thinking Silicon Valley, many individuals and businesses have made profitable investments in Bitcoin and other cryptocurrencies. Employers may want to take advantage of healthy appreciation and pay their employees in this increasingly-valuable currency. But employers must use caution. Employment laws still apply to regulate the manner in which a worker must be paid. Wage and hour disputes are more difficult with cryptocurrency, and there is not yet clear case law to define these issues. Employers should consult with an experienced Silicon Valley employment law attorney before making the decision to switch to crypto.

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Wage and Hour Law

The Fair Labor Standards Act (FLSA) requires that employees be paid in “cash or negotiable instruments paid at par.” Cryptocurrencies are not the same as cash. They are not negotiable instruments or any other form of payment recognized by the FLSA. In fact, cryptocurrencies are almost entirely unregulated, and as a result, they have not yet been recognized by the government as currency in any official sense. (The IRS considers Bitcoins to be property.) An employee who has been paid in Bitcoin could sue his or her employer for violations of the FLSA. Even if your employees express a preference for cryptocurrency, this will not excuse an employer’s obligation under the FLSA. Employers also have legal obligations to pay unemployment insurance, payroll taxes, and other legally mandated fees. Paying employees in Bitcoin could complicate these issues, as well, and expose an employer to liability or administrative fines from a variety of state and federal employment agencies.

In some cases, it might be possible to pay employees a bonus in the form of cryptocurrency. Employers should, however, be careful with doing so, because such bonuses can affect the employee’s base rate used to calculate overtime. As cryptocurrencies become more common, it is likely that the issue will be revisited, either in the courts or by the United States Department of Labor. California state law is also likely to be on the cutting edge of cryptocurrency issues. With state legislators heavily involved in the needs of Silicon Valley entrepreneurs, state law could be more favorable – and more timely – on this issue than federal law. A single decision could quickly establish the right to use Bitcoin to pay employees. Until then, however, employers should seek legal advice before giving employees cryptocurrencies as any type of compensation.

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Here in Silicon Valley, technology affects employee relations on a daily basis. This can greatly reduce corporate operating expenses. Let our attorneys help guide your company so that you can meet all legal obligations while effectively using new technologies. Call Structure Law Group at (408) 441-7500 or contact us online. Our skilled San Jose employment lawyers can help you establish employment policies that will protect yourself, your employees, and your business for years to come.