In recent years, more consumers, merchants, and financial institutions have accepted cryptocurrency as a form of payment for everyday products and services. Last November, mayors of two major U.S. cities signaled what may be the next phase of cryptocurrency’s melding into the mundane, when they announced they would accept paychecks in cryptocurrency. On Twitter, Mayor Francis Suarez of Miami said he would accept his next paycheck in Bitcoin, to which Mayor Eric Adams of New York responded that he would accept his first three paychecks in Bitcoin.
Just as the Mayors are trying to project their cities’ images as leaders in the technology and the crypto-wave, employers are considering paying employees’ wages or other compensation in cryptocurrency in order to position themselves as forward-thinking companies that embrace change and the new. Relatedly, employees may want to be paid in cryptocurrency because of its potential to grow in value. Some experts predict that Bitcoin’s price will continue to grow to $100,000, and therefore some employees may want a portion of their salary to be paid in this dynamic form as a way to structure part of their income as a long-term investment as soon as it’s paid.
Before taking the plunge, however, employers should take note of the New York’s Office of the Mayor’s January 20, 2022 press release on Mayor Adams’ cryptocurrency paycheck:
Due to U.S. Department of Labor regulations, New York City cannot pay employees in cryptocurrency. By using a cryptocurrency exchange, anyone paid in U.S. dollars can have funds converted into cryptocurrency before funds are deposited into their account.
Here are some things employers should keep in mind if they are considering paying their employees in cryptocurrency.
Employees Must Be Paid in U.S. Currency or Its Equivalent
The Fair Labor Standards Act (FLSA) is the key federal legislation that governs many aspects of both public and private employment in the United States. The FLSA oversees wage-related topics, including minimum wage and overtime pay, and the relevant regulations explain the FLSA requires “payment of the prescribed wages, including overtime compensation, in cash or negotiable instrument payable at par.” Although there are some exceptions to this rule (e.g., in certain situations, the FLSA permits employers to count “food, housing, or other facilities” as wages), in general, employers are left with two options for paying FLSA-prescribed wages: cash or negotiable instruments “payable at par,” which means payable at face value.
In a May 2006 opinion letter, the Department of Labor (DOL) provided guidance on what constitutes a negotiable instrument payable at par. There the DOL permitted an employer to pay its employees with foreign currency in combination with U.S. dollars to satisfy the minimum salary requirement of the FLSA’s executive, administrative, and professional exemption. The foreign currency was an acceptable wage when it met the relevant FLSA threshold after being exchanged into U.S. dollars using the “exchange rate current at the time of payment (i.e., the rate generally available to an individual person in the vicinity where the employee is working).” The DOL and courts interpreting the FLSA have yet to indicate whether cryptocurrency is considered functionally similar to foreign currency and therefore a negotiable instrument payable at par. Accordingly, employers should be cautious if they proceed with paying wages directly in cryptocurrency.
State Considerations
As always, employers must also take relevant state and local laws into account when formulating compensation plans. The majority of states have laws …….
Source: https://www.lexology.com/library/detail.aspx?g=71dae7da-f4a4-4a53-b796-d45c7d687f36