Call me a Luddite, but as many of us believe, cryptocurrencies are still too sketchy of an exchange medium for employers to get behind, especially for payment of wages. There may come a time when the government stands behind some form of cryptocurrency to solidify its position as “legal tender,” but it’s not right now.

That said, hypothetically speaking, if an employer and employee get together and agree on cryptocurrency as payment, why not? There are celebrities out their endorsing cryptocurrencies, and two mayors of major cities (Miami and New York) have promoted taking paychecks in cryptocurrency. Why not give it a try?

 A few concerns:

The Fair Labor Standards Act (FLSA) is not very clear on crypto payment as of yet. The federal law generally is wages in a traditional work setting are normally required to be paid in lawful money or negotiable check, payable on demand and without discount.

Many state laws specifically require payment of wages in U.S. dollars.

In Michigan our Payment of Wages and Fringe Benefits Act states:

“Form of payment. An employer or agent of an employer may pay wages to an employee by any of the following methods (Sec. 408.476, as amended by Act 534 (S. 851), L. 2004):
 

1.     payment in U.S. currency.

2.     payment by a negotiable check or draft payable on presentation at a financial institution or other established place of business without discount in U.S. currency.

3.     direct deposit or electronic transfer to the employee's account at a financial institution.

4.     issuance of a payroll debit card to the employee.”
 

Beside the issue of payment by U.S. currency (Item 1 above), will any given financial institution accept cryptocurrency for deposit? (Item 2 above) Since one of the “values” of cryptocurrency is it being outside of the financial system, requiring the payment of wages to go through a “financial institution,” even if it would be accepted by a bank, would eliminate the “value” to the employee outside of the financial system,

One significant advantage of crypto is that it can be paid immediately and almost anywhere in the world for the services of remote workers. Crypto is arguably faster and more efficient compared to the process of transmitting pay internationally. It also avoids bank fees and other administrative costs – a particular value for small transactional amounts. But the above depends on where the cryptocurrency is being sent. Some countries such as Egypt and Pakistan are banning cryptocurrency.

The other area of uncertainty is the tax treatment of cryptocurrencies. Does the law treat cryptocurrencies as actual money or is it more of a commodity? Consult with a qualified expert on this concern.

One more basic concern of a businesses seeking to pay workers in bitcoin is acquiring it. This will require mining it, purchasing it, or receiving it as part of the day-to-day business activity.

Payments to contractors (or employees should it become legal) would be in dollar equivalencies at the time of transfer. This can be done manually, but that can leave parties open to human error. There is now software that can do crypto payroll. One is called PaymentX.

The above just scratches the surface of employer concerns around cryptocurrency as wages. As a Luddite on this, my concern would be getting paid in cryptocurrency that had a value of say “10,” and the next day (instead of value the cryptocurrency going up) due to weakness in the cryptocurrency market, it is only worth 8. We have seen this happen in just the past couple weeks as cryptocurrency has lost up to 15% of their value due to volatile market conditions.

The above concerns are for your consideration so you may be prepared when an employee asks if you would consider paying his or her wages in cryptocurrency.

Sources: CCH HR Answers Now Three Wage and Hour Predictions For 2022: Pay Incentive Class Actions, Cryptocurrency Pay, And Multistate Class Actions — EXPERT GUIDANCE (Jan. 18, 2022); Yahoo Finance Morning Brief 1/24/2022