Cryptocurrency has been making headlines for years now. From Bitcoin becoming legal tender in El Salvador to the joke currency Dogecoin gaining Elon Musk’s advocacy and support, it’s unsurprising that cryptocurrency has captured the attention of investors worldwide. As a result, we’re seeing more employees open to the idea of being paid in cryptocurrency, with some even requesting payment in crypto. So, is it legal to pay employees using cryptocurrencies?
The short answer (for California): don’t pay wages using cryptocurrency, but discretionary bonuses and perquisites may be paid via crypto (assuming your company is able to overcome the significant obstacles to do so).
California Minimum Wage Laws
There hasn’t yet been a test case to determine whether cryptocurrency can be used by employers to satisfy their requirement to pay at least minimum wage in California, nor has the California Division of Labor Standards Enforcement released any guidance on the topic. As a result, it’s best to assume that employers must pay employees at least the minimum wage (including overtime) using a fiat currency.
Unless and until the guidance validating the use of cryptocurrency to pay employees is released, employers should assume it is risky to pay employees using cryptocurrency. If a court or government agency determines an employer did not satisfy its minimum wage obligations by paying in cryptocurrency, the employer would be liable for minimum wage payments, pay stub violations and other related claims and penalties.
Can California Employers Pay Employees in Cryptocurrency For Any Payments in the Employment Setting?
Yes, California employers could use cryptocurrency to pay discretionary bonuses or as a perk for employees. However, there are significant issues that must be addressed before considering doing so, including:
- Fluctuations in value. Cryptocurrencies are known to experience volatility in terms of their value. As a result, there may be calculation issues regarding the conversion rates where fluctuations have occurred either between the time you agree to pay an employee bonus in cryptocurrency and the time it is paid or even between when you complete payroll and when the employee receives the payment. You would need to consider the appropriate course if the value of the cryptocurrency dipped or skyrocketed before payroll paid out the bonus.
- Payment of fees to access the cryptocurrency. You should determine in advance how you will provide an additional amount to compensate the employee for those fees.
- Calculating withholding tax will be complicated.
- Meeting paystub requirements will also be complicated.
If you’re uncertain about your obligations under California employment law, reach out. Our team would be thrilled to help you.
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