As I attend VeeCon this week in Los Angeles, from August 9 to 11, the event’s dynamic blend of business innovation and cultural exchange has certainly lived up to its billing as a hybrid between Davos and South by Southwest. One panel discussion, “Is It Time For Another Look at Blockchain?”, particularly piqued my interest. The conversation centered on how brands could leverage blockchain to engage their customer communities via Web3 technologies. As an employment lawyer, this discussion prompted me to consider the implications of paying employees in cryptocurrency. Although the fervor around blockchain, Web3, and cryptocurrencies has diminished in recent years, I remain hopeful about the technology’s potential to transform employer practices in the near future.
To delve deeper into this emerging field, I interviewed Robert Hayes, a blockchain enthusiast and seasoned HR expert. His insights painted a vivid picture of the future possibilities and challenges.
“As someone who has been involved in HR for over a decade, I can tell you that blockchain has the potential to revolutionize how we handle employment records, payments, and even recruitment,” Robert began. “Cryptocurrencies like Bitcoin and Ethereum are not just virtual currencies; they exist on the blockchain—a highly secure type of database that allows multiple people to access and record transactions simultaneously.”
So, what does this mean for employers?
“One of the most intriguing aspects is the possibility of paying employees in cryptocurrencies,” Robert continued. “This could be particularly advantageous for multinational companies looking to streamline payments to employees located around the world. However, the legal landscape is not entirely clear on this matter.”
Under federal law, the Fair Labor Standards Act (FLSA) mandates payments of wages in “cash or negotiable instruments payable at par.” This provision ostensibly allows for the possibility of paying employees in cryptocurrencies, provided the conversion rate meets the applicable minimum wage or other required salary amounts. The Department of Labor has even indicated that a combination of U.S. Dollars and foreign currency could satisfy the minimum salary requirement for certain exemptions under the FLSA.
“In California, the Labor Code defines wages as ‘all amounts for labor performed by employees of every description,’ without specifying that wages must be paid in U.S. Dollars,” Robert explained. “This opens the door for the potential use of cryptocurrencies as a form of payment, although there are additional considerations.”
For instance, California Labor Code section 212 prohibits employers from paying employees in “script, coupon, cards, or other things redeemable,” designed to prevent the practice of paying wages in forms of currency only redeemable at the “company store.” Since cryptocurrencies are considered a form of “money,” there is an argument that section 212 does not prohibit payment of wages in cryptocurrency.
“Until there is more guidance, employers interested in paying employees in crypto could take a hybrid approach,” Robert suggested. “By paying the employee minimum wage or the required salary in U.S. Dollars, and offering additional payment in cryptocurrency, employers can avoid many foundational legal issues. However, this hybrid approach still requires careful navigation of federal, state, and local regulations.”
One of the significant challenges in paying employees with cryptocurrency is the volatility of its value. “The value of cryptocurrencies can fluctuate widely within short periods, which presents potential issues,” Robert noted. “Employers would need to establish a clear and fair conversion rate, especially for past unpaid wages or premium wages for missed meal or rest breaks. The question arises: should the employer pay the value at the time of the missed break or the current value, which could have increased substantially?”
Beyond the complexities of cryptocurrency payments, blockchain technology itself offers exciting possibilities for the employment sector. “Imagine a world where educational history, work experience, and certifications are stored securely on the blockchain,” Robert said. “MIT has already issued virtual diplomas recorded on the blockchain, allowing students to share their academic achievements securely. Employers could adopt similar practices for internal certifications, titles, and employment records.”
This digital record-keeping could simplify many aspects of HR, from verifying employment history to ensuring accurate and tamper-proof records. “Employees could share their blockchain-based records when applying for new jobs or verifying their salary for a loan, making the process seamless and highly secure,” Robert added.
As VeeCon continues to unfold, the potential impact of blockchain on employers becomes increasingly apparent. From secure payment methods to innovative record-keeping, the technology promises to reshape the employment landscape. While legal and practical challenges remain, the path forward is undeniably exciting.
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