With the spectacular crash of the centralized cryptocurrency exchange FTX and the potential bankruptcy of a second high-profile cryptocurrency exchange called BlockFi, now is a good time to revisit whether an employer would want to pay or employees receives all or part of their wages in Bitcoin or other cryptocurrency.
Let’s go back to 2014: Guardians of the Galaxy was a box office hit, Russell Wilson and the Seattle Seahawks were the defending Super Bowl champs, Taco Bell finally released a breakfast menu, and we first wrote about paying employees with cryptocurrency. So what’s new in the eight years since we first wrote about cryptocurrency? Not much.
Over the past several years, Bitcoin and other various forms of digital cryptocurrency have skyrocketed in popularity. This popularity is shown through celebrities and politicians taking their salaries, at least in part, in Bitcoin (e.g., Aaron Rodgers and New York Mayor Eric Adams). Despite this popularity, several crashes and bear markets have plagued the cryptocurrency market. While some employees may find pleasure in receiving Bitcoin that is on a decline, others – and the FLSA – do not.
The volatility of the cryptocurrency market, which can best be described as very high when its high and very low when its low, may expose Texas employers to liability for unpaid wages. One crash, which occurred as recently as last week, has failed to recover in light of the exchange company FTX’s bankruptcy filing announcement. This announcement, which raised security concerns regarding the exchange platform, was as unexpected as it was detrimental to the world of cryptocurrency. In fact, over a week later, the future of the digital market is still in fluctuation. So, what does this have to do with Texas employers?
Texas law allows for employers and employees to agree, in writing, for an employee to receive part or all of their wages either in kind or in another form—including Bitcoin or cryptocurrency. The FLSA, however, requires the compensation required by law (i.e., salary, minimum wage, and overtime) to be paid in cash or negotiable interest payable at par. Because the FLSA supersedes Texas law when the two conflict, Texas employers are limited to paying bonuses, commissions and sums in excess of minimum wage and overtime in cryptocurrency. If a Texas employer wants to pay these sums cryptocurrency, and the employee wants to accept that method of payment, they must make an agreement in writing to do so. The agreement should clearly outline the payment structure and the risks associated with such payment, including the potential for a decrease in worth between the time of payment and the payment’s receipt. As a reminder, however, for non-exempt employees, bonuses and commission still must generally be included in the employee’s regular rate of pay—making this strategy even riskier in terms of FLSA compliance.
Texas employers cannot always accurately predict the market. However, they can minimize their risk of running afoul of the FLSA by paying their employees through more traditional methods of payment. As the old saying goes, if it isn’t broke, don’t fix it – and the traditional payment methods (when paid correctly) aren’t broken.