Cryptocurrency has been in the news lately. Its advocates point to features like transparency, decentralization, and a lack of connection to any nation’s laws or banking systems. They tout its potential for replacing national currencies like the dollar or the euro. Critics note that cryptocurrency transactions require tremendous amounts of energy and that it often functions more as a form of investment property than currency. For New Jersey employees, this raises a question that has not received a great deal of attention in the legal world yet. Can employers pay their employees in cryptocurrency? New Jersey’s wage and hour laws seem to suggest that employers cannot, or should not, do this at the present time.
What Is Cryptocurrency?
Cryptocurrency is a type of digital or virtual money. It uses a technology known as “blockchain” to record transactions. A blockchain is an open-source ledger that records every cryptocurrency transaction. It also records the creation of new cryptocurrency, which is a process known as “mining.” These processes are distributed across computers all over the world. The first cryptocurrency, Bitcoin, first appeared in 2008 and remains the largest and most famous example.
In principle, people can use cryptocurrency as a medium of exchange. Few businesses accept cryptocurrency as payment, though. Many people buy and sell cryptocurrency as investments, somewhat similar to the way investors buy and sell stocks and other securities.
Cryptocurrency can experience extreme fluctuations in value. This makes it appealing to investors looking for big rewards from high risks. It makes it less suited as a form of payment.
What Kinds of Payment Do New Jersey Wage and Hour Laws Allow?
The federal Fair Labor Standards Act (FLSA) and the New Jersey Wage and Hour Law (WHL) regulate the payment of wages. They set a minimum wage and require payment of overtime for work in excess of forty hours in a week, with some exemptions.
The regulations implementing both statutes address how employers may pay their employees. FLSA regulations state that employers must pay workers “in cash or negotiable instrument payable at par.” In certain situations, wages may include the “reasonable cost” or “fair value” of “board, lodging, or other facilities” provided to the employee.
WHL regulations contain similar language. The definition of “wages” includes “monies due an employee from an employer for services rendered” and “the fair value of any food or lodgings supplied by an employer to an employee.”
Can Employers Pay Employees in Cryptocurrency?
Whether employers may pay their employees in cryptocurrency depends on whether cryptocurrency is considered to be “money” under the law. No definitive answer exists, but the approach taken by the IRS suggests that cryptocurrency is not “money.”
The IRS issued a notice in 2014 regarding the treatment of cryptocurrency for federal tax purposes. It determined that it is not currency, but rather property subject to federal tax rules regarding capital gains and losses.
Under this view, it seems unlikely that cryptocurrency would meet the definition of “wages” under New Jersey’s wage laws. The courts have not weighed in on the issue, though. An employee or government regulator will probably have to object to payment of wages in cryptocurrency for that to happen.
If you have questions about a dispute with your employer over wages or salary in New Jersey or New York, the knowledgeable employment lawyers at the Resnick Law Group are here to discuss your rights and options. Please contact us online, at 973-781-1204, or at 646-867-7997 today to schedule a confidential consultation.