According to a recent article by DLA Piper, more employees are requesting to be paid in Bitcoin. Bitcoin is a virtual or digital currency usually used for online payments. Although Bitcoin has only been around for five or six years and I doubt it will ever be used for the widespread payment of wages, Texas law currently allows for this form of payment.
Texas law and the Fair Labor Standards Act require that employees be paid in U.S. currency, written instrument issued by the employer that is negotiable on demand at full face value for United States currency; or by the electronic transfer of funds. However, Texas law allows for flexibility in the payment of wages and employers and employees may agree in writing to receive part or all of the wages in kind or in another form, including Bitcoin or even Euros. Thus, a Texas employer that was not covered by the FLSA might be able to agree with an employee to make some of employee’s wages payable in cryptocurrency.
When a Texas employer pays an employee in any form other than U.S. currency, it takes a risk that any interruption in that payment can result in the potential liability for unpaid wages. For example, if payment is refused for any reason, the payment attributable to the employer does not constitute the payment of wages. Given the novelty of Bitcoin payments and the potential for security breaches involving Bitcoin payments and accounts, an employer takes unnecessary risks in making payments in anything other than U.S. currency or more traditional negotiable instruments (e.g., checks).
While there does not appear to be a significant demand for payment of wages by Bitcoin, at least one payroll processing company is experimenting with processing payroll using Bitcoin.
To the extent that employees are increasingly requesting payment by Bitcoin, I speculate that the reason for those requests stem from a belief that those payments may be tax exempt or less likely to be reported to the IRS. The IRS has clearly stated that Bitcoin payments are taxable as wages, just as more traditional payments, and must be reported by employers on Form W-2 and employees on their annual return.
Until Bitcoin has a longer track record of success and is used on a more widespread basis by employers, most Texas employers would probably be better served compensating their employees using more traditional forms of payment.
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