The use of cryptocurrencies has become increasingly common in Indiana as stories of their increasing values have made headlines. Employers may be tempted to attract employees to their companies with offers of compensation with cryptocurrencies like bitcoin. However, under U.S. federal law, this practice could be considered a wage and hour violation.

The Fair Labor Standards Act (FLSA) governs an employer’s right to compensate employers with currencies other than U.S. currency. It allows employers to compensate employees with foreign currencies as long as certain requirements are met when the currency is converted to U.S. dollars, such as compliance with minimum wage standards. Courts have not addressed the issue of whether compensation with cryptocurrencies complies with the FLSA.

The Securities and Exchange Commission (SEC) is also still working to decide if cryptocurrencies should qualify as securities. If they are deemed to be securities, then employers using cryptocurrencies as compensation would be required to comply with relevant state and federal regulations.

One issue that could cause problems with cryptocurrencies as employment compensation is their tendency to fluctuate greatly in value. This could leave an employer open to liability for failure to abide by the minimum wage and overtime laws. For example, if an employee was paid with bitcoin at a rate that complied with overtime and minimum wage standards when the bitcoin was converted to U.S. currency, but if the price of bitcoin suddenly fell, this could potentially leave the employer exposed to liability.

Employers and employees that have questions about wage and hour laws may wish to consult an employment law attorney. Cryptocurrencies present new questions of law that may be addressed by courts as well as state and federal legislatures for years to come. Employers may wish to avoid potential legal problems by getting legal advice early on when they have a question about an employment compensation plan, especially if the issue is unclear under current laws and regulations.