Keith Markel, Alana Mildner Smolow and Vani Upadhyaya Debut Reuters Series on Employment Law and the Digital Assets Industry

Keith A. Markel, Alana Mildner Smolow and Vani Upadhyaya, with input from Jason Gottlieb, debuted a new series for Reuters exploring the relationship between employment law and the digital assets industry. In their first article, “Compensation in Cryptocurrency Tokens and Other Digital Assets: What Employers Should Know,” they discussed the legal implications of offering cryptocurrency tokens as part of an employee compensation package.

The authors wrote that the most glaring question in the digital assets space is whether tokens given as compensation for work constitutes a securities transaction, which would implicate federal securities laws, or if such distributions are more akin to traditional employee bonuses. While thus far, courts have reasoned that tokens given to employees as compensation are not necessarily securities, there are likely to be additional cases that challenge this.

Employers must also consider wage and hour laws, which expressly mandate under the federal Fair Labor Standards Act (FLSA) that wages be paid in “cash or negotiable instrument” to meet minimum wage and overtime exemption threshold requirements. When employees are paid in nontraditional forms of compensation or given various benefits in lieu of cash compensation, employers may find themselves facing allegations that they failed to pay employees at or above the federal, state and/or local minimum wage thresholds.

Another area of frequent wage and hour litigation involves employees claiming that they were misclassified as exempt from overtime and paid a flat salary, instead of receiving time-and-a-half payment for overtime hours. In some cases, non-exempt employees will also allege that their overtime pay rate does not add up to time-and-one-half pay of their regular rate of pay, especially if their compensation might include some other perk, such as a grant of tokens.

The authors concluded that “ultimately, U.S. employers should be mindful that there are many open legal questions when it comes to compensating employees in cryptocurrency, and that paying an employee in U.S. dollars, at least in part, involves less risk that employers will run afoul of securities and wage and hour laws.”

Read the full article here.