Is Paying Wages In Bitcoin Illegal In California?

There was a lot of news last week about Assembly Bill 129, which some described as a bill to “legalize bitcoin in California.” Governor Brown signed AB 129 into law on June 26, 2014. Basically, AB 129 repeals an outdated section of the Corporations Code that prohibited putting any money into circulation other than U.S. dollars.

Although AB 129 is a step in the right direction, there is still a question as to whether bitcoin may be legally used to pay employee wages. Labor Code section 212 states:

(a) No person, or agent or officer thereof, shall issue in payment of wages due, or to become due, or as an advance on wages to be earned:

(1) Any order, check, draft, note, memorandum, or other acknowledgment of indebtedness, unless it is negotiable and payable in cash, on demand, without discount, at some established place of business in the state, the name and address of which must appear on the instrument, and at the time of its issuance and for a reasonable time thereafter, which must be at least 30 days, the maker or drawer has sufficient funds in, or credit, arrangement, or understanding with the drawee for its payment.

The primary issue is whether bitcoin qualifies as an “order, check, draft, note, memorandum, or other acknowledgment of indebtedness.” None of these terms seem to fit the digital currency. Bitcoin might arguably be considered an “other acknowledgement of indebtedness,” insofar as wages are a debt owed to the employee. But the payment of bitcoin would extinguish the debt, leaving nothing left to be acknowledged. Perhaps bitcoin could be construed as a digital “memorandum” or “note.” But that construction fails for the same reason, i.e. bitcoin is not redeemable for money; bitcoin is the money that the parties contractually agreed to pay and accept. Nothing in Labor Code section 212 prohibits the employer and employee from agreeing to payment in Yen or Euros. Nor does the statute prohibit payment of wages in capital assets, e.g. precious metals. Thus, whether bitcoin is considered a currency or a capital asset, it appears that Labor Code section 212 would not prohibit payment of wages in bicoin.

Posted on July 3rd, by in Uncategorized.

Leave a Reply

Your email address will not be published.