Home Featured Ontario company’s plan to pay half of workers’ wages in crypto it created shot down by labour board

Ontario company’s plan to pay half of workers’ wages in crypto it created shot down by labour board

by HR Law Canada

Two workers have been awarded about $233,000 in back pay after a bid by their employer to pay part of their salaries in a company-created cryptocurrency was rejected by the Ontario Labour Relations Board (OLRB).

It ordered Kinglory Inc. to pay Y.H. and T.H. $116,741.88 each — in Canadian currency — as a result.

Dispute over cryptocurrency compensation

The case stemmed from Kinglory Inc.’s employment contracts with the workers, which stipulated an annual salary of $240,000. However, the employer paid only $120,000 in cash, cheque, or direct deposit, and claimed the remaining $120,000 would be paid in Kinglory cryptocurrency.

The employees contested this, asserting their contracts entitled them to the full $240,000 in legal tender.

Kinglory Inc. argued that the cryptocurrency payment was part of the agreed compensation package. The OLRB, however, found that the company’s payment method violated the Employment Standards Act (ESA), which requires wages to be paid in cash, cheque, or direct deposit.

“The employer has not established that Kinglory cryptocurrency constitutes legal tender,” it said.

The ruling

The board concluded, “The applicants’ base salary was $240,000, and it was not open to the Employer to pay their wages in a method other than those stipulated in subsection 11(2) of the Act—that is by cash, cheque or direct deposit.” It added that the cryptocurrency did not constitute a “greater benefit” under the ESA.

The ruling also addressed the imbalance in bargaining power between employers and non-unionized employees, emphasizing that the ESA must be interpreted in a manner that protects employees.

“These decisions recognize the imbalance in bargaining power between employees and employers,” the board stated, referring to precedents set by the Supreme Court of Canada.

Financial impact on Kinglory Inc.

The OLRB ordered Kinglory Inc. to pay the workers the amounts due for their employment period from March 15, 2021, to December 20, 2021. The ruling calculated that the pro-rated annual salary of $240,000 over the 40-week employment period amounted to $184,615.40. After deducting the payments already made, each employee was entitled to $116,741.88, including vacation pay.

Kinglory Inc. has 30 days from the date of the decision to comply. Failure to pay within this timeframe will result in the ruling becoming Orders to Pay in favour of the Director of Employment Standards, with an additional 10% administrative fee and interest as determined by the Director under subsection 88(5) of the ESA, it said.

Director orders to pay request denied

The two employees also sought Director Orders to Pay (DOTPs) against J.H., a director of Kinglory Inc. However, the OLRB declined this request. It expressed concerns over natural justice, noting that the director had no advance notice his personal liability would be at issue.

“He was never added as a party to these proceedings in his capacity as a director,” it said, questioning the ability to issue an order against him at the end of the proceedings.

Interest on unpaid wages

Additionally, the employees requested that interest on the unpaid wages be applied from January 6, 2023. The OLRB denied this request, citing the Director of Employment Standards’ statement that no method for calculating interest had been set.

Consequently, no interest will accrue on the orders against Kinglory Inc.

“There is no point in doing so since the DES has not exercised its power to set the rate of interest at this time,” it noted.

As cryptocurrency and other non-traditional payment methods become more prevalent, this case serves as a crucial reminder of the legal requirements governing wage payments in Ontario. Employers considering such payment methods must carefully evaluate their compliance with existing labour laws to avoid similar legal challenges.

For more information, see Yujie Hou v Kinglory Inc., 2024 CanLII 59430 (ON LRB).

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