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Employment attorneys caution against using W-2s to verify employment and salary history
Employers may be tempted to ask job applicants for a copy of their W-2 form to verify employment and compensation, but that practice comes with substantial legal risks, according to employment attorneys.
HR professionals may want to look at a job candidate's W-2 for a number of reasons:
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"No federal law prohibits an employer from requesting a W-2 to verify past employment or salary history," explained Nathaniel Glasser, an attorney with Epstein Becker Green in Washington, D.C. He noted, however, that certain state laws may ban such inquiries or prohibit employers from asking for the information found on the form.
For example, Rhode Island law prohibits employers from asking for W-2s and other tax related documents, and
Massachusetts recently passed a law that will ban salary history inquiries until a conditional employment offer is made.
"To the extent there is an advantage to requesting a W-2, it would be to confirm employment gaps, rate of pay and the like when proof doesn't otherwise exist," said John Doran, an attorney with Sherman & Howard in Phoenix.
But Doran and Glasser both said they don't endorse the practice. "Because of the potential pitfalls of asking for W-2s—and other tax documents—to verify past employment or salary history, I generally recommend against requesting this document as part of the recruiting process," Glasser said.
Most workers are familiar with IRS Form W-2 because they receive a copy each year from their employer. The form summarizes a worker's earned wages, withheld taxes and other information that is used to prepare tax returns.
There are several legal risks for businesses that request this document from potential hires. Not only do some states prohibit the practice, some also don't allow employers to request a job applicant's Social Security number until after making a conditional offer of employment, Glasser explained.
Furthermore, some states and local jurisdictions have banned—or are considering banning—salary history questions until an employer extends a conditional job offer.
In additional to Massachusetts, Philadelphia passed a law banning such salary history questions, and California and other states
are considering similar legislation.
Some states may also construe a W-2 request to be an unlawful invasion of privacy, Doran added.
Even where employers are permitted to ask for a W-2, there are many considerations to take into account before doing so, Glasser said.
The W-2 bundles wages, tips and other compensation together, so it may not provide the prospective employer with all the information it seeks about someone's compensation history, he explained. "Nor does it capture middle- or end-of-the-year raises."
Another drawback is that the job candidate may dislike the request and have concerns about privacy and identity theft, he said. "Employers should not be asking for an individual's Social Security number at this stage of the process," he added.
Employers may also open themselves up to claims of discrimination if they don't require a W-2 from all candidates, Doran cautioned. Additionally, he said, because the W-2 conceivably provides information about protected status, employers could be vulnerable to claims of discrimination if the candidate isn't hired.
"Rather than looking at an applicant's past compensation history, employers are better served by evaluating the requirements of the job, conducting market research to determine what range of compensation the industry supports for that position, and paying an appropriate amount based on the job, the market and company performance," Glasser suggested.
Employers that want to verify the accuracy of an applicant's disclosed salary history can later rescind an offer or discharge an employee for lying about it, he added.
"For those employers who do use or are considering using W-2s as part of their verification process, they should make sure applicable state laws do not prohibit requesting the information and that they comply with federal and state law regarding background—including credit—checks," he said.
Glasser also recommended that those employers ask applicants to redact their Social Security numbers from the W-2 and limit the request to just the W-2, without seeking additional tax records.
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