On April 29, 2020, the Equal Employment Opportunity Commission (EEOC) issued an opinion letter reiterating its position that proper use of Internal Revenue Service Form 8850 for the Federal Work Opportunity Tax Credit (WOTC) does not violate federal equal employment opportunity laws. The opinion letter provides useful clarification and guidance for employers concerned that participation in the WOTC program may violate federal equal employment opportunity (EEO) laws and result in discrimination claims.

WOTC and Form 8850

The WOTC encourages “employers to hire and train people who are experiencing severe difficulties that are often linked to unemployment,” such as recipients of certain federal and state assistance programs, individuals who have completed or are completing certain rehabilitative services, and certain individuals convicted of felonies, by offering them tax credits. To qualify for the WOTC tax credit, employers must “obtain official confirmation of job applicants’ WOTC eligibility status before” making an offer of employment.

Eligible individuals are asked to self-identify using Form 8850, which, in Box 2, broadly inquires as to whether the job applicant qualifies for the WOTC as:

• A “member of [a] family that has received assistance from [Temporary Assistance to Needy Families] TANF for any 9 months during the past 18 months”;

• A “veteran and member of a family that has received [Supplemental Nutrition Assistant Program benefits] food stamps for at least 3 months during the last 15 months;

• An individual referred by “a rehabilitation agency approved by the state, employment network under the Ticket to Work program, or [the U.S.] Department of Veterans Affairs”;

• An individual “convicted of a felony or released from prison for a felony” during the past year;

• A recipient of “supplemental security income (SSI) in any month ending during the past 60 days”; or

• A veteran unemployed “for a period or periods totaling at least 4 weeks but less than 6 months during the past year.”

“Form 8850 also asks several separate questions, including two about whether the job applicant is a veteran entitled to compensation for a service-connected disability.”

In the past, employers have raised concerns about whether these questions violate federal EEO laws, including the Americans with Disabilities Act’s (ADA) prohibition on pre-offer disability inquiries, the Age Discrimination in Employment Act (ADEA), and/or Title VII of the Civil Rights Act. The opinion letter clarifies that proper use of Form 8850 does not violate these EEO laws and provides compliant employers a formal legal defense under the ADEA and Title VII.

ADA

Title I of the ADA prohibits covered employers from making pre-offer “disability-related inquiries,” which the EEOC has defined broadly as questions “likely to elicit information about a disability.”

In the opinion letter, the EEOC explains that box 2’s broadly framed question is not a “disability-related inquiry” because it prompts affirmative responses from both workers with disabilities and those who qualify for WOTC “for reasons unrelated to a potential disability.” As such, an applicant’s “yes” response does not reveal whether he or she has a disability. The EEOC cautions, however, that any changes to the wording of this question may change the analysis. Therefore, employers may want to inquire about workers’ WOTC status using the exact language in Form 8850.

In addition, Form 8850 poses questions in boxes 4 and 5 about whether job applicants are disabled veterans. While these are disability-related inquiries, which are generally banned, the EEOC explains they are subject to an exception. Specifically, the EEOC points to its ADA Pre-Employment Guidance, whereby it explains that employers may invite applicants to voluntarily disclose their disability status “if the employer is voluntarily using the information to benefit individuals with disabilities.” Because the purpose of the WOTC program is to benefit disabled individuals, the EEOC takes the view that these inquiries are permitted provided the information is voluntarily provided by the applicant and held confidentially by the employer.

The opinion letter goes on to note that Form 8850 may also be supported by an ADA regulation providing for an “other Federal laws defense.” Because, “under the WOTC, employers must know whether an applicant falls into the service-connected disabled veteran eligibility category before making an employment offer to receive the tax credit”, the EEOC takes the position that “obtaining the information requested on Form 8850” may be permissible because it “is necessitated by another federal law.”

In addition, the EEOC notes that the ADA permits “employers to comply with any laws that afford individuals with disabilities equal or greater rights.” Because the WOTC program invites “applicants to self-identify for the purpose of benefiting from potential affirmative action in a hiring decision, an employer’s invitation to voluntarily self-identify does not violate the ADA.”

ADEA and Title VII

The opinion letter briefly addresses Form 8850 relative to the ADEA and Title VII. With respect to the ADEA, the EEOC notes that the statute does not prohibit employers from asking age-related questions. They further explain that the WOTC does not violate the ADEA because applicants who enable an employer to qualify for the tax credit include individuals both under and over age 40, and Form 8850 does not identify into which category a particular applicant falls. Therefore, an employer’s hiring decision is based on the ability to obtain the tax credit, not an applicant’s age. Similarly, the EEOC explained that Form 8850 does not put an employer in the position of violating Title VII, because it does not ask whether “an individual belongs to a particular Title VII protected group.”

Key Takeaways

The opinion letter usefully guides employers wishing to participate in the WOTC program by (1) reiterating the EEOC’s view that employers’ participation in the WOTC program, by itself, does not violate federal EEO laws; and (2) in some circumstances, providing a formal defense to claims of discrimination. However, strict compliance with Form 8850 is required to preserve an employer’s legal defenses, and any deviation from Form 8850’s language, or other requirements, could eliminate the applicability of the opinion letter, and its potential use as a defense to federal discrimination claims.