On April 29, 2020, the Equal Employment Opportunity Commission (EEOC) issued an opinion letter in favor of using the Federal Work Opportunity Tax Credit Form. Even though the WOTC program encourages businesses to hire individuals who consistently face a variety of employment barriers, many employers avoid it due to fears of discrimination claims.
However, according to EEOC’s opinion letter, proper use of Work Opportunity Tax Credit Form 8850 does not violate federal equal employment opportunity laws. The agency confirmed that employers can use the WOTC for hiring individuals with disabilities, veterans, and other underrepresented workers without violating federal anti-discrimination laws. Furthermore, they provided clarification and guidance for employers concerned that participation in the WOTC program may result in discrimination claims or law violations.
Work Opportunity Tax Credit Program Details
The WOTC program is a federal government initiative designed to increase employment opportunities for people who typically experience certain barriers to employment, such as the long-term unemployed, workers with disabilities, people with a criminal history, military veterans, and more. WOTC benefits both employers who can use the tax credit to reduce hiring costs and individuals who would otherwise have difficulties finding a job. In addition to this, by taking eligible workers off other forms of government assistance, WOTC helps saving money for both the federal and state governments.
There is no limit to the number of new hires who can qualify for WOTC, but individuals need to be identified as members of one of ten target groups. The amount of the tax credit is based on a percentage of qualified wages paid to the new employee for the first year of employment only, with the exception of the long-term Temporary Assistance for Needy Families (TANF) recipients. Both the percentage and the cap on qualifying wages vary based on which target group the new employee falls into.
To qualify for the WOTC tax credit, employers need to obtain confirmation of job applicants’ WOTC eligibility status before making an employment offer. Eligible individuals are asked to self-identify using the Work Opportunity Tax Credit Form 8850. This form broadly inquires whether the job applicant qualifies for the WOTC and certifies an individual as a member of a target group.Use this comprehensive guide to find all the necessary information about the WOTC as a cost-effective hiring program that benefits employers and employees in numerous ways.
Equal Employment Opportunity Laws
Work Opportunity Tax Credit Form 8850 questions are likely to cause concerns among employers in relation to potential violations of federal EEO laws. These include the Americans with Disabilities Act’s (ADA) prohibition on pre-offer disability inquiries, the Age Discrimination in Employment Act (ADEA), and Title VII of the Civil Rights Act. However, the EEOC’s opinion letter clarifies that proper use of the Work Opportunity Tax Credit Form does not violate these EEO laws and provides compliant employers a formal legal defense under the ADEA and Title VII.
According to the EEOC, Form 8850’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 confirming response does not reveal whether they have a disability. Still, it is important that employers avoid any changes to the wording of this question and inquire about workers’ WOTC status using the language presented in the Work Opportunity Tax Credit Form 8850.
With regard to questions about whether job applicants are disabled veterans, employers may ask applicants to voluntarily disclose their disability status if they are voluntarily using the information to benefit individuals with disabilities. Given that the WOTC aims to help disabled individuals, such inquiries are permitted as long as the information is voluntarily provided by the applicant and kept confidential by employers.
Age Discrimination in Employment Act and Title VII
The opinion letter also addresses the Work Opportunity Tax Credit Form in relation to the ADEA and Title VII of the Civil Rights Act. EEOC underlines that 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. Furthermore, the Work Opportunity Tax Credit Form 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.
Getting the Most out of the WOTC Program
With high unemployment rates across the nation, the WOTC program continues to assist employers to improve their bottom line while helping employees gradually move from economic dependency into self-sufficiency. Still, some employers keep away from the WOTC process due to fears of discrimination claims.
On the other hand, the EEOC’s opinion letter supports businesses to take advantage of this underutilized tax credit without any fears of discrimination claims resulting from information learned through Work Opportunity Tax Credit Form 8850. The EEOC underlines that employers’ participation in the WOTC program does not violate federal EEO laws and provides a formal defense to claims of discrimination under some circumstances. However, to preserve an employer’s legal defenses, it is necessary to maintain strict compliance with the Work Opportunity Tax Credit Form 8850. Any changes to Form 8850’s language or other requirements can eliminate the applicability of the opinion letter, and its potential use as a defense to federal discrimination claims.
Even though WOTC is often described as a win-win program for both employers and employees, achieving WOTC benefits involves overcoming many challenges. An easy solution to this is to outsource WOTC administration, automate the entire process, and stop missing out on tax credit opportunities. An electronic WOTC solution takes new hires through the questionnaire electronically, by eliminating all administrative challenges and time-consuming steps. As a result, employers ensure efficient capture of available tax credits while reducing the risk of hiring discrimination.