"he is insisting that his employer did not include the income in his W-2"... so, you haven't seen his compensation breakdown?  I'd start with that just to make sure nothing is amiss.  I'd get proof that the election was filed on a timely basis with both and that the RS does qualify.

The employer's refusal to recognize the election would also have a knock-on effect on dividends; if any is paid, it'd be reported as compensation on his W-2 instead of normal dividend.