When is it acceptable to share employees W-2?

Federal law makes tax returns and tax return information, including W-2 forms,confidential and prohibits their unauthorized disclosure.  As to whether you can release redacted W-2 forms, in 1987 the U.S. Supreme Court held that tax returns are themselves protected from disclosure and, thus, could not be released with redactions.  State courts in Pennsylvania and Colorado have also refused to authorize release of redacted forms.  Of course, you need to speak to an attorney in your area to see if the specific circumstances of your situation may lead to a different outcome.