Not only should it have been reported on his W-2, it was subject to income tax withholding including social security and medicare tax.
Your son should ask for a corrected W-2. Then he can file an amended return. I suspect the company doesn't want to issue a corrected W-2 because they would have to pay both the employee half and employer half of social security and medicare tax, and they don't want to pay both halves. Presumably they could garnish your son's wages for your son's half of those taxes, but they would still have to pay their own half.
If they refuse to issue a corrected W-2, your son can file an amended return using form 4852, that will assess him his half of social security and medicare tax in addition to income taxes.
But unfortunately, the ability for a business to cover employee moving expenses tax-free was eliminated for 2018 through 2025 by the 2017 tax reform law. The company is correct that the reimbursement should have been taxable, although they are handling it in an incorrect way and they should really issue a corrected W-2.
