I was thinking about this at the negotiation stage, before hiring occurs. I can't imagine that an employer would try this after the hiring stage.
As for salary information, there are other ways to know how much someone else is making without accessing "confidential information". You can find out socially (e.g. from them), knowing their performance combined with position, etc.
EDIT: It is worth noting that these are facts I consider when I am interviewing for a new job, not something I put into practice. I wouldn't tell my current employer this information about a perspective hire, nor would I as an employer ask for this information.
Right you are correct, I think we are speaking past each other and that may be my fault, I read somewhere in the thread about the risk of being terminated if the employer found out and my point was more to that fact.
But yes, you do run the risk of not getting the job for being perceived as lying. For me personally as a (small I employ 4 guys) employer, it would not amount to a hill of beans to me, if I found out a prospect inflated his salary.
I just have a hard time viewing it as lying in the traditional sense. Culturally we negotiate when it comes to jobs and if I asked someone to hand over information that would give me a strong advantage at the negotiation table, I would expect that information to not be accurate.
The only reason to ask that question is to strengthen your position at the negotiating table, so in effect the person asking is being just as dis-ingeniousness as the person inflating. To call foul on the other guy for trying to strengthen his position when the other side is doing the same, reeks of a double standard.
As for salary information, there are other ways to know how much someone else is making without accessing "confidential information". You can find out socially (e.g. from them), knowing their performance combined with position, etc.
EDIT: It is worth noting that these are facts I consider when I am interviewing for a new job, not something I put into practice. I wouldn't tell my current employer this information about a perspective hire, nor would I as an employer ask for this information.