Hiring Focused on Skills Over Degrees Gets Boost in Pending Law

Efforts to scale back degree requirements to create inclusive employment practices and attract high-skilled workers will make gains with new federal requirements for agency hiring managers to prioritize skills when evaluating job applicants.

President Joe Biden is expected to sign the Chance to Compete Act into law before his term ends, which aims to overhaul the recruiting and hiring process for federal government jobs to ensure applicants are judged based on their skill sets and competencies, not traditional education accolades.

The legislation, passed Dec. 16, adds momentum to a growing movement among public and private sector employers like Bank of America, Delta Airlines, Google, and International Business Machines Corp., which have reduced their reliance on degrees for some jobs.

Also driving these changes are evolving societal attitudes toward post-secondary education due to concerns about rising student debt and the demand for skilled workers. Relaxing degree requirements can help employers tap into a more diverse pool of qualified candidates with relevant skills, encouraging modernized hiring practices, advocates said.

“Companies are looking for new strategies in a light labor market to help them boost recruitment and retention, and realizing that potentially the degree requirement has historically been boxing out over half of the American workforce,” said Layla O’Kane, director of data analytic solutions at Opportunity@Work, a nonprofit that advocates for skills-based hiring.

Job listings requiring four-year degrees dropped from 51% in 2017 to 44% in 2021, according to a labor market analysis from the Burning Glass Institute, a think tank that studies the economy and workforce trends.

“This doesn’t mean that four-year degree requirements aren’t important. They will always play a big part in our economy, but we are seeking labor shortages across many sections, and one of the barriers for filling these jobs are necessary degree requirements that can be replaced with skills and competency-based approaches,” said Robert Espinoza, CEO of the National Skills Coalition.

“As the landscape on diversity, equity, and inclusion evolves, it’s important for employers and policymakers to access” and ensure underrepresented communities “have equitable access to jobs and industries that lead to economic mobility,” he said.

Bipartisan Push

Skills-based hiring gained widespread bipartisan support in recent years, gaining ground where several other initiatives designed at least in part to boost workforce diversity have been subject to court challenges or legal threats.

Twenty-five states, including California, Florida, and Pennsylvania, have taken various steps to eliminate degree requirements from public sector jobs through either legislation or executive action, according to Opportunity@Work.

The public sector represents the largest employer in many states. Cross-party consensus makes a lasting impact by setting the foundation, and “sends a signal to the private sector,” said Erin White, senior director of corporate initiatives at the Business Roundtable, a trade group representing corporate CEOs.

The federal measure—backed by several labor and employment law trade groups like the Society for Human Resource Management—builds on a series of actions from the Biden administration and President-elect Donald Trump’s first term to reduce the government’s reliance on degree-based hiring as a proxy for skills. It requires federal agencies to conduct technical and skills-based assessments of federal job candidates, rather than the current candidate self-evaluations.

Ahead of the law’s passage, the US Labor Department published a resource guide in November for employers to establish skills-based hiring, promotion, and management practices.

Legal Guardrails

While skills-based hiring helps employers cast a wider net for talent and promotes inclusive hiring efforts, there are legal considerations to avoid costly workplace bias litigation.

Employers implementing skills-based hiring typically use pre-employment assessments to measure prospective workers’ skills and readiness for the job. A bias claim under Title VII of the 1964 Civil Rights Act could arise if an assessment method or degree prerequisite unintentionally screens out members of certain protected groups disproportionately, even if the policies appear neutral.

In such a disparate impact case, the plaintiff doesn’t have to show that the alleged discrimination was intentional.

Guidance from the US Equal Employment Opportunity Commission, the agency that enforces Title VII, indicates that an employer may be legally vulnerable if a job applicant successfully demonstrates that an equally effective assessment method existed that would accurately predict job performance without causing any disparate impact.

The EEOC has brought bias cases concerning pre-hire employment assessment over the years, some of which resulted in settlements. They include a $2.8 million deal from Target Corp. reached in 2015 to resolve claims that it disproportionately screened out applicants for exempt-level professional positions based on race and sex, in violation of the Americans with Disabilities Act.

The commission advises employers to review and validate the application of their pre-employment testing methods and procedures. The agency separately issued guidance on the use of software, algorithms, and artificial intelligence in pre-employment selection procedures under Title VII and the ADA.

Attorneys have urged employers to be vigilant in asking and confirming with third-party vendors conducting human resource functions on their behalf that their services are in compliance with anti-discrimination laws.

The success of skills-based hiring in transforming traditional workplace hiring practices relies on employers who commit to its adoption following through in the long term, White said. It requires a “culture change” of frontline managers and hiring personnel, she added.