House Bill Incentivizes Skills-Based Hiring

Legislation would provide employers safe harbor with EEOC

Roy Maurer By Roy Maurer November 1, 2022
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​Organizations would be encouraged to prioritize job applicants' skills and competencies over educational requirements under recently proposed legislation.

The Advancing Skills-Based Hiring Act, introduced by Rep. Elise Stefanik, R-N.Y., would boost skills-based hiring by first ensuring an employer's pre-employment assessments are compliant with the law.  

Specifically, the bill would support employers seeking to adopt skills-based hiring practices through technical assistance from the Equal Employment Opportunity Commission (EEOC). The agency would review the validity of employment tests and selection procedures and provide a safe harbor for those employers that participate in the voluntary compliance initiative.

"The bill is designed to alleviate some of the uncertainty employers may feel about using assessments and testing for hiring," said Tony Dick, an attorney in the Cleveland office of Fisher Phillips. "The EEOC reviews your program and decides whether it is job-related and consistent with business necessity. That would be very enticing for a lot of employers, especially big employers who use these tools nationwide and don't currently have the backstop of the EEOC weighing in and letting them know their tool is compliant."   

Trouble with navigating federal employment laws and regulations on the use of pre-employment assessments can prevent employers from using skills-based hiring, Stefanik said.

"The federal government should remove barriers for employers who want to use skills-based hiring to strengthen their workforce," she said. "While millions of Americans remain out of the workforce in the midst of a labor shortage, I am committed to helping employers broaden their applicant pool and identify talented workers who have gained skills outside of postsecondary education."

The Society for Human Resource Management (SHRM) supports the proposal.

"Skills-based hiring better recognizes the abilities of all workers, regardless of where these skills are learned," said Emily M. Dickens, SHRM chief of staff and head of government affairs. "We applaud this effort to support employers in building more equitable and inclusive hiring practices while ensuring appropriate safeguards for workers."

Interest in skills-based hiring has grown as employers continue to deal with one of the tightest labor markets in years, particularly in sectors like technology and manufacturing, Dick said. But the rub for employers is the uncertainty in whether their skills-based testing tools are compliant with the law, he added.

"Employers have earnestly set out to conduct skills-based hiring only to find themselves on the wrong end of an enforcement action, which could reach settlements in the range of millions of dollars," he said. "This may have led to some trepidation in the past in implementing some of these assessment tools."

The legislation would allow employers to voluntarily submit assessment validity evidence to the EEOC for proactive review and ensure employers can participate in the voluntary compliance initiative without risk.

"The bill gives employers a definite yes or no answer as to whether or not they are in compliance when using their chosen assessments and explicitly states that the EEOC can't use information garnered from the review to initiate an enforcement action," Dick said. "I would think a lot of employers would be interested in participating in a program like this if it came to fruition."

The proposal calls for a "reasonable fee" for employers with more than 100 employees to pay before a review is conducted, to help defray the cost to the agency.  

Shift to Focus on Skills

Hiring based on a candidate's skills and performance rather than formal qualifications has taken corporate talent acquisition by storm.

Bipartisan lawmakers and both the Trump and Biden administrations have also recognized the importance of skills-based hiring and have worked toward moving the federal government in that direction, as well.  

According to research from Harvard University professor Joseph Fuller, more employers are resetting degree requirements to de-emphasize four-year degrees after decades of degree inflation. 

Analyzing data from Lightcast, a leading labor market analytics firm, Fuller found that the reset began in earnest during the tight employment market of the late 2010s as the demand for talent far surpassed supply.

Between 2017 and 2019, employers reduced degree requirements for 46 percent of middle-skill positions and 31 percent of high-skill positions. Among the jobs most affected were those in IT and management.

The COVID-19 pandemic and ongoing disruption to the labor market has reinforced the trend, pushing more employers to forgo degree requirements to fill in-demand roles, Fuller said.

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