In a sweeping shift, the Department of Labor (DOL) has proposed to rescind nearly all affirmative action requirements that apply to federal contractors under EO 11246 and Section 503.

The changes, outlined in recent Notices of Proposed Rulemaking (NPRM) and reinforced by DOL’s FY 2026 Budget document, would dismantle decades of compliance obligations related to race, gender, and disability-based affirmative action.

The budget seeks to eliminate the Office of Federal Contract Compliance Programs (OFCCP) entirely and shift its enforcement responsibilities to other agencies. Specifically, oversight of affirmative action obligations for veterans under Vietnam Era Veterans Readjustment Assistance Act of 1974 (VEVRAA) would move to the Veterans’ Employment and Training Service (VETS), and Section 503 responsibilities would be transferred to the Equal Employment Opportunity Commission (EEOC).

Key Proposed Changes

Rescission of EO 11246 Regulations
The first NPRM confirms that contractors would no longer be required to prepare affirmative action plans related to race, ethnicity, or gender; request demographic self-identification from applicants; conduct pay equity analyses; run adverse impact reviews; or comply with internet applicant tracking requirements. It would also end the obligation to identify as a federal contractor when filing EEO-1 reports. Contractors with 50 to 99 employees would also no longer be required to file EEO-1 reports under federal contracting rules, as the proposed rescission would eliminate the specific regulatory trigger that imposed this obligation.

Rollback of Section 503 Requirements
The second NPRM proposes to eliminate self-identification invitations and the longstanding seven percent utilization goal for individuals with disabilities. The DOL argues that these requirements conflict with the Americans with Disabilities Act (ADA), which prohibits most disability-related inquiries before a job offer and limits post-offer inquiries to those that are job-related and consistent with business necessity.

Legal Foundation

The DOL points to the Supreme Court’s 2023 decision in Loper Bright Enterprises v. Raimondo as a basis for rescinding earlier regulatory interpretations that may exceed clear statutory authority. Citing both the ADA and Loper Bright, DOL signals a more literal and constrained reading of what federal regulations can require.

Next Steps for Contractors

The public comment period for both NPRMs runs through September 2, 2025. As of now, the proposed rules have not been finalized, and no effective date has been announced.

Together, these proposals reflect a dramatic shift in policy, but they are not yet in force. OFCCP has issued a bulletin confirming that it intends to complete open audits under Section 503 and VEVRAA. Contractors currently undergoing compliance reviews should maintain all documentation and continue cooperating with the agency until further notice.

For more information on this and related issues, contact the authors Kenneth Rosenberg at krosenberg@foxrothschild.com and Kelly McNaughton at kmcnaughton@foxrothschild.com or another member of the firm's Federal Government Contracts or Labor & Employment teams.

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