The future of federal contractor compliance is undergoing one of its most significant renovations in decades. In its Fiscal Year 2026 (FY 2026) proposal, the U.S. Department of Labor (DOL) recommends eliminating the Office of Federal Contract Compliance Programs (OFCCP), the agency historically responsible for enforcing affirmative-action requirements and anti-discrimination rules for federal contractors.
For employers, particularly those holding federal contracts or subcontracts, this proposal raises serious questions about legal obligations, compliance planning, enforcement risk, and future reporting requirements. Understanding how we got here and what may come next is crucial as the regulatory landscape evolves.
How We Got Here: The Undoing of EO 11246
For more than half a century, Executive Order 11246 served as the backbone of affirmative-action and anti-discrimination enforcement for federal contractors. It required contractors to maintain written affirmative-action programs (AAPs), conduct annual workforce analyses, and comply with rigorous audit and reporting expectations. The OFCCP, a division of the federal DOL, was the Agency charged with enforcing all of this.
This infrastructure collapsed in early 2025. Executive Order 14173 revoked EO 11246 entirely, sweeping away the legal foundation for OFCCP’s core enforcement activities. As a result, the agency experienced dramatic downsizing, shrinking from 55 field offices to just 4, and from 479 employees to roughly 50. What had once been a nationwide civil-rights enforcement arm was reduced to a small, limited-function office.
Still, not everything originally enforced by the OFCCP disappeared. In July 2025, the DOL issued Secretary’s Order 08-2025, authorizing OFCCP to resume enforcement under two statutes Congress, not the President, had assigned to the agency:
- Section 503 of the Rehabilitation Act of 1973 (“Section 503”), which prohibits disability discrimination by federal contractors; and
- The Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA), which protects certain classes of veterans.
Though enforcement authority was restored, OFCCP simultaneously announced it would close all pending compliance reviews and would not require new Section 503/VEVRAA AAP certifications “at this time.” Enforcement resumed mostly in theory, but not at the level employers had historically experienced.
The FY 2026 Proposal: Eliminate OFCCP and Transfer Its Duties
The DOL’s FY 2026 budget goes further; it proposes zeroing out OFCCP’s funding entirely, formally ending the agency. Under the proposal:
- VEVRAA enforcement would move to the Veterans’ Employment and Training Service (VETS); and
- Section 503 enforcement would shift to the Equal Employment Opportunity Commission (EEOC).
The Administration argues that because EO 11246 has been rescinded, OFCCP’s remaining mission is too narrow to justify maintaining the Agency. However, Congress must approve the budget, and the two chambers are split. The House Appropriations Committee approved eliminating OFCCP’s funding, but the Senate Appropriations Committee rejected elimination and instead provided $106 million (a modest 4.5% reduction from prior levels, but far from zero). Until Congress finalizes an appropriations bill, OFCCP’s fate remains uncertain.
The Legal Wildcard: Can Enforcement be Transferred?
Even if Congress approves the elimination, one major legal question lingers: Does the DOL have the legal authority to transfer Section 503 enforcement? Section 503 explicitly assigns enforcement responsibility to the Secretary of Labor, not to the EEOC or any other agency. Moving such authority may require congressional action, not simply an administrative decision. This issue could draw litigation from contractors, advocacy groups, and states, potentially delaying or even blocking any transfer.
The same concerns apply to VEVRAA. Although the proposed move to VETS creates fewer legal complications, it still represents a fundamental restructuring of long-standing enforcement mechanisms.
In short, the proposed transitions are not legally guaranteed and could be tied up in litigation well into 2026.
What This Means for Federal Contractors Right Now
For employers, the most immediate consequence of EO 14173 is clear: the federal government’s affirmative-action requirements for women and minorities under EO 11246 are no longer in effect. This means:
- No mandatory written AAPs for women and minorities;
- No OFCCP-driven audits under EO 11246;
- No utilization goals or disparity analyses;
- No compensation-system reviews under EO 11246; and
- No annual certification through the OFCCP Contractor Portal.
From an administration perspective, the compliance burden under EO 11246 has effectively been erased.
However, this does not mean federal contractors are free of all compliance obligations. Section 503 and VEVRAA remain active federal laws. While enforcement may diminish during the transitional period, employers must still comply with the following:
- Disability nondiscrimination and reasonable accommodation requirements;
- Veteran nondiscrimination requirements;
- Required job listing, outreach, and compliance documentation for protected veterans; and
- Policies that ensure nondiscrimination in hiring, compensation, and advancement.
In practice, the enforcement environment may become more reactive and complaint-driven. Agencies like the EEOC are not structured for proactive contractor audits in the way the OFCCP was, meaning systemic reviews may become rare. Weaker federal oversight may also lead to more private litigation, as employees and advocacy groups seek enforcement through the courts instead of administrative processes.
The Employer Perspective: Risks and Opportunities
For many contractors, the proposed elimination of OFCCP brings a sense of relief. The Agency’s audits were often lengthy, resource-intensive, and document-heavy. If the OFCCP is dissolved, many employers will experience reduced administrative burden, lower audit risks, and cost savings.
Yet, with that relief comes new challenges.
- Compliance Uncertainty: The regulatory structure is in flux. Contractors must be careful not to assume obligations have disappeared when the statutory requirements remain intact.
- Litigation Risk: If federal oversight weakens, plaintiffs’ attorneys may see an opening. Disability-related claims in particular may rise, especially as the EEOC assumes greater responsibility.
- Contractual Risk: Federal contracts may still include (outdated) nondiscrimination clauses tied to requirements of the superseded Executive Order 11246. Failure to comply can result in breach-of-contract disputes, even without OFCCP involvement.
- Reputational and Workforce Implications: Scaling back affirmative-action initiatives may generate internal or public concerns, especially among employees who value DEI programming. However, adopting affirmative action–type measures may carry legal risk, as the current Administration is encouraging courts to invalidate such initiatives as unlawful discrimination.
What Employers Should be Watching
Employers should closely monitor:
- The final FY 2026 appropriations bill;
- Any legal challenges to the transfer of Section 503 enforcement;
- New rulemaking or guidance from EEOC or VETS;
- Changes to subcontractor “flow-down” requirements, i.e., the obligations to comply with affirmative action mandates;
- Litigation trends involving disability or veteran discrimination; and
- How peer contractors adjust their compliance and hiring practices.
This is a transitional period: a time to stay informed, protect against foreseeable risks, and avoid overreacting to incomplete information.
The Bottom Line
Whether or not OFCCP survives FY 2026, the era of proactive, audit-driven affirmative-action enforcement for federal contractors appears to be ending for now. Employers should not mistake this shift for a total elimination of responsibilities, but they should prepare for a regulatory environment that looks very different from the one they have known for decades.
For now, the safest path for contractors is strategic caution: maintain compliant practices, simplify where appropriate, and prepare for a future in which enforcement may come not from the OFCCP, but from EEOC, VETS, the courts, or the contracts themselves. Brody and Associates regularly advises management on compliance with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.
