U.S. Labor Department Eliminates Contractor
The U.S. Department of Labor issued three final rules on Friday, eliminating race- and sex-based affirmative action requirements for federal contractors
The U.S. Department of Labor issued three final rules on Friday. These rules eliminate affirmative action requirements for federal contractors, aligning with an executive order from President Donald Trump issued in 2025.
The first rule rescinds the race- and sex-based affirmative action requirements established by a 1965 executive order. The second and third rules target regulations under the 1973 Rehabilitation Act and the 1974 Vietnam Era Veterans’ Readjustment Assistance Act, respectively.
Key Changes to Hiring Benchmarks
A significant change removes the 7% utilization goal for hiring qualified individuals with disabilities. This benchmark had applied to each job group within a contractor's workforce. The rules also adjust the coverage thresholds for these laws, which are based on specific contract dollar amounts.
Federal contractors had been expecting these final rules. They follow Trump's 2025 executive order, which directed the federal government to end contractors' affirmative action programs and other diversity, equity, and inclusion initiatives enforced by the Office of Federal Contract Compliance Programs (OFCCP).
Implementation Timelines
The three rules take effect on different dates, as outlined below.
| Rule Target | Effective Date | Notes |
|---|---|---|
| 1965 Executive Order | October 26 | Rescinds race- and sex-based requirements. |
| Section 503 (Rehabilitation Act) | September 21 | Most provisions; one section effective December 21. |
| VEVRAA (Veterans Act) | September 21 | Alters hiring benchmarks for veterans. |
Shortly after the 2025 order's publication, the DOL paused OFCCP investigations related to discriminatory hiring practices. The department stated it no longer had authority under the rescinded 1965 order. This pause was lifted for the veterans and disability acts in July 2025.
Ongoing Contractor Obligations
Legal analyses highlight that contractors still have certain obligations. According to attorneys at Jackson Lewis, the Section 503 final rule removes several requirements. However, contractors must still take affirmative action to employ and advance qualified individuals with disabilities. They must also continue assessing the effectiveness of their recruitment outreach to this group.
Attorneys from Ogletree Deakins noted that the new rules do not eliminate discrimination prohibitions under other laws. Title VII of the 1964 Civil Rights Act and various federal, state, and local laws remain in force.
The 2025 executive order referenced in these rules is separate from another Trump order issued in March. That earlier order requires contractors to avoid engaging in discriminatory DEI programs or risk contract cancellation. At least one lawsuit challenging the March order has been filed, and that litigation is ongoing.
