White House Proposed Budget Targets OFCCP, Section 503, and VEVRAA

Quick Hits

• On April 3, 2026, the Office of Management and Budget published the White House’s priorities for fiscal year (FY) 2027 through the president’s proposed federal budget and related fact sheets.
• President Trump’s proposed FY 2027 federal budget would defund OFCCP, as he proposed for the FY 2026 budget, and move the agency’s “more limited statutory functions” as to individuals with disabilities and protected veterans to an expanded Office of Civil Rights. Even if the president’s proposals for OFCCP in FY 2027 are achieved, current legal obligations of federal contractors and subcontractors under Section 503 of the Rehabilitation Act and VEVRAA remain unaffected.

On April 3, 2026, the Office of Management and Budget (OMB) published President Donald Trump’s proposed fiscal year (FY) 2027 budget for the federal government, together with a handful of fact sheets, laying out the administration’s proposal for the upcoming fiscal year, which will begin on October 1, 2026. While the OMB’s publication “[c]ontains information on the President’s priorities,” final funding for all federal agencies is annually set by the U.S. Congress.

In aiming to cut the U.S. Department of Labor’s (DOL) overall discretionary budget from the prior year by 25.9 percent, the FY 2027 President’s Budget seeks to defund OFCCP and move the agency’s “more limited statutory functions” requiring federal contractor nondiscrimination on the basis of veteran and disability status to an expanded Office of Civil Rights (OCR). The budget proposal characterizes these functions as “more limited” because Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” “abolished affirmative action policies Government-wide, including the 1960s-era Executive Order [11246] that was the basis for most of OFCCP’s legal authority.” Under the proposal, OCR would also take on most whistleblower functions currently administered by the Occupational Safety and Health Administration (OSHA). OFCCP’s obligations under Section 503 of the Rehabilitation Act (Section 503) and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) are statutory in nature, and moving those to another federal agency would necessitate changes be made to 29 U.S.C. § 793 and 38 U.S.C. § 4212, along with corresponding changes to the regulations implementing those statutes at 41 C.F.R. § 60-300 and 41 C.F.R. § 60-741.

The FY 2027 proposal is slightly different from the one made for FY 2026, when the White House first aimed to eliminate the OFCCP. That FY 2026 proposal, along with early budget proposals by the U.S. House of Representatives, unsuccessfully tried to defund OFCCP and move enforcement of Section 503 to the U.S. Equal Employment Opportunity Commission (EEOC) and enforcement of VEVRAA to the Veterans’ Employment and Training Service (VETS). Congress did not adopt any of those recommendations and instead provided OFCCP nearly $101 million in the FY 2026 appropriations bill, preserving the agency’s oversight of both Section 503 and VEVRAA.

Proposals published in mid-2025 to modify certain Section 503 and VEVRAA regulations remain pending. Regardless of whether OFCCP is eliminated or its oversight functions are moved to OCR or another agency, federal contractors and subcontractors retain their existing legal obligations, including compliance with Section 503 and VEVRAA and the preparation of affirmative action programs for individuals with disabilities and protected veterans. Accordingly, federal contractors and subcontractors may want to continue to maintain, as applicable, their existing compliance programs pending any formal legislative or regulatory changes.

The White House’s proposed budget for FY 2027 appears to illustrate that the current administration remains committed to pursuing the elimination of OFCCP and restructuring the oversight of statutory obligations for individuals with disabilities and protected veterans. Employers may want to monitor how this proposal plays out once congressional negotiations begin for the upcoming fiscal year and consider how any resulting changes may affect day-to-day operations.

Ogletree Deakins’ Government Contracting and Reporting and Workforce Analytics and Compliance Practice Groups will continue to monitor developments and will provide updates on the Government Contracting and Reporting and Workforce Analytics and Compliance blogs as additional information becomes available.

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