Impending Changes to Section 503 of the Rehabilitation Act

What Employers Need to Know

Section 503 of the Rehabilitation Act prohibits covered federal contractors and subcontractors from discriminating against qualified individuals with disabilities.

On August 21, 2026, the U.S. Department of Labor released a final rule revising its Section 503 implementing regulations and eliminating several key tools used to measure disability employment and evaluate affirmative-action efforts.

The changes take effect September 21, 2026.

What is changing?

Beginning September 21, 2026:

• • Contractors will no longer be required under Section 503 to collect disability data on applicants, referrals, and hires for purposes of assessing their affirmative-action efforts.
  • The CC-305 voluntary disability self-identification form will be discontinued.
  • The 7% utilization goal will be eliminated.
  • Section 503 coverage will now apply to federal contracts and subcontracts of $20,000 or more, an increase meant to account for inflation.

What was the 7% utilization goal?

Covered federal contractors and subcontractors were required to aim for at least 7% of employees in each job group to be individuals with disabilities. The 7% goal was a benchmark for measuring the effectiveness of affirmative-action efforts, not a quota requiring employers to hire a specific number of people with disabilities.

What is not changing?

Several key requirements remain in place:

• Nondiscrimination: The prohibition against disability discrimination remains.
• Affirmative action: The final rule also explicitly retains the “equal employment opportunity clause at 41 CFR 60-741.5, which requires contractors to take affirmative action to employ and advance in employment individuals with disabilities”.
• Reasonable accommodations: The final rule “does not make changes to the reasonable accommodation requirements”.
• Outreach and recruitment requirements: Contractors must continue, “on an annual basis, [to] review the outreach and recruitment efforts it has taken over the previous twelve months to evaluate their effectiveness in identifying and recruiting qualified individuals with disabilities.
• • However, contractors will no longer be required to use quantitative disability applicant, referral, or hiring data when evaluating the effectiveness of those efforts.
• Workplace analysis: The final rule also states that “contractors can continue to assess their workplace policies through other means such as barrier analyses of recruitment, hiring, retention, and promotion practices”.

The rule does not change other federal employment programs or laws, including VEVRAA, which protects certain veterans from employment discrimination, or Schedule A, which allows federal agencies to hire certain individuals with disabilities through a noncompetitive process.

What does this mean for disability data?

Contractors will no longer be required under Section 503 to collect disability data for the utilization analysis. However, employers can still voluntarily track disability demographic data, provided the collection and use are lawful. Removing the utilization goal does not make disability demographic tracking illegal. 

Why does disability data still matter?

Disability data is essential to understanding whether organizations are making substantive progress on disability inclusion. Without reliable data, organizations may not be able to see disparities, identify barriers, or determine whether their efforts are producing meaningful results.

Tracking disability data can help organizations:

• Identify disparities: Examine differences in recruiting, hiring, promotion, and retention outcomes.
  Identify barriers: Pinpoint where employees and applicants with disabilities may experience barriers or unequal outcomes.
• Measure progress: Assess whether disability inclusion initiatives are improving outcomes over time, as well as any accidental backslides.
• Inform decisions: Use data to determine where resources, programs, and interventions are most needed.
• Strengthen accountability: Provide leaders with measurable information to evaluate progress and identify areas for improvement.

Ultimately, data makes visible what might otherwise be overlooked or dismissed. Without that visibility, organizations have a harder time understanding their workforce, knowing whether their efforts are making a difference, and recognizing the business value of disability inclusion.

Conclusion

The Department of Labor’s new rule significantly rolls back several Section 503 requirements that contractors have followed for more than a decade. The 2013 regulations, which established the 7% utilization goal and expanded requirements for data collection, recordkeeping, and analysis, were widely recognized as strengthening contractors’ and OFCCP’s ability to measure progress and identify potential barriers to employment.

The new rule removes important parts of this framework. While these practices may no longer be federally required, their value remains. Employers that continue collecting and analyzing disability data will be better positioned to understand their workforce, sustain progress, respond to emerging gaps, and capitalize on the value of disability inclusion.

For More Information

Partner Exclusive: Join us on September 15 12:00-1:30 p.m. ET for a conversation with Candee Chambers, Director of the Office of Public Liaison at the U.S. Department of Labor. We will dedicate part of the discussion to the Section 503 changes and what they mean for employers. To RSVP, please reach out to council@nod.org.

Read the Final Rule: Modifications to the Regulations Implementing Section 503 of the Rehabilitation Act of 1973, as Amended. This is the Department of Labor’s official regulatory action and links to the actual final rule.

Read the News Coverage:

• Labor Department Rescinds Disability Hiring Mandate by Shaun Heasley at Disability Scoop
• OFCCP Issues Final Rules Upending Federal Contractors’ Affirmative Action Obligations by Lauren B. Hicks, Christopher J. Near, and Zachary V. Zagger at Oagletree Deakins law firm.
• OFCCP New Rule Eliminates Many Disability-Related Obligations by Guy Brenner, Partner in the Labor & Employment Law Department at Proskauer Rose law firm.
• OFCCP Completes Overhaul of Federal Contractor Compliance Framework: Three Final Rules Rescind EO 11246 Regulations, Narrow Section 503 Affirmative Action Requirements, and Update VEVRAA Coverage Thresholds by Crowell & Moring law firm.