WASHINGTON, DC — The United States federal government has long maintained a dual identity regarding its workforce: it is widely recognized as the nation’s largest single employer of Americans with disabilities—operating through a vast network of direct hires, federal contractors, subcontractors, and federally funded programs—while simultaneously grappling with systemic employment barriers. For years, advocates and policymakers pointed to steady, hard-fought bipartisan gains in disability employment as proof of progress. However, disability rights organizations warn that an unrelenting sequence of regulatory rollbacks by the Department of Labor (DOL) is systematically dismantling those decades of advancement.
The American Association of People with Disabilities (AAPD) has issued a strong condemnation of the latest regulatory shift by the federal government. On August 21, 2026, the U.S. Department of Labor released a new final rule that significantly modifies and rolls back disability employment regulations under Section 503 of the Rehabilitation Act. Set to take effect on September 21, 2026, the regulation alters the landscape of federal contracting by removing critical enforcement mechanisms designed to ensure equal opportunities for disabled workers.
"The recent decision by the Department of Labor to reverse key regulations that incentivize employers to hire individuals with disabilities and to track disability employment data is the latest in a concerted federal effort to roll back decades of progress towards workforce opportunity for disabled Americans," said Maria Town, AAPD President and CEO.
This regulatory retreat arrives against a backdrop of historic, albeit fragile, momentum in disability employment over the past decade. According to data from the Bureau of Labor Statistics, the percentage of working-age people with disabilities who were employed rose from 19.2% in 2009 to 22.5% in 2023, marking the highest rate of disability employment since comprehensive data collection began in 2008. Similarly, labor force participation for people with disabilities climbed from 22.4% in 2009 to a record high of 24.2% in 2023.
Civil rights leaders warn that future data will likely be less comprehensive, transparent, and accurate as a direct result of the new regulation and parallel policy shifts that eliminate primary mechanisms for tracking workforce participation across the federal contractor ecosystem.
"Recent gains in disability employment are no accident — they are the result of deliberate, measurable strategies like voluntary self-identification and workforce utilization goals," explained Michael Lewis, AAPD Vice President of Public Policy. "When working-age people with disabilities experience roughly double the unemployment rate and half the labor force participation rate of their nondisabled peers, the need for such tools is clear. Now, those measurable strategies will no longer be enforced as requirements for federal contractors by the Department of Labor."
Under the revised rules, Section 503 itself technically remains in effect. Federal contractors with contracts exceeding $20,000 are still obligated to prepare an annual written Affirmative Action Plan for hiring and conducting outreach to disabled job candidates, and they remain bound by the law’s core nondiscrimination requirements. Furthermore, contractors are still technically expected to make affirmative efforts to employ and advance candidates and employees with disabilities.
However, the regulatory teeth have been pulled. Employers are no longer required to track those efforts or the specific data they generate, nor are they held to concrete participation goals, such as the previous 7% benchmark. Consequently, most federal contractors will now be held accountable by the DOL only for compliance with a substantially weakened version of Section 503.
Part of a Broader Pattern Undermining Disabled Workers
The August 21 regulation is not an isolated policy shift; rather, it forms part of an expansive and concerning pattern across the federal government to dismantle programs and policies that promote equitable employment for disabled workers.
Last year, the federal government proposed reversing a parallel participation policy that had required registered apprenticeship programs to ensure that at least 7% of their participants were individuals with disabilities. According to entries in the Federal Register, a final rule regarding this proposal was submitted for review to the White House and the Office of Management and Budget on August 12, 2026.
In another major policy move in July 2025, the DOL formally withdrew a nearly finalized regulation that would have phased out the long-standing federal program allowing employers to pay subminimum wages to workers with disabilities. Under the Fair Labor Standards Act of 1938, employers can still legally pay subminimum wages to employees with disabilities by obtaining "14(c) certificates" issued by the DOL. Data from a 2019 Government Accountability Office report revealed that a majority of 14(c) program participants earned less than $3.40 an hour, amounting to roughly $53.44 per week and $213.76 per month, with many individuals receiving as little as $0.25 an hour. These workers are frequently segregated from nondisabled colleagues and are largely excluded from opportunities for career development and advancement.
The AAPD previously submitted formal comments condemning these proposals and provided tools to help people with disabilities voice their perspectives during the federal rulemaking process. For Maria Town, the contradiction between national rhetoric and federal policy is stark.
"As the richest nation in the world, the United States of America should have one of the world’s most prosperous and opportunity-filled workforces. This should be especially true for populations like disabled people, who face discrimination all over the world, but also benefit greatly from federal civil rights protections if they live in the United States," Town noted. "That makes it all the more painful when elected officials describe us as a land of near-limitless economic opportunity, while simultaneously removing the tools that would promote such opportunity for disabled workers."
It’s Not Just Disability Civil Rights
The August 21 changes to Section 503 were introduced as part of a broader deregulation package that extends similar rollbacks to other protected classes. One regulation within the package modifies the implementation of the now-overturned Executive Order 11246, which historically prohibited federal contractors and subcontractors from discriminating in hiring based on race, gender, sexuality, religion, and other protected characteristics. As a result of the new rules, mandatory data collection for federal contractors has been scaled back across multiple protected groups, not just disability.
Additionally, regulatory updates to the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) raised the financial contract threshold required for contractors to maintain an affirmative action hiring environment for veterans, moving the baseline from $150,000 to $200,000. Similar to the changes under Section 503, smaller federal contractors will no longer be actively monitored or held accountable by the DOL for VEVRAA compliance. The updated VEVRAA rules also eliminate cross-referencing provisions used to track data on disabled veterans across multiple affirmative action statutes.
"By removing the regulatory tools that expose inequality, the administration is ensuring that existing disparities in the employment of disabled people, women, and people of color remain invisible — if you can’t track it, you cannot prove that it is insufficient or identify pain points," explained Jess Davidson, AAPD Senior Director of Communications. "If you cannot identify the problem, you certainly cannot improve it."
Despite the loss of federal oversight tools, advocates emphasize that the regression of government standards does not preclude private-sector leadership.
"No matter what data do or do not exist, disabled workers have always and will continue to make invaluable contributions to their workplaces and to our nation’s economy. Disability employment data serve to highlight these essential contributions," Town concluded.
While the AAPD strongly opposes the new final rules, civil rights leaders emphasize that the regulations do not prevent federal contractors and other employers from maintaining or expanding their own inclusive hiring practices. Companies remain entirely free to go far beyond federal minimums, viewing legal compliance as a baseline floor rather than a performance ceiling.
Business research continues to demonstrate that disability inclusion is not merely a philanthropic endeavor, but a sound economic strategy. A 2023 study by Accenture found that companies leading in disability inclusion tend to achieve stronger revenue, net income, and overall profit margins. As the regulatory environment shifts at the federal level, organizations like the AAPD continue to urge employers to remain steadfast in their commitment to recruiting, conducting outreach to, and tracking data for qualified disabled candidates and employees.
