Last week, the administration unveiled the details of its proposal to slash around $163 billion in federal spending for the 2026 fiscal year which starts October 1st. Unsurprisingly, many of the cuts hit agency staffing and activities. The1,220-page document and agency blueprints show the extent of the administration’s push of a vast transformation in Washington. Although the administration, like previous administrations, would like their budget to go unscathed by congress, it is unlikely to do so. It could be accepted in whole or in part, rejected in whole or in part, or ignored. In other words, this budget proposal is not set in stone.
Generally, budgets are passed through a budget reconciliation process. Budget reconciliation is a special parliamentary procedure to expedite the passage of certain federal budget legislation in the Senate. The procedure overrides the Senate's filibuster rules, which may otherwise require a 60-vote supermajority for passage. The House is not impacted by this process, as simple majority rules. In the past few administrations, budget bills have not been passed except for Defense. Like the current budget, it has been allowed under a continuing resolution (CR) approved by both houses of Congress and signed by the President.
The budget will likely be discussed after the current tax law is finalized and submitted to the President. The fact that the Republicans hold both houses does not mean that the budget bill will be completed in a timely manner, and a CR may be necessary to support government until passage. Otherwise, there will be a government shutdown, which the Republicans do not want at this time.
Assuming this budget proposal in whole or in part becomes law, it does have specific impacts to HR activities. First, for federal contractors, it becomes a new day and savings of dollars. With Executive Order (EO) 11246 revoked under EO 14173, there are no requirements or fear of audits by the federal government. Specifically, page 658, OFCCP is no longer a viable funded agency and is eliminated as an agency.
There are still questions at this time about the requirements of the Veteran (Section 4212) and Disabled (Section 503) AAPs (which appears enforcement is being transferred to VETS and EEOC respectfully), but until told otherwise, federal contractors should continue to complete them and ensure all jobs, except executive level and less than three days, are listed with state workforce agencies.
The U.S. Department of Veterans' Employment and Training Service (VETS) appears that it will continue data collection of veteran employment information (VETS 4212).
More importantly, for employers who are federal contractors, they need to be vigilant on their diversity and compliance training to ensure it does not run afoul of Title VII, as there is an expected increase of filings of False Claim Act (FCA) actions. FCA can be lottery winners, especially for disgruntled employees.
Both Wage and Hour and OSHA will have reduced budgets and headcount. However, Wage and Hour has been staffed with political appointments who are highly knowledgeable and skilled in the area. They should be able to do more even with less resources. As for OSHA, expect the states to pick up the slack with more investigations and possibly more whistleblower actions.
The EEOC budget will be decreased by $45 million from 2025 Fiscal Year. The proposal specifically states that the EEOC “may take no action to implement any workforce repositioning, restructuring, or reorganization until such time as the Committees on Appropriations of the House of Representatives and the Senate have been notified of such proposal.” The focus of the agency will be as before: ‘[t]he priority for agency resources continues to be litigating systemic cases and maintaining a manageable inventory of cases.” More importantly, although not specifically stated in the budget document, a May 20, 2025, memo states that it will no longer fund joint investigations of discrimination claims that involve transgender employees as well as those involving disparate-impact allegations. States will have to pick up the slack.
The EEOC stated that enforcement priorities will be race bias, including discrimination that stems from diversity, equity, and inclusion programs, protecting American workers from national origin preferences that favor foreign workers, defending women from sex-based bias, and guarding workers against religious discrimination and harassment.
The National Labor Relations Board (NLRB) is asking for a $285 million budget, a little less that FY 2025, which was $299 million. In the budget proposal, it also recommends the following:
SEC. 408. None of the funds provided by this Act or previous Acts making appropriations for the National Labor Relations Board may be used to issue any new administrative directive or regulation that would provide employees any means of voting through any electronic means in an election to determine a representative for the purposes of collective bargaining.
In other words, elections have to be live and in person. With reduced budget, the NLRB may be more picky and choosy as to what cases it will hear and bring to the forefront.
Although there is a lot packed in to the proposed budget, it still has a long way to go. With the number of court cases concerning federal employment and reduction of regulatory actions and efforts, what the final budget or executive branch transformation will be is in question. As the year continues, it is recommended that senior leadership meet with legal counsel to determine how to allocate compliance dollars and efforts. Further, legal counsel should review the employer’s business and professional insurance to ensure that it covers what the current administration has as priorities.
Source: Law 360 6/2/25NYTimes 5/30/25, HR Dive 5/30/25