Employers and business groups are trying to stop an Obama administration effort that calls for federal contractors to hire a minimum number of disabled workers and could penalize those who don't by revoking their contracts.

The proposal could reshape hiring at roughly 200,000 companies that generate $700 billion a year in contracts with the federal government. They include defense contractor Lockheed Martin Corp. , aircraft maker Boeing Co. and firms across the health-care, construction and information-technology industries.

Under the Labor Department plan, most firms that contract or subcontract with the federal government would be asked to have disabled people make up 7% of their work force. While the department says it wouldn't be an explicit requirement, companies that don't hit the target could have their contracts canceled or could be barred from winning future contracts until they show they are trying to meet the target.

Companies have flooded the department with complaints that the rule amounts to a first-ever government quota for hiring disabled workers that would expose them to a thicket of legal pitfalls. Some employers say there might not be enough qualified disabled workers in their fields to meet that target and that they may have to fire nondisabled workers to achieve the ratio. Others say that existing federal law actually prohibits them from asking whether a job applicant is disabled, potentially forcing firms to violate one law in order to comply with another.

"We are very concerned that the department is moving forward with what is clearly a fundamental change in longstanding policies regarding affirmative action," said Jeffrey McGuiness, president of the HR Policy Association, a trade group for human-resource executives at more than 300 of the largest private-sector U.S. companies.