This chapter reviews legislation and court litigation during 1986 that addressed the rights of handicapped students and employees. The most far-reaching legal activity occurred in the legislative arena, with the passage in 1986 of the Education of the Handicapped Act (EHA) mandating that services must be available for handicapped children between the ages of 3 and 21. Procedural safeguards in the EHA ensure appropriate identification, evaluation, and placement of handicapped children. Provisions of the EHA with respect to development of individualized education programs, change in placement, and administrative remedies are discussed. Subsequent sections discuss related services, an extended school year, discipline, and remedies awarded to successful litigants under the provisions of the act, as well as damages, compensatory services, and attorneys' fees. The next two sections discuss the question of state immunity to suits brought under the EHA and the enforcement of state laws that exceed EHA requirements. Remaining sections are devoted to cases of discrimination against handicapped students and employees, brought under the Rehabilitation Act of 1973, Section 504. (TE)