After you update Windows to version 10.0.17134, a backup that includes OneDrive folder fails with an error similar to the following:
(error might be different if version 11 archive format is used)
Error code: 12
Message: The file is read-only.
Since Windows update 10.0.17134, OneDrive started storing actual data in the cloud. The files that you see in the OneDrive folder are "links" to the data in OneDrive cloud. As a result, it is not possible to back up these files.
For Version 12 backup format: this issue has been fixed in Update 3.1 (Build 10330) please update the software to the latest build.
To work around the issue without installing the update or if you use Version 11 backup format follow the steps below:
1. Use the workaround described in this article.
2. If that does not help, exclude the OneDrive folder from the backup.
Successful backup and recovery of OneDrive folder is only possible in case of the full backup of the Entire Machine (disk level) and recovery of Entire Machine (disk level) due to the fact that One Drive folder has dependencies over the system and has to be consistent with system state.