(Reuters) — A federal appeals court has revived an Equal Employment Opportunity Commission lawsuit against United Airlines Inc., saying U.S. law generally requires employers to reassign disabled workers to vacant jobs for which they are qualified.

Friday's decision by the 7th U.S. Circuit Court of Appeals in Chicago, where parent company United Continental Holdings Inc. is based, overruled a 12-year-old case by that same court and reversed a February 2011 lower court ruling.

United Continental is the world's largest air carrier.

The case stemmed from a "competitive transfer" policy that United had adopted in 2003 for workers who could no longer perform their jobs because of disabilities.

That policy gave disabled workers preferential treatment over nondisabled workers for vacant positions — if two workers were equally qualified for a job, the disabled worker would win — but did not afford automatic placement into those positions.

The EEOC argued that the policy violated the Americans with Disabilities Act. It said the law required employers to move workers losing their jobs because of disability to vacant jobs for which they are qualified.

In 2000, the 7th Circuit concluded that disability law had no such requirement. But a three-judge panel of that court overruled that decision on Friday.

"(We) hold that the ADA does indeed mandate that an employer appoint employees with disabilities to vacant positions for which they are qualified, provided that such accommodations would be ordinarily reasonable and would not present an undue hardship to that employer," Circuit Judge Richard Cudahy wrote for the panel.

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The 7th Circuit sent the case back to U.S. District Judge Harry Leinenweber in Chicago to review United's policy under this standard.

It also said it was joining two other federal appeals courts in its interpretation of the ADA, while noting that another had adopted the reasoning of the 2000 decision that was overruled.

A United spokeswoman had no immediate comment. The EEOC did not immediately respond to requests for comment.

The EEOC had originally brought the case in June 2009.

Lead plaintiff Joe Boswell, a United mechanic at San Francisco International Airport for more than a decade, said the carrier had rejected him for new jobs and put him on involuntary leave after a brain tumor left him unable to work as a mechanic.

The 7th Circuit relied on a 2002 U.S. Supreme Court decision involving what is now US Airways Group Inc. in adopting its new standard.

That court held that disabled workers seeking jobs with lessened physical demands generally cannot bump more senior workers from those jobs.

But it said exceptions can be made that would afford reasonable accommodations to the disabled workers, and which did not pose undue hardships on their employers.

"The Supreme Court has found that accommodation through appointment to a vacant position is reasonable," Judge Cudahy wrote.

The case is Equal Employment Opportunity Commission v. United Airlines Inc., 7th U.S. Circuit Court of Appeals, No. 11-1774.