Employers may need to re-evaluate functional ability tests given to injured employees to make certain they are capable of returning to work safely as a result of an appeals court decision last week, attorneys say.

In that case, the 9th U.S. Circuit Court of Appeals ruled 2-1 that an employee can sue Georgia-Pacific Corp. for violating the Americans with Disabilities Act because of the way a vendor administered an evaluation for an injured employee trying to return to work.

Such tests are known as both physical capacity evaluations and functional capacity evaluations.

Claims administrators and case managers frequently rely on results of such tests to determine whether injured or disabled employees can safely perform essential job functions, said Bob Stoner, vp of employer payer services for Hanover, Md.-based BTE Technologies Inc., which provides functional assessment systems and other products.

Job-specific tests also provide physicians with information to help determine whether to release an injured employee for modified or full duty.

But attorneys said last week's ruling in Kris Indergard vs. Georgia-Pacific Corp. represents the first time a federal appeals court has weighed guidelines from the Equal Employment Opportunity Commission to determine when a PCE/FCE crosses the line to become a medical exam.

Under the ADA, employers may not require employees to undergo medical exams unless they can show the exam is job-related and consistent with business necessity, last week's ruling states.

The court's finding has “a potentially very broad application for anyone that uses this type of evaluative tool with people (returning) from workers comp injuries and nonwork-related injuries,” said Scott G. Seidman a partner at Tonkon Torp L.L.P. in Portland, Ore., who represents Georgia-Pacific in the case.

“It doesn't give employers a very wide scope to conduct these types of exams because there is a pretty narrow line between being able to test for functional ability and stepping over that line,” Mr. Seidman said.

Ms. Indergard's attorney could not be reached for comment.

In addition to showing a business necessity, employers can avoid running afoul of the courts by giving an employee a physical agility exam limited to specific injured body parts, said Clay Creps, chair of the employment law practice group at Bullivant Houser Bailey P.C. in Portland, Ore.

Every employer should have a written protocol for return-to-work exams that states “the only thing that exam is to explore is whether the injury or illness that caused the person to be out of work has healed to the point that they are now capable of performing the function,” Mr. Creps said.

Employers also should provide a written directive to health care providers that conduct the tests and any insurer that requests them to assure compliance with the employer's policy, Mr. Creps said.

Georgia-Pacific contracted with an independent occupational therapy company to conduct the PCE once an orthopedic surgeon authorized Ms. Indergard to return to work in 2005.

She had taken medical leave in 2003 to undergo surgery for work-related and nonwork-related knee injuries, court records state. A Georgia-Pacific policy required employees to participate in a PCE before returning from medical leave.

Before evaluating the woman, a physical therapist visited her worksite to analyze Ms. Indergard's duties.

The therapist studied the job's physical demands, including the amount of weight-lifting and body motion required.

Then an occupational therapist conducted the PCE, recording information such as Ms. Indergard's pain level, use of alcohol and tobacco, blood pressure, heart rate and breathing after a treadmill test. Range of motion and muscle strength tests also were administered.

As a result of the exam, the therapist recommended that Ms. Indergard not return to work.

Georgia-Pacific then terminated Ms. Indergard in 2006, pursuant to a collective bargaining agreement allowing the employer to terminate employees on leave for more than two years.

Ms. Indergard sued, arguing that the PCE was an improper medical exam among other allegations. But a lower court judge agreed with Georgia-Pacific that the PCE was not a medical exam and dismissed the suit.

Ms. Indergard appealed and the appeals court noted that the ADA does not define “medical exam” and case law on the issue is limited. So the court turned to EEOC Enforcement Guidance that distinguishes between a medical exam and a physical agility test.

It found that several components of the PCE administered to Ms. Indergard are considered medical exams under the EEOC guidance, which came into force about a decade ago, including the heart rate measurement and observations of her breathing after the treadmill exercise.

In overturning the lower court, the appeals court said that while the purpose of the exam may have been to determine whether Ms. Indergard was capable of returning to work, it clearly sought information capable of revealing whether she suffered a disability.

Employers that have not evaluated their employee testing in light of EEOC Enforcement Guidance applied in the case may want to do so, said Anthony Oncidi, chairman of the labor and employment department for the Los Angeles office of Proskauer Rose L.L.P.

The opinion “shows how carefully regulated the testing and analysis that employers can do with respect to employees is under the ADA,” Mr. Oncidi said.

A dissenting judge hearing the case argued that, under the EEOC guidance, “any return-to-work test qualifies as a medical examination by seeking to determine whether an employee is fit enough to resume their duties.”

To avoid ADA lawsuits, employers “would have to allow injured workers to return to the job without being able to verify their fitness for duty, creating the potential for re-injury,” dissenting Judge Diarmuid F. O'Scannlain said.

The decision could negatively affect workers compensation claims, said Trey Gillespie, senior workers compensation director for the Des Plaines, Ill.-based Property Casualty Insurers Assn. of America.

The appeals court remanded the case to the trial court to determine whether the PCE was job-related and consistent with business necessity.

Kris Indergard vs. Georgia-Pacific Corp., 9th U.S. Circuit Court of Appeals, No. 08-35278, Sept. 28, 2009.