* EEOC accuses UPS of limiting disability leave
* Hundreds of workers could be affected
* UPS calls lawsuit misdirected, defends leave policy
* Shares fall less that 1 pct

NEW YORK - A U.S. government agency has sued United Parcel Service Inc (UPS.N), the world's largest package delivery company, for allegedly violating federal law by limiting workers' ability to take medical leave.

In a lawsuit filed Thursday with the federal court in Chicago, the Equal Employment Opportunity Commission said UPS has since at least 2002 had an inflexible 12-month leave policy that does not provide for reasonable accommodation of disabled employees, and instead calls for their termination.

The EEOC accused Atlanta-based UPS of violating the Americans with Disabilities Act and federal civil rights law.

It brought the case on behalf of Trudi Momsen, a former UPS worker with multiple sclerosis who it said was fired in 2007 rather than being given extended leave or a new position.

We expect a large number of employees are affected, given that UPS is a big employer, and has had this nationwide policy in place for a long time, said Diane Smason, an EEOC lawyer handling the case, in an interview. It is a blanket rule with no flexibility, and the law requires individual assessments.

Atlanta-based UPS employed about 426,000 people at the end of 2008. Smason estimated that hundreds of workers could be affected by the company's medical leave policies.

UPS spokesman Norman Black called the lawsuit surprising and misdirected, saying the EEOC chose to attack one of the more generous and flexible leave policies in corporate America.

He also said Momsen never asked for an accommodation under the federal disability law, and upon returning from a nearly year-long paid leave worked for just 18 days before she abandoned her position.

Momsen could not immediately be reached for comment.

On July 23, UPS won reversal by the U.S. Third Circuit Court of Appeals of a class-action certification of a lawsuit on behalf of employees who claimed they were discriminated against for trying to return to work after medical leave. The ruling means workers who want to sue must do so individually.

The panel that ruled in favor of UPS in that case included retired U.S. Supreme Court Justice Sandra Day O'Connor, who sat with two other judges on the case by designation.

In late afternoon trading, UPS shares were down 34 cents at $53.61 on the New York Stock Exchange.
The latest case is Equal Employment Opportunity Commission v. United Parcel Service Inc, U.S. District Court, Northern District of Illinois (Chicago), No. 09-5291. (Reporting by Jonathan Stempel; Editing by Tim Dobbyn)

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