Recently, in EEOC v. United Airlines [pdf], the 7th Circuit answered this question. In that case, the EEOC challenged United's "Reasonable Accommodation Guidelines," which provide that transfers to open positions are competitive, and that disabled employees will only receive "priority consideration over a similarly qualified applicant." The 7th Circuit concluded that this policy passes muster under the ADA: "The ADA does not require employers to reassign employees, who will lose their current positions due
to disability, to a vacant position for which they are qualified."
The 6th Circuit appears to follow a similar approach. There exists, however, split among the federal courts, with a minority interpreting the ADA as requiring the transfer as a reasonable accommodation. What does this mean for your business? It means that this area of the law it unsettled. It means that if you are considering a transfer as a reasonable accommodation, your location will dictate the legality of your decision. It means that the Supreme Court will likely weigh-in on this issue at some point and provide some clarity (It tried to once, but the parties settled before the Court could rule). And, it also means that no matter the rule of law, you should ensure that the disabled employee is actually qualified for the position sought. No matter whether a transfer is discretionary or mandatory, no employee, disabled or not, is entitled to a job for which he or she is not qualified.