(FORTUNE Magazine) – EVER SINCE the dawn of so-called scientific management, employers in pursuit of the ideal worker have subjected present and prospective employees to tests. In the past, most of these measures have attempted to get at an individual's psychology, broadly defined -- pen-and-paper tests to ascertain intelligence or attitude, handwriting samples to probe character, lie-detector tests to determine honesty. In contrast, a new and increasingly popular generation of tests focuses instead on the subject's body. While on their face these high- tech diagnostic procedures might seem more scientific, as it turns out they are just as mired in controversy as their predecessors. A few of the questions being raised: Are the tests reliable? Are the results relevant to job performance? And -- perhaps the knottiest issue -- do they violate an individual's right to privacy? The testing of a person's blood and urine reveals hundreds of details about his private life -- his medical history, which diseases he's susceptible to, what drugs he takes, even what he eats and drinks. From an ounce of blood, sophisticated screening techniques can determine, for example, whether someone has had venereal disease, epilepsy, or schizophrenia, and whether he is predisposed to heart attacks or sickle-cell anemia. Testing for drug use presents the most obvious case of the collision between technology and privacy. Nearly 25% of the FORTUNE 500 corporations now do routine urinalysis on employees and job applicants to try to detect illegal drugs, vs. just 10% three years ago. The use of other tests like genetic screening, in which scientists analyze blood samples to identify genes linked to certain illnesses, is likely to increase as the technology improves. The extent to which corporate America adopts these new measures will be affected by the current debate on drug screening. Today some companies conduct tests for drug use as part of the physical required for employment, but without telling applicants that they'll be screened for drugs. If the test is positive, most companies simply don't offer that candidate a job. Some corporations allow applicants to retest within a certain period of time. Still others randomly test employees, including those who have shown no signs of impairment in the workplace. Many corporate leaders think the drug problem justifies vigorous preventive measures. Peter B. Bensinger, former head of the Federal Drug Enforcement Administration and now president of a firm that counsels companies on dealing with drug abuse, claims, ''More than 15 million working Americans use marijuana and at least three million use cocaine.'' Concern about employee drug abuse has spurred IBM, American Airlines, Storer Communications, and many others to require all job applicants to pass a urinalysis test for marijuana and cocaine. DR. WILLIAM HSIAO, professor at the Harvard School of Public Health, defends the practice. ''Why should the social and economic burden of drug users be imposed on corporations?'' he asks. ''They must compete and make a profit. If one corporation screens out drug users, it will have a lower accident rate and greater productivity, while a company that doesn't screen will be out of business.'' Jerry Fields, director of safety and health at Boise Cascade, which screens its job applicants for drugs, observes, ''We have a responsibility to stockholders and employees to provide the best and safest working environment. With someone using drugs, there is less productivity, less creativity. I don't think we can legislate morality, but we can put together the best team possible.'' To critics, though, putting together the best team possible can become a witch hunt. ''I'm not a Communist,'' says Dr. Arthur McBay, head toxicologist in North Carolina's office of the chief medical examiner. ''But I find it hard to criticize Communist countries or totalitarian states when I see the kinds of things going on here.'' The skeptics argue that employers are presuming applicants and employees guilty until proved innocent. ''Mandatory urinalysis is an invasion of privacy that flies in the face of traditional U.S. values,'' says Norma Rollins, director of the privacy project for the New York Civil Liberties Union. ''A fair program should focus on those individuals who exhibit symptoms of drug dependence on the job, rather than forcing tests on thousands of innocent people who will capitulate under the threat of imminent unemployment.'' Retorts Bensinger: ''Employees give urine samples freely. No one is sticking a catheter in their bladder. This is not involuntary.'' Civil libertarians may object, but the law generally allows employers to fire employees at any time for any reason unless the employment contract says otherwise, or unless specific statutes, such as civil rights laws, restrict the prerogative. Similarly, the right to privacy as a legal doctrine usually constrains only government action, not corporate policies. ''So the government can't take medical specimens,'' explains David Vaughn, a Washington lawyer who specializes in labor arbitration. ''But that same protection doesn't extend to private-sector employees.'' The only legal protection a drug-dependent employee has is the Federal Rehabilitation Act and similar state laws that prohibit dismissal of workers for drug or alcohol addiction -- unless their work is deficient. Not all states have such laws; the federal law affects only those companies that do business with the government. Some aspects of the law seem to be changing in the employee's favor. John Larkin Thompson, president of Blue Shield of Massachusetts, fired 24 workers who were using drugs on the job last year, but decided not to initiate a screening program for applicants or employees. ''Employers have a legitimate interest in determining which employees can perform their jobs,'' he says, ''but you can't put an unreasonable requirement on employees unrelated to the nature of the job itself. The Xerox obesity case is a good example of that.'' In that case Catherine McDermott, a 67-year-old New York woman, sued Xerox Corp. for withdrawing a job offer when it learned that she was nearly 100 pounds overweight. New York State's highest court recently ruled in McDermott's favor, arguing that employers unwilling to hire seriously overweight people must show that those people are unable to perform assigned tasks. What may be the most neglected question in the controversy is whether drug screening makes business sense -- whether the costs and liabilities outweigh the benefits. Although Bensinger has cited numbers on the costs to industry of drug use -- he estimates it runs over $25 billion a year -- those figures rely on a lot of guesswork. Pinning down the cost more precisely is almost impossible. Applicants and employees who don't use drugs may resent the testing, even refusing to work for a company that screens. When Baseball Commissioner Peter Ueberroth recently announced his intention to test all the game's employees except players -- their contract forbids it -- Boston Red Sox pitcher Bob Stanley told a reporter, ''I don't take drugs, and I don't believe I have to piss in a bottle to prove I don't.'' Identifying drug users also entails legal risks for a company. ''If a corporation is going to label someone a drug user,'' says Roger Winthrop, director of the Alternative Resource Center, a public policy consulting firm in Lansing, Michigan, ''it better be right. It better be able to prove it in court or it can face some hefty legal damages.'' The root of the problem: the tests, at least the ones companies can currently afford to use in volume, are highly fallible. Dr. David Greenblatt, chief of clinical pharmacology at Tufts New England Medical Center, says ''false positives'' -- which indicate a person is taking a drug when he really isn't -- can exceed 25% for many types of tests. Chemicals in the body, like caffeine, cough syrup, or antiasthmatic medication, can throw off the findings. ''The tests are unreliable,'' he says. Syva Co. of Palo Alto, California, a manufacturer of drug-testing apparatus, claims that its products are accurate at least 95% of the time, but stresses that it's important to confirm the tests with still more tests. The Centers for Disease Control (CDC) discovered recently that companies often treat confirmation as a dispensable luxury. ''It costs less than $5 to do the initial screen and another $20 to $50 for the confirmation,'' explains Dr. Joe Boone, chief of the CDC's clinical chemistry and toxicology section. ''A lot of labs just do the initial screen to save money.'' The CDC found that some labs testing for drugs had a false-positive error rate of up to 66%. Some labs gave false-negative results -- indicating that a person is not taking a drug when he really is -- 100% of the time when testing for certain drugs. ''If these labs would have dumped the samples down the sink or tossed a coin,'' Boone says, ''they would have come up with the same reliability in their test results.'' CASEY TRIBLO of Brighton, Michigan, claims to be one of the hundreds of victims of this erratic system. Triblo, 31, is suing the city of Detroit and Quality Clinical Laboratories for about $3 million because he lost his job as * an emergency medical technician with the city fire department in 1981 as the result of a series of drug tests. Triblo admits that he smoked marijuana before the city hired him. Two tests taken during his pre-employment physical came out positive for marijuana. But, he says, once he learned he was going to be hired, he stopped. He was warned that if he failed a third test, he would be discharged. The third test, performed after he got the job, was also positive and he was dismissed. Triblo claims he had not smoked for 45 days before the third test and had received a negative result on a test done at another lab. In his suit, which will be tried in Wayne County circuit court, he asserts that Quality Clinical Laboratories failed to confirm the test. ''When I got the negative results, I knew a mistake had been made,'' says Triblo. Since 1982 he has worked for a private ambulance company, now at $3.70 an hour. If he worked for the city, he'd be getting over $9 an hour. ''I just want my job back,'' he laments. As medical screening spreads beyond drug abuse, the courts are likely to see more cases that weigh the employer's right to know against the employee's right to privacy. Companies would probably welcome, for example, a reliable screen for acquired immune deficiency syndrome (AIDS), since the disease is so frightening and the cost of treatment -- some of which the company might end up bearing -- so high. Mark A. Rothstein in his book Medical Screening of Workers reports that without such a screen, corporations have dismissed homosexual men who had fever and weight loss because these symptoms often indicate AIDS. The only mass-produced test available determines whether an individual has the antibodies to the AIDS virus -- indicating only that he's been exposed to the disease, not that he has it. And that test, while reasonably priced, has a clearly unreliable false-positive rate of 67%. AIDS screening raises some of the same questions as drug screening. Since AIDS is largely a disease of homosexual men, some see it as a disease of choice similar to a drug habit. Dr. Herbert Sherman, at the Harvard School of Public Health, summarizes the dilemma by asking, ''Should a corporation be responsible for self-destructive behavior?'' But others argue that homosexuality is not a matter of choice but an innate characteristic and, therefore, that AIDS is not a self-inflicted disease comparable to a drug habit. Genetic tests, which screen for physiological rather than behavioral ( aberrations, are also extremely unreliable, and few companies use them. The most recent congressional survey of the nation's largest corporations, done in 1982, found that only 23 companies had tried genetic testing in the prior decade. But the market for genetic screening will expand. Omnimax Inc. of Philadelphia claims it is developing a more reliable test to determine an individual's general susceptibility to illness in the workplace. The screen, which could be available as early as 1987, will cost about $150 per employee. This should increase pressure on companies to use genetic tests. Such tests can in effect reveal a family history of, say, cancer -- signaling that the individual is more likely to contract that disease than other workers. Companies fear that eventually they may be held negligent if they fail to conduct such tests and assign genetically unsuited employees to high-risk jobs. But they also worry that use of the tests could leave them open to charges of discrimination. Since certain genetic traits are particular to race or sex, discrimination on the basis of test findings could result. For example, Du Pont claims that in 1972 it began administering tests for the sickle-cell trait at the request of black employees in Wilmington, Delaware. But the New York Times subsequently reported that in interviewing Du Pont officials, it got conflicting accounts of the reason for the testing. One account implied the tests were used to make hiring decisions. The newspaper reported that individuals with the sickle-cell-anemia trait were not hired for certain jobs. In addition the tests were offered only to blacks, even though Mediterranean Caucasians, including Greeks and Italians, also can carry the sickle-cell- anemia gene. Du Pont, which still maintains it never used the test in hiring decisions, continues to offer the screening to black applicants who want it. JOHN BAILAR, one of Hsiao's colleagues at the Harvard School of Public Health, argues that the inevitable outcome of genetic screening will be ''the employment of the fittest,'' where only the most physically and mentally sound people will be able to find jobs. ''That's scary,'' he says. Dr. Robert Wiencek, General Motors director of occupational safety and health, agrees: ''It's up to the company to control what workers are exposed to in the workplace rather than hire people who can stand specific exposure levels. It's the employer's responsibility not to select out the genetically strong and let the person with certain genetic traits be unemployed.'' Although no federal laws deal with genetic screening, several states are taking action. Screening for the sickle-cell trait in the hiring process is prohibited in Florida, Louisiana, and North Carolina. New Jersey forbids discrimination based on a person's ''atypical'' genetic traits. Who then is to decide whether an employee with a high risk of susceptibility to illness in a workplace will work in that environment -- the employee or the employer? ''Some people will want to keep their job even if it will kill them,'' says Philip Lipetz, an Omnimax director. Adds Stephen Wear, professor at the Medical School of the State University of New York in Buffalo, ''A candidate with some genetic condition might be told not to take a position for his own good. There the employer might be looked upon as being paternalistic, and the employee might then say he's being discriminated against.'' Concludes Frances Miller, a professor of law at Boston University, ''Companies are damned if they do and damned if they don't.'' That's not likely to change anytime soon.