The Americans with Disabilities Act (ADA) limits when an employer can require an employee to take a medical examination. Specifically, the ADA forbids employers from requiring medical exams (and cannot otherwise inquire into the nature or severity of a disability) unless the exam or inquiry is shown to be "job-related and consistent with business necessity."
The U.S. Equal Employment Opportunity Commission (EEOC) advises (here) that an exam is permissible where the employer "has a reasonable belief based on objective evidence, that: (1) an employee's ability to perform essential job functions will be impaired by a medical condition; or (2) an employee will pose a direct threat due to a medical condition."
So, let's assume that you have an employee about whom you receive multiple reports of emotionally-erratic workplace behavior. At what pointy can you require that employee to seek counseling?
For that answer, let's turn to a recent case in Michigan, where the plaintiff, an EMT, asserted ADA claims because her former employer required that she complete psychological counseling to keep her job. The company had received first-hand reports that the plaintiff was having a tumultuous affair with a married co-worker, often crying in (and out of) the workplace, texting while driving an ambulance, and ignored a request to administer oxygen to a patient.
Based on these facts, the court concluded that not only did it appear that the plaintiff's ability to perform her job had been compromised by her erratic behavior, but her actions also created a direct threat to others; namely, the patients for whom she was required to care. Consequently, the court determined that the employer had a reasonable basis to require psychological counseling.
[Based on guidance from the Sixth Circuit, the lower court assumed that a psychological examination is the type of medical exam contemplated under the ADA]
The key in the Michigan case, as it will be in your workplace, is to brush aside the unreliable reports about emotional employee behavior. Rumors aren't much better. However, follow-up on rumors. Squash them if they have no support; but, document reliable firsthand information.
Ultimately, it's the objective, reliable information upon which you may rely to relying -- rather than rumors and hunches -- to require a psych exam as a condition of continued employment.