A panel of independent science advisers to the Environmental Protection Agency concluded yesterday that involuntary exposure to tobacco smoke causes lung cancer in nonsmokers and increases risk of respiratory illness in children.

The decision is expected to solidify plans by the EPA to rank environmental tobacco smoke (ETS) as a known human carcinogen, a move that would have major implications for employers nationwide. The Labor Department is waiting for a final EPA assessment, at least six months off, to determine whether ETS should be regulated in the workplace.

"We are persuaded that evidence exists. . . that ETS does cause lung cancer in nonsmokers," said Morton Lippmann, a scientist who chairs the indoor air quality panel of the EPA's Science Advisory Board, summing up a two-day meeting here.

Lippmann emphasized that the panel's judgment was tentative, based on its initial review of an EPA study that he said was "not fully developed." He called for further refinement of the data, saying EPA "should be able to make that case."

The tobacco industry, which mounted a full-court press to challenge the study as scientifically flawed, took heart in criticisms by individual panel members and their recommendation that the study be rewritten. "The science is so lacking, it's impossible to believe that the conclusions will hold up," said Brennan Dawson, a spokesman for the Tobacco Institute.

But anti-smoking advocates viewed the panel's description of ETS as a human carcinogen as a catalyst for government regulation of smoking in workplaces.

"An employer will no longer be able to justify unnecessarily exposing nonsomking employes to tobacco smoke in the workplace without risking serious and substantial liability," said Matt Myers, director of the Coalition on Smoking or Health.

The 16-member panel was asked to review the EPA study because of controversy last May over its designation of passive smoke as one of just a handful of substances known to be human carcinogens. That study also offered the first official estimate of ETS's toll: 3,800 lung cancer deaths a year, the third largest cause after radon and direct smoking.

Another controversial finding was that smoking parents, especially mothers, expose their children to higher rates of bronchitis and pneumonia in their early years.

Although similar warnings were issued in 1986 by the U.S. surgeon general and National Academy of Sciences, the conclusions of a regulatory body empowered to protect the public health were seen as having more practical significance.

The agency has no power to regulate indoor air pollutants, including tobacco smoke. But designating ETS as a human carcinogen could be important for the Labor Department's Occupational Safety and Health Administration, which has agreed in a court suit to consider controls on ETS and is awaiting EPA's verdict.

The findings are also the centerpiece of a policy guide EPA is preparing for governmental and private employers. A draft recommended that involuntary exposure be eliminated "wherever possible" by prohibiting smoking or segregating smokers.

With the trend toward smoke-free workplaces growing nationwide, the tobacco industry lobbied intensely to influence the choice of panel members and their review process, according to EPA officials.

A dozen industry witnesses faulted EPA's methodology, criticizing its averaging results of several epidemiological studies, failure to test laboratory animals, reliance on foreign data and omission of contrary information.

"This is a classic case where the evidence is not all that strong. Any study can be found to have flaws," Lippmann said. But he said the "weight of the evidence" supports the general conclusion that ETS causes lung cancer in nonsmokers and respiratory illness in children.