Drug and Alcohol Management –A Quick Guide for N.Z Employers
Managing drugs and alcohol in the workplace is a high-risk employment law issue for New Zealand employers, which should always be approached with caution.
Decisions to test, discipline or dismiss employees for drug or alcohol-related matters routinely lead to personal grievance claims, particularly where employers fail to follow a fair process, rely on weak evidence, apply policies inconsistently, or fail to have a workplace drug and alcohol testing policy at all.
Ensuring a sound understanding of the key legal considerations and risks that apply to this area of employment law helps to reduce an employer’s exposure to protracted disputes, including potential successful personal grievance claims.
The Legal Framework
Drug and alcohol management in the workplace is informed by several intersecting legal obligations, including:
Health and Safety at Work Act 2015 (HSWA) – Duty to ensure health and safety so far as reasonably practicable.
Privacy Act 2020 – Collection, use and disclosure of test results.
Human Rights Act 1993 – Disability and medical condition considerations.
There is no express statutory right to test employees by employers. Any testing must be lawful, reasonable and justified in the circumstances. In this context, the Employment Relations Authority and the Employment Court have set down legal precedents which have been established in case law, including the importance of an employer have a clearly defined workplace drug and alcohol policy in place to support workplace drug and alcohol testing of employees.
When Can Employers Conduct Drug and Alcohol Testing?
Testing is generally accepted as lawful where it is:
Supported by a clear workplace policy, including prescribing the circumstances where testing can be required such as ‘reasonable cause’, ‘post-incident/accident’ or random testing (for safety sensitive roles only).
Conducted for a legitimate safety or business reason.
Proportionate to the risk involved.
Carried out using reliable, accredited testing methods such as a reputable testing agent and independent verification of testing results.
Established Legal Grounds for Testing
Employers may be justified in testing employees in the following circumstances:
Pre-employment testing (where disclosed and consented to in advance).
Random testing in safety-sensitive roles only where the nature of the work involves risk.
Post-incident testing following accidents or near misses.
Reasonable cause testing based on observable behaviour, or genuine circumstances.
Testing without a work policy and corresponding authority or outside these grounds is likely to be unlawful and may expose the employer to legal risk.
The Importance of a Drug and Alcohol Management Policy
A robust drug and alcohol policy is critical. It should clearly set out:
The purpose of testing and safety rationale.
Roles subject to testing (including safety-sensitive positions).
When and how testing will occur.
The testing process and standards.
Consequences of positive tests or refusals.
Support, rehabilitation and EAP options.
Employers who rely on ad-hoc decisions rather than policy-based processes are far more likely to lose personal grievance claims and have financial orders imposed against them.
Employer Pro has a template workplace ‘Drug and Alcohol Policy’ and other employer focused resources that employers can use as a basis to establish legally compliant testing and employment processes where necessary.
Managing Positive Tests and Suspected Impairment
A positive test does not automatically justify dismissal. Employers must:
Provide the employee with test results and an opportunity to respond via a formal and documented employment process, including all the usual procedural fairness formalities.
Consider medical explanations (including prescription medication).
Assess whether the conduct amounts to misconduct or serious misconduct.
Consider alternatives to dismissal where appropriate.
Dismissals based on drug or alcohol issues are commonly overturned where employers pre‑determine outcomes, fail to consider individual circumstances or do not ensure decisions are balanced and proportionate.
Police Roadside Drug Testing – Workplace Implications
New Zealand’s expanded roadside oral fluid drug testing regime allows Police to test drivers for impairing drugs without suspicion. While this regime applies to road safety rather than employment, it has practical workplace implications, particularly for employees who:
Drive company vehicles.
Hold safety-critical licences.
Perform driving as part of their duties.
A roadside positive does not automatically justify disciplinary action, but it may trigger:
Reasonable cause testing under workplace policy.
Temporary removal from safety-sensitive duties.
A workplace investigation into fitness for work.
Formal disciplinary action, if warranted.
Employers must still follow a fair and lawful employment process.
Common Employer Mistakes
Employers frequently face liability where they:
Test without policy authority.
Misapply random testing to non-safety-sensitive roles.
Fail to follow contractual disciplinary procedures.
Treat circumstances that may be less severe as serious misconduct.
Ignore medical or dependency issues.
Fail to consider rehabilitation options.
Case Law Snapshot – What Recent Decisions Tell Employers
C3 Limited v O’Brien [2024] NZEmpC 6
The Employment Court (‘the Court’) dealt with an employee dismissed after a workplace drug test was considered invalid because the sample did not meet the technical requirements (e.g., no warm thermal strip trigger or sufficient creatinine levels). The employer’s policy allowed dismissal if sample integrity was “suspect,” but did not require a second sample to be taken as the applicable testing standard (AS/NZS 4760:2019) would have advised.
The Authority initially reinstated the employee pending investigation, and on appeal the Court found the employee had a strong arguable case of unjustified dismissal, holding that a fair and reasonable employer would likely have:
Collected a second urine specimen in accordance with the relevant standard.
Properly investigated the employee’s explanation about the testing process.
Considered other plausible reasons for the invalid sample.
The Court accepted it was arguable the employee should be permanently reinstated, as he had the skills and experience to reintegrate into the workforce. Nevertheless, the Court found the balance of convenience and overall justice went against ordering full interim reinstatement. However, because the employee had a strongly arguable case, the Court ordered him to remain on the payroll (and continued being paid by the employer) until the substantive determination of his claim by the Authority was made.
Employer Takeaway: Employers must ensure that drug and alcohol testing procedures not only reflect workplace policy but also align with the technical standards that govern workplace drug and alcohol testing. Simply relying on policy wording without following established testing standards and conducting adequate follow-up testing risks a finding of unjustified dismissal. Employers should always engage a reputable and qualified external drug and alcohol testing agent to carry out workplace testing to help ensure the integrity of testing results.
Hadfield v Atlas Concrete Limited [2023] NZERA 470
A concrete truck driver was dismissed after a random workplace drug test returned a non-negative result for cannabis. The employee admitted to using cannabis over the weekend but argued he was not impaired at work. The employer relied on its drug and alcohol policy and collective employment agreement to justify immediate dismissal for serious misconduct.
The Employment Relations Authority (‘the Authority’) found that while a fair and reasonable employer could conclude the test was indicative of attending work under the influence (given the safety-sensitive nature of the role), Atlas Concrete’s process was procedurally flawed. Shortcomings included:
The employer’s policy and the collective agreement contained inconsistencies, and the updated policy had not been properly agreed with the union.
The employee was not properly advised of his rights (e.g., to representation or to see relevant documents) before disciplinary meetings.
The employer did not genuinely consider alternative disciplinary options or rehabilitation, effectively adopting a “zero tolerance” approach without meaningful assessment and fair consideration.
The Authority ruled the employee’s dismissal was unjustified due to procedural errors and ordered over $23,000 in financial remedies against the employer, less a 20% reduction for contributory conduct (excluding the own employer’s legal costs).
Employer Takeaway: Even where safety and testing rationale appears strong, employers must ensure policy alignment with their employment agreements, follow their own procedures, ensure proportionate outcomes and genuinely consider employee explanations and alternatives to dismissal. Procedural errors – especially in sensitive areas like drug testing can turn a justified decision into an unjustified dismissal with the potential of significant remedies being awarded against employers.
Key Employer Takeaways
Drug and alcohol testing must be policy‑based and justified:
Poor process frequently leads to significant financial remedies being ordered.
Well–designed workplace policies and consistent application are essential to managing drug and alcohol risk while reducing unnecessary legal exposure.
Compliance Warning
While employers may have legitimate health and safety reasons to conduct drug and alcohol testing in the workplace, there is no automatic statutory right to test employees, and disciplining or dismissing employees for drug or alcohol use comes with risk. Decisions that are not clearly supported by policy, evidence, and a fair process are frequently overturned and adverse litigation outcomes ruled against employers who get it wrong.
The Authority and the Court consistently find that employers lose drug and alcohol cases because procedural fairness failings in their processes, policies inconsistently being applied, or individual circumstances not being properly considered and weighed by employers. Even in safety-sensitive roles, a positive test or refusal to test does not remove the obligation to act as a fair and reasonable employer.
Employers should regularly review their drug and alcohol policies, ensure testing regimes align with current legal standards, and train managers to apply policies carefully and consistently. In this area, process is as important as outcome, and failures can result in significant financial remedies and reputational harm.
This article is provided for general information only and does not replace professional advice. Employers should seek advice specific to their circumstances from Employer Pro if in doubt on their legal obligations associated with workplace drug and alcohol testing, including employment practices. Employer Pro has a range of employer focused resources and services available through our competitive Employer Protection Packages.
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