The ROI of Employee Drug Testing Programs

Product Manager

Workplace drug testing has been around for more than forty years in the U.S.  At the start, drug testing was all about compliance with federal rules and has since evolved with state-specific laws and case laws that employers also need to follow. The primary goal of these rules is to maintain safety in our workplaces. Today, more than 600 state statutes and regulations and over 12,000 court and agency decisions impact employer drug testing programs.[1] Maintaining compliance can be a chore, but employers that invest in the effort benefit from a long list of advantages and increased safety and productivity. 

Employers are beginning to recognize that drug testing programs also present attractive financial opportunities. These opportunities are not just in the form of deterring or refusing to hire or firing those who would instead use drugs than get or keep their jobs. Employers can benefit from leveraging voluntary state-specific Drug-Free Workplace Programs (DFWP), workers' compensation intoxication defenses, and unemployment claim defenses to positively impact the company's bottom line.

Drug-Free Workplace Programs (DFWP)

Employers may be eligible for a discount on their workers' compensation insurance premiums, so long as an appropriate Drug-Free Workplace Program (DFWP) is established. Complying with DFWP rules is voluntary for employers; however, if a company wishes to use drug testing to reduce their workers' compensation insurance premiums, they must comply with the rules to qualify for the benefits. 

More than a dozen states currently offer some incentive(s) in exchange for an employer willing to establish a drug-free workplace program or meet detailed state-specific criteria.  These incentives typically come in workers' compensation insurance premium discounts ranging from 5% to 7.5%.

The rules in each state differ, but most require developing a written company policy, using specific screening methods, drug testing panels, laboratory specifications, using a Medical Review Officer (MRO), and providing notice and specimen challenge information.

Intoxication Defense to a Workers' Compensation Claim

Another critical benefit that can directly impact your company's bottom line is defeating a workers' compensation claim when the injured employee tests positive for drugs or alcohol. 

In the past, it was difficult for employers to succeed in defeating claims, mainly because in most states' employers had to prove (1) that the employee was intoxicated and (2) that the intoxication "caused" the accident and injuries.

When drug testing appeared in the workplace, legislatures began using it to ease employers' difficulty proving the intoxication defense.  Nearly every state now has an intoxication defense to a worker's compensation claim. Employers should take notice and utilize this defense whenever possible.

Many states have also evolved to offer employers the benefit of a "rebuttable presumption of intoxication" defense to a workers' compensation claim. This essentially means that, so long as the rules are followed, a positive test will 'prove' that the employee was under the influence and that intoxication caused the incident. 

Each state law is different, and these details of each states' laws matter. Some states have a basic set of rules, and other states have somewhat complicated rules that must be met. 

Unemployment Claim Defense

All states have some form of unemployment or "employment security" claim defense.  Most state laws list specific employee actions that may result in a loss of benefits. "Misconduct" related to work is typically among those actions. How misconduct is defined differs from state to state, and it is recommended that your employee drug testing policy clearly explains what your company describes as "misconduct."

Similar to workers' compensation claim defenses, state unemployment claim defenses range from simple to very complex. Not all laws mention or provide for drug or alcohol use.  

Compliance = Savings

Did you know the cost savings by leveraging these financial benefits will likely cover the costs of your entire employee drug testing program? 

A Society for Human Resource Management (SHRM) survey from 2011[2] found the number of employers reporting high workers compensation incident rates decreased by approximately 50% after introducing drug testing. A powerful stat still today. Insurance providers look at standard measures to calculate the cost of a company's workers' compensation premiums. A critical factor measured is a company's Experience Modification Rate.

Experience Modification Rate (e-mod)

A company's experience modification factor (e-mod) is a barometer of your historical worker's compensation experience.  An e-mod of 1.0 represents the average for your industry class.  Anything higher means experience worse than your industry average; anything lower is better than your industry average.  Many employers think an e-mod of 1.0 is good.  Not so—it's only average.  Would you be satisfied if other aspects of your business, such as quality, sales goals, or customer satisfaction, scored an average of a "C" grade for performance?  If not, you shouldn't be satisfied with a 1.0 e-mod.  Learn what the minimum e-mod is and set a target to get there. Utilizing a compliant drug testing program is vital in your company's e-mod and reducing your insurance costs.

Employer Expectations

Employers are again encouraged to clearly understand the benefits available to them and the detailed rules they must follow to comply and leverage the financial benefits voluntarily. It is critical to understand the specific language of requirements within the law in each state your company operates. Implement the rules into your company policy, procedures, handbooks, situational checklists, employee training, and other tools utilized in the 'heat of the moment.' Inform your employees about the company's workers' compensation program during their onboarding process.  Educate your employees on what to expect if they have a work-related incident or injury.  Explain their rights and responsibilities should an incident or injury occur.  Communicate to your employees about the company's expectations for strict adherence to safety standards, same-day reporting of any injuries, and compliance with your return-to-work program. Spend the time to train your supervisors and managers to be the gatekeepers to compliance for your company.