If you're a small business owner, you already know workers' compensation is a big expense. Because most states require this type of insurance in case an employee is injured on the job you may think it's something you can't change. The fact of the matter is you can lower your premiums over time by implementing some employee programs and policies and making your business a drug free workplace is one of them.

A drug free workplace is considered to be free of both drugs and alcohol: what's known as substance abuse. While the focus of this article will be drugs in general it will also touch on alcohol.

There are industry variations in the national statistics on drug use in the workplace, so if your business is in one of the high-risk industries you may wish to become more proactive in keeping drug use out of the employment arena.

There are specific actions you can take to make your business a drug free workplace and those actions will be outlined so you have a blueprint to work from.

Because many states now allow medical marijuana for various physical and mental conditions the laws regarding marijuana use by employees are changing so it's vital you check with your own state laws pertaining to medical marijuana card holders.

Several states actually give employers discounts on their workers' compensation insurance if they implement a drug free workplace policy, so you may see direct savings. Those states will be listed below.

According to the National Institute on Drug Abuse (NIDA) you will see improvements in a wide range of areas once you implement a drug free program. Here's a look at some of the benefits:

  • Improvements in morale and productivity
  • Decreases in absenteeism, accidents, downtime, turnover, and theft
  • Better health status among employees and family members
  • Reduced healthcare costs

By ignoring the problem, you may find the exact opposite result: employees injured on the job while under the influence may result in higher workers' compensation premiums. Depending on the state in which you do business drug use can affect workers' compensation benefits, too.

Industry Variation

According to the Substance Abuse and Mental Health Services Administration (SAMSHA) certain industries are more prone to drug use in the workplace, so if your business falls in one of these categories you'll want to be more proactive with your employees. Those employed in the mining industries have the highest rate of alcohol abuse at 17.5 percent, followed closely by construction workers at 16.5 percent. Because these are both high risk industries they already face high workers' compensation insurance rates, so a drug free policy should be followed strictly.

Illicit drug use follows a similar pattern in different industries. Workers in the accommodations and food services industry had a drug use rate of 19.1 percent and construction workers were reported at 14.3 percent.

Some places of employment such as hospitals and schools require drug testing and have a zero-tolerance policy, which may bear a factor in those industries reporting low abuse rates. While testing practices are usually set by the business itself methods and practices may include:

  • pre-employment testing
  • random testing
  • post-accident testing
  • return-to-duty testing
  • reasonable suspicion or cause testing
  • follow-up testing

How to Become a Drug Free Workplace

  • Your first step should be to create a drug free workplace policy. Put it in writing and make it available to all employees; if you have an employee handbook you should also insert the policy within.
  • Educate your employees so each one has a clear understanding of the safety and health risks involved with impaired working.
  • Show you care. Provide resources such as helpline numbers, treatment center information as well as information on how drug use can impact employees, coworkers, and family members.
  • Check with your workers' compensation insurance carrier for materials to help implement a drug free workplace environment. Your insurance company will be pleased to see you taking proactive measures and may have formal training programs you can use in the workplace.
  • Be prepared to consistently follow your written policies.
  • Have a policy on medical marijuana use and make sure it follows your state's legal guidelines.

Remember, as you implement a drug free workplace policy you'll see many more benefits besides a potentially lower workers' compensation premium here are some other ways a drug free policy will help your business:

  • Increase bottom line and productivity
  • Reduce healthcare costs
  • Fewer workplace injuries
  • Less absenteeism
  • Less employee turnover
  • Improved employee morale

State Laws

As many states are changing their laws regarding medical marijuana as a business owner you're most likely going to eventually have a situation with a card holding employee. If your business is in a state with legal medical marijuana you should keep yourself informed of any changes regarding employment laws. For example, in January 2017 Washington State changed their law to prohibit an employer from discriminating against employing a medical marijuana card holder but allows the employer to discriminate possession, use, or impairment while on the job. The new law also allows an employer to discriminate if compliance would cause the business to lose a federally funded or license related benefit.

Because cannabis may cause delayed reaction, lower cognitive performance, and other effects most legalized states have either kept their original laws or amended the standing laws to resemble that of Washington State. NCCI notes it is worthy to mention that the legalization of recreational marijuana in both Colorado and Washington has not resulted in measurable increases in automobile crash fatality rates.

The main reason you should consider implementing a zero tolerance policy is federal: although legal in many states marijuana remains a Schedule I drug on the federal level. Businesses seeking federal contracts must maintain a drug free workplace, and the Department of Transportation also requires businesses operating commercial vehicles interstate must have a drug free workplace.

State Discounts

If you live in one of the following 13 states you're in luck: there's already a a state law in place that will give you a discount on your workers' compensation policy if you implement a drug free policy in your business:

  • Alabama provides a 5 percent discount to employers that establish a drug-free workplace.
  • Arkansas employers with drug-free workplaces qualify for a 5 percent discount on workers' compensation premiums.
  • Florida gives a 5 percent premium discount to employers that begin and maintain a certified drug-free workplace program.
  • Georgia gives a 7.5 percent discount on workers' compensation premiums to employers with a drug-free workplace program that has been certified by the state Board of Workers' Compensation.
  • Hawaii gives a discount of at least 5 percent to employers that maintain an effective safety and health program.
  • Idaho public employers who conduct drug and alcohol testing of all current and prospective employees qualify for an employer Workers' Compensation premium reduction.
  • Kentucky grants employers who implement a drug-free workplace program a 5 percent reduction of their insurance premium.
  • Mississippi gives a 5 percent reduction in workers' compensation premiums to employers with a drug-free workplace program.
  • Ohio provides a five-year phased in workers' compensation premium reduction that can rise as high as twenty percent.
  • New York has a Workplace Safety and Loss Prevention Incentive Program of 6 percent.
  • South Carolina gives a 5 percent discount on workers' compensation premiums to employers that establish a drug-free workplace program.
  • Tennessee awards a 5 percent discount on premiums to employers who establish a drug-free workplace program.
  • Virginia gives a 5 percent premium discount for employers with a drug-free workplace program.

Drugs and Benefits

In some states when a worker is injured on the job and is found to be under the influence of drugs or alcohol they are barred from collecting benefits. Other states have a similar policy that reduces the amount of benefits an employee may collect.

Your workers' compensation policy may have a clause that says it won't pay if the injured worker is under the influence. Keep in mind your workers' compensation insurance does not cover third parties that may be injured by your impaired worker, but in that case an injury may be covered under your liability insurance.

Any way you look at it, drugs in the workplace are not a good idea. While it may take time for you to see savings on your workers' compensation insurance premium you'll most likely see immediate positive results in other areas. Now is the perfect time to implement a drug free policy in your business.


  • Laborers' Health & Safety Fund of North America

  • National Council on Compensation Insurance (NCCI)

  • Washington State