The next day Mr O'Connor's supervisor Alex Beck called them into a meeting and said he had received a phone call from a member of the public, who said she had seen the pair smoking marijuana in Mr O'Connor's car the day before, the authority said.
Mr O'Connor explained he was smoking a cigarette, but he and Mr Brown were told they were required to take a drug test, and if they refused it would amount to serious misconduct.
Mr O'Connor told the authority that as he was on his last warning, he felt as though he had no choice but to undertake the test.
The test showed a non-negative result for cannabinoids, and Mr O'Connor was suspended on pay until tests were verified.
At a disciplinary meeting Mr O'Connor acknowledged he smoked cannabis at home, but denied smoking at work, the authority said.
As a result of his test results Mr O'Connor was dismissed for serious misconduct.
Ballance denied that Mr O'Connor's dismissal was unjustified, as he failed a drug test which constituted serious misconduct, the authority said.
It said the decision to dismiss Mr O'Connor was open to it as a fair and reasonable employer.
Mr Beck said Mr O'Connor displayed unusual behaviour on the day the meeting was called and appeared agitated, leading him to believe a drug test was warranted.
Authority member Anna Fitzgibbon said Ballance did not have the grounds to request that Mr O'Connor undergo a drug test.
"A complaint from the public did not entitle Ballance to require a reasonable cause test."
She said she also did not accept evidence that Mr O'Connor was acting in an unusual way on the day of the meeting.
Ms Fitzgibbon said Ballance was not justified in dismissing Mr O'Connor based on his positive drug test, which returned a low level of cannabinoids.
Mr O'Connor was awarded $10,857 for lost wages, and $3000 compensation for humiliation, loss of dignity and injury to feeling.
Costs were reserved.
Both Ballance and Mr O'Connor were not immediately available for comment.