Site manager Darryn Adams said all employees should be subjected to a "reasonable cause" drug test because the site was only accessible by staff and not easily accessed by the public.
However, during the testing the Engineering, Printing and Manufacturing Union (EPMU) pointed out to the company it was breaching its Policy and Operating Procedure.
The authority ruled that despite knowing that breach, the company continued the tests because it believed staff could have been in danger.
EPMU spokesman Alan Clarence said it was "galling" that the company continued with the tests in order to send a strong message to its staff.
Testing the workers would also not have uncovered the owners of the marijuana plants, Mr Clarence said.
"It was a complete overplay of the company's position and using their position of power to enforce urine testing on their whole workforce."
The testing, by the New Zealand Drug Testing Agency, involved a tester standing behind male employees as they urinated into a cup. Women staff were allowed to give their sample in private.
One employee was found to have a "non-negative test", but there was no suggestion he was responsible for the plants.
CHH told the authority it was justified in testing the employees because it was reasonable to assume that whoever planted the cannabis worked at the sawmill.
The company conceded the testing was not in strict accordance with its procedures but said it was motivated by a strong desire to protect its employees and so the testing was justified.
But one worker, Aaron Sim, told the authority it felt like they were seen as guilty until proved innocent.
"It is a very intrusive and demeaning thing to be required to do when it is not for medical purposes."
Staff understood the company had a reasonable cause testing policy, but that was only to be used in cases where a staff member was behaving as if they were under the influence.
"So for the great majority of us that meant there was no reason to think we would ever be tested outside of random testing.
"Then suddenly every one of us was herded up and made to give urine samples for testing."
Authority member Christine Hickey said CHH's approach was "wrongheaded", but Mr Adams acted with honesty and openness.
The company knew it was acting against its own policy, but continued on nonetheless, she said.
Nobody from Carter Holt Harvey was available for comment.
