In the US, alcoholism has been ruled to be a disability as defined by ADA (American with Disabilities Act), which basically states that an employer cannot discriminate against actual (or potential) employees who are disabled and must make "reasonable accomodations" for such employees. The manager in your story may be avoiding confrontation but really is toeing a well-defined line: as long as this employee is able to perform his/her job (and, since the manager has labelled the employee "functional," we can assume s/he is), any "confrontation" (as I'm guessing you'd like to see) could be construed as "discrimination" under ADA and there are plenty of lawyers would love to jump on that gravy train. (In fact, discussing this employee's issues with other employees has to be done carefully as well, both so as not to be construed as "discrimination" under ADA as well as not violating the "functional alcoholic's" rights to medical privacy under HIPPA. HR is a complicated field.)
This was put into place to protect people from "being kicked when they were down" (i.e., so they wouldn't lose their job as they were coping with a serious condition).
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