They are not required by law to give you another chance
False! Under both, the US Dept of Transportation and the Dept of Health & Human Services regulations, a dilute does not constitute a failure and a retest must be given. Water is not the only fluid that can cause a diluted result. Coffee and all other fluids can affect the outcome of a test.

obviously a LAB knows if you drank water right before, and why did you drink water right before?....to dillute you piss to filter out drugs.
Wrong. Labs are not detectives. Fluid intake is normal prior to a drug test. Its especially common in blue-collar fields where workers stay hydrated. In fact, its an OSHA requirement for workers to keep hydrated during the course of duty. For this reason, and many others, an existing employee who had been discharged for a diluted result can be entitled to civil remedy.

Thats the same as failing.
Wrong again. See first paragragh.