***!!!!!
Is she in the UK? If so, that's ILLEGAL - the Equality Act 2010 requires employers to make 'reasonable adjustments' for people with disabilities : T1's are classed as disabled under terms of the act (in Northern Ireland it's the DDA 1997).
She needs to explain to her boss (politely and in an email) that if he/she docks even a nano-second from her pay for any diabetes related aspects that he/she will be breaking the aforesaid law. She then needs to forward her email to HR and request a meeting with them and a senior manager in order that they establish the ground rules for how the complany accomodates her disability (and get that idiot removed) - she should add that she's doing this to protect everyone from further misunderstandings and unfortunate errors of judgement. She should use the meeting to explain her condition and why she blood tests, etc.
She needs to point out that sticking needles in her finger tips, thighs, arms, stomach, etc., is not something she chooses to do, but does in order to be able to stay alive. Consequently, she needs to test her BG levels to know how much insulin she needs to take, etc.