California Drug Testing Laws: A Small Business Guide

If you have been running a small business in California for a while, you probably have some version of a drug-free workplace policy. You may have been including marijuana on your standard drug screening panel for new hires. You may have even asked applicants about their drug use during interviews.

As of January 1, 2024, a lot of that is no longer legal.

Two California laws changed the rules on marijuana and employment, and most small business owners I talk to either have not heard of them or do not fully understand what they mean. Here is what you need to know.

The Two Laws That Changed Everything

AB 2188 amended California's Fair Employment and Housing Act to prohibit employers from discriminating against applicants or employees based on their off-duty use of cannabis. If someone uses marijuana at home, on their days off, or away from work, you cannot fire them, refuse to hire them, or take any adverse action against them based on that alone.

SB 700 added a separate protection: employers cannot ask job applicants about prior marijuana use. That question comes off your application and out of your interviews.

Both laws went into effect on January 1, 2024. Both apply to employers with five or more employees. If you own a restaurant, a salon, a retail shop, or a home services business in Orange County, these laws almost certainly apply to you.

Why Standard Urine Tests Are Now a Legal Liability

Here is the detail that catches most employers off guard.

A standard urine test for marijuana does not measure whether someone is actually impaired. It detects metabolites, the byproducts your body stores after cannabis use, which can linger in your system for 30 days or more after you last used it. Someone who had an edible on a Saturday could still test positive the following Friday. They could be completely fine to work.

AB 2188 specifically prohibits taking action based on tests that only detect those non-psychoactive metabolites. That includes standard urine panels. Running a routine urine drug test and refusing to hire someone because they tested positive for marijuana is now an illegal discriminatory act in California.

What you can test for is psychoactive THC, which indicates recent use and potential current impairment. Blood tests and oral fluid (saliva) tests can detect this. They are more expensive and less commonly available than urine tests, but they are the only legally defensible option if you want to screen for cannabis impairment.

For most small businesses, the standard pre-employment urine panel for marijuana is no longer a useful tool. It never told you much anyway, and now it creates legal exposure.

You Can Still Have a Drug-Free Workplace

This is worth being clear about: the law does not require you to tolerate impaired employees. You can absolutely maintain a policy that prohibits coming to work under the influence of marijuana, using cannabis on premises, or showing up unable to do your job safely.

The line the law draws is between off-duty behavior and on-the-clock behavior.

Think of it like alcohol. A server who had wine with dinner last night is legally protected from being fired for that. But if they show up slurring their words and struggling to carry a tray, that is a completely different situation. Cannabis now works the same way under California law.

If you observe an employee showing signs of impairment at work, such as slowed reaction time, difficulty following instructions, coordination problems, or erratic behavior, you have a basis to act. That basis is what you observed, not a positive metabolite test from last week.

What You Cannot Ask During the Hiring Process

SB 700 is straightforward. These questions are off the table:

• "Have you ever used marijuana?"
• "When did you last use cannabis?"
• "Do you use recreational drugs?"
• Any question about cannabis-related prior criminal history

The law also prohibits using criminal history related to marijuana possession against applicants, reflecting California's broader push to expunge prior marijuana convictions. Review your application and make sure none of these questions appear.

For a broader look at what California restricts during the background screening process, see our guide on background checks for small business hiring in California.

Can You Still Do Pre-Employment Drug Testing?

Yes, with conditions.

You can conduct drug testing after you have made a conditional offer of employment. The key word is conditional: the offer has to come first. You cannot screen for drugs during the interview process or as a prerequisite for receiving an offer.

And when you do test, the same restriction on metabolite testing applies. If you want the results to hold up legally, you need to use a test that detects current psychoactive impairment, not one that just flags past exposure.

Practically speaking, many small businesses in California are moving away from pre-employment marijuana testing entirely for hourly roles. A positive metabolite result from a restaurant job applicant tells you nothing meaningful about how they will perform as a line cook or server. The behaviors that matter, showing up reliably, working clean, treating customers well, are better assessed in the interview itself.

For guidance on what to actually ask candidates, see our guide on interview questions for hourly workers that actually work.

Exceptions That Might Apply to Your Business

A few categories of employers are exempt from parts or all of AB 2188 and SB 700.

Building and construction trades: If you employ workers under a collective bargaining agreement in the building and construction trades, the cannabis testing restrictions do not apply.

Federal contractors: If your business has a federal government contract and is subject to the federal Drug-Free Workplace Act, federal law governs. The federal government still classifies marijuana as a controlled substance, and California law does not override that.

DOT-regulated positions: Employees in Department of Transportation safety-sensitive roles, such as commercial vehicle drivers, are subject to federal testing requirements. California's rules do not apply to those positions.

Federal clearance positions: Any role requiring a federal background investigation or security clearance is also exempt.

For the vast majority of small businesses in Orange County, none of these exceptions apply. If you run a taco shop in Anaheim, a nail salon in Irvine, or a fitness studio in Newport Beach, you are operating under the standard rules.

What Happens If You Ignore This

Violations of AB 2188 and SB 700 fall under the California Fair Employment and Housing Act, enforced by the California Civil Rights Department. Employees and applicants have the right to file complaints and pursue legal action.

Even if you ultimately prevail in a claim, the cost to defend it is significant. Employment attorneys, discovery, and depositions add up fast. A wrongful termination claim tied to a marijuana test can cost tens of thousands of dollars before you see the inside of a courtroom.

The smarter path is to update your policies before something happens. A 30-minute review of your hiring documents can eliminate most of the exposure.

How to Update Your Process

Here is a practical checklist for most small businesses:

Step 1: Pull your job application. Look for any questions about marijuana, drug use, or cannabis-related criminal history. Remove them now. If you use an online application through Indeed or your website, update it today.

Step 2: Update your employee handbook. Your drug-free workplace policy needs to reflect current law. You can still prohibit on-duty impairment and cannabis use on your premises. You cannot make off-duty use a terminable offense. See our guide on what to include in your employee handbook for help with the specific language.

Step 3: Train anyone who manages people. Since your basis for action is now observable impairment rather than a metabolite test, your managers need to know what that looks like and how to document it. Slurred speech, coordination problems, inability to follow instructions, and behavioral changes are what you are looking for. Observations need to be written down with the date, time, and names of witnesses.

Step 4: Decide whether pre-employment testing still makes sense. For most hourly service positions, the honest answer is no. If you are in an industry with genuine safety concerns, consult an employment attorney about which testing methods are defensible in California in 2026.

Step 5: Document everything. Any time you take action related to observed impairment, put it in writing the same day. Who was present, what was observed, what was said. That documentation is your protection if a claim is ever filed.

A Note on Safety and Operational Reality

Some business owners push back on this and say: I have people working in a kitchen with open flames. I have delivery drivers. I have employees serving alcohol. Can I really not test for marijuana?

The answer is nuanced. You can test for current impairment. You can maintain clear performance standards and document when they are not met. What you cannot do is use a urine metabolite test as a proxy for fitness for duty, because the test does not measure that.

A good policy focuses on observable performance and behavior, not on what someone did on their last day off. That framing actually works better for you as an employer anyway, because it puts attention on the job itself.

A restaurant owner in Santa Ana told me that after updating her policy to focus on on-the-clock performance instead of metabolite screening, she stopped having arguments with staff about what they do on their own time and started having clearer conversations about expectations at work. Her conflict rate went down, not up.

Where My Friendly Staff Fits In

If you are updating your hiring process to stay compliant, the questions you ask during initial candidate screening matter. My Friendly Staff helps small businesses in Orange County run structured intake interviews that stay on the right side of California law from the start. Nothing in the screening call touches marijuana use or other protected areas, and every question is focused on job fit.

That means you get pre-screened, ranked candidates without introducing any of the legal risk that comes from unguided early-stage conversations with applicants. If your current intake process is informal or inconsistent, that is exactly where compliance problems tend to begin.

Staying Current on California Employment Law

California's employment law landscape changes frequently. AB 2188 and SB 700 will not be the last laws that affect how you hire and manage your team.

A few resources worth bookmarking: the California Civil Rights Department publishes employer guidance on Fair Employment and Housing Act requirements. The California Chamber of Commerce flags new compliance bills each legislative session. Your industry association, whether that is the California Restaurant Association or a retail trade group, usually updates members when relevant laws pass.

For a broader look at common legal mistakes in the hiring process, see our guide on hiring mistakes small business owners make most often. And if you are building out your whole hiring process from scratch, our guide on how to hire employees for small business in 2026 walks through every step.

The Bottom Line

The standard urine test for marijuana is no longer a legally defensible hiring screen in California. You cannot ask applicants about past use. You cannot take action based on metabolite tests. And off-duty cannabis use is a protected activity under state law.

What you can do is maintain clear performance expectations, observe and document impairment when it happens at work, and build a hiring process that evaluates what actually matters: reliability, experience, attitude, and fit.

Update your application. Update your handbook. Brief your managers. And stop running tests that create more risk than they prevent. That is the whole playbook.