California Gov. Gavin Newsom and state lawmakers have brokered a deal with Uber and Lyft, granting rideshare drivers the right to unionize while preserving their status as independent contractors.
The agreement, finalized on Aug. 31, pairs AB 1340, a labor-backed measure allowing more than 800,000 drivers to form unions and negotiate wages, with SB 371, a company-favored cut to insurance mandates that slices coverage from $1 million to $60,000 per person and $300,000 per accident.
The Service Employees International Union (SEIU), the labor union that sponsored AB 1340, championed the deal.
“Gig workers have been fighting, organizing, and advocating for years, because for too long, the industry’s giants have handed workers a raw deal: you do all the work and take all the risks, while corporations make all the decisions and reap the lion’s share of the rewards. That stops with AB 1340,” Tia Orr, executive director of SEIU California, said in a statement on Aug. 29.
This is not the first time California’s gig economy workers have gone up against rideshare companies over employee classification.
In 2019, Assembly Bill 5 sought to reclassify drivers as employees, which would have entitled them to minimum wage, overtime pay, and other benefits.
In 2020, companies including Uber, DoorDash, and Lyft countered AB 5 with Proposition 22, collectively spending more than $200 million to get the measure to pass, which it did.
Prop 22 allows app-based transportation or delivery companies such as Uber and Lyft to classify drivers as independent contractors and not employees covered by workers’ compensation laws.
The California Supreme Court upheld Prop 22 in 2024, a verdict that seemed to close the door on the labor union’s ambitions. Now, AB 1340 has opened it just enough to let drivers bargain collectively, certified by the Public Employment Relations Board, without crossing the threshold into employment.
Ramona Prieto, Uber’s head of public policy for California, called it a balance: “stronger voices for drivers” paired with cost relief for riders.
Nick Johnson, director of public policy at Lyft, said the insurance cuts—addressing costs that eat nearly a third of every fare—will keep rides affordable in the state.
Newsom echoed that sentiment, calling the deal a middle ground between labor unions and rideshare companies.
“Labor and industry sat down together, worked through their differences, and found common ground that will empower hundreds of thousands of drivers while making rideshare more affordable for millions of Californians,” he said in a statement. “It’s proof that California can do big things, tackle tough issues, and improve peoples’ lives.”
Naveen Athrapully contributed to this report
