California Governor Newsom signed the AB1340 bill on October 3, allowing over 800,000 Uber, Lyft, and other gig economy drivers to join unions as independent contractors to collectively bargain for higher wages and better benefits. In exchange, the state legislature supported the SB371 bill, signed into law by Newsom, which will reduce the costly insurance fees that ride-hailing companies had to pay and may lower fares for customers.
AB1340, titled “Transportation Network Company (TNC) Drivers: Labor Relations,” was proposed by nine Democratic state assembly members, including Buffy Wicks from the 14th district and Marc Berman from the 23rd district, and passed in the Senate and Assembly with votes of 29-10 and 60-15 (5 absent).
Newsom stated, “Trump is holding the government hostage, depriving workers of protections. What we are doing in California is the opposite: proving that government can deliver on promises—empowering drivers to form unions while working to lower household costs. That’s the difference between chaos and efficiency.”
Wicks mentioned, “For too long, drivers have lacked meaningful input into improving their livelihoods. AB1340 will empower them to unite, demand better pay and protections, and help shape the future for gig economy drivers.”
Berman added, “Ride-sharing drivers are the backbone of the gig economy, and they have been deprived of rights and protections taken for granted by others. The new law changes the dynamics—allowing them a seat at the negotiating table with companies to secure better pay, safer working conditions, and a voice in their future work.”
California follows Massachusetts in passing similar legislation, but Massachusetts achieved it through a voter referendum in 2024, while California did so through legislative action.
SEIU California initiated AB1340. In a press release on the 3rd, the union stated that the bill will allow union formation, collective bargaining, setting industry-wide service standards, preventing companies from driving down wages, and protecting workers from retaliation. Theresa Rutherford, chair of SEIU Local 1021, said, “Ride-sharing companies spent $200 million to pass Proposition 22, exploiting workers to protect profits,” and “bringing insecurity to drivers and families, many of whom are immigrants or people of color.”
In November 2020, Californians supported Proposition 22 with 58.6% of the vote, allowing drivers for companies like Uber and Lyft to be independent contractors rather than employees. However, in 2021, Alameda County Superior Court Judge Frank Roesch ruled Proposition 22 unconstitutional.
California’s employee classification dispute began in 2018, and after Governor Newsom signed AB5 in 2019, many gig economy workers including ride-sharing drivers, janitors, nail salon employees, therapists, translators, and writers were reclassified as employees.
In March 2023, three judges in the San Francisco Appeals Court overturned a lower court’s 2021 ruling in a 2-1 decision, siding with companies like Uber and Lyft and allowing drivers to be independent contractors rather than employees.
Following the passage of AB1340, drivers will have to wait until next year to apply to join a union. Due to restrictions from Proposition 22, unions need to mobilize 10% of the 800,000 drivers; and 30% of drivers must vote to approve negotiation of wages and other terms with the companies.
SB371, initiated and promoted by Uber and Lyft, titled “Transportation Network Companies: Insurance Coverage,” was supported by a group of Democratic and Republican legislators and passed in the Senate and Assembly with votes of 39-0 and 77-0 (3 absent).
Senator Cabaldon mentioned in a press release, “This will directly reduce the cost for residents.” SB371 will eliminate the requirement for ride-share drivers to have $1 million insurance coverage and reduce the per-incident insurance requirement to $300,000—an expense that was previously passed on to customers as fees.
According to Uber, in May 2025, 45% of the fare paid by passengers in Los Angeles went towards government-mandated insurance, the highest in the nation; in other parts of California, it was around 30%. While driver earnings have been increasing, their share of the fare has been decreasing, leading to confusion and frustration about rising costs and where the funds go.
Lyft’s calculations show that on average, $6 of a trip in California is allocated to insurance costs, twice the national average. The insurance requirements for ride-sharing companies were set over a decade ago when the industry was just starting, and data over the years have shown that the requirements were significantly higher than needed.
Ramona Prieto, Uber’s Director of Public Policy in California, stated, “The state legislature has unanimously agreed to lower ride-sharing prices in California, and we are pleased to see these two important legislations moving forward together.”
Senator Cabaldon said, “My purpose in introducing SB371 was to lower fares for passengers who use ride-sharing for commuting, school, work, or medical purposes”; “During the legislative process, we clearly understood that without meeting the drivers’ needs, we cannot attract enough drivers, and the shortage of drivers has led to fare increases. I am pleased to see these two bills bring a win-win for drivers and passengers.”