California regulators unveiled a compromise on Friday that would set up a ride-hailing driver system so they could work as freelancers, but would also guarantee a number of benefits and protections for workers — a first-of-its-kind policy that could have national implications.
The pathway would be established by two companion bills supported by the governor, Gavin Newsom, Senate President Pro Tem Mike McGuire and Assembly Speaker Robert Rivas. Assembly Bill 1340, which is supported by a statewide service employees union, would provide drivers with a collective voice on pay, deactivations and working conditions. Backed by the big platforms, Senate Bill 371 tackles state insurance requirements associated with ride-hail operations.
State leaders characterized the arrangement as a negotiated solution that would strike a balance between drivers’ demands for better job protections and industry concerns about the cost structure of doing business in California. Officials said the bills were intended to increase driver representation without reclassifying gig workers as employees outright.
Company officials and labor advocates welcomed the paired legislation in statements. One California head of public policy for one of the platforms said by having legislative changes that work in conjunction with both organizing and insurance will cut down on consumer fares, a claim the companies have consistently made when criticizing state insurance mandates as a contributor to higher prices and reduced take-home pay for drivers.
“This agreement increases the minimum compensation for drivers while preserving the flexibility they want and that tens of thousands of people value,” said a company policy official who asked to not be identified, characterizing the bills as complementary.
Drivers and union organizers consider AB 1340 as one of the most significant changes to labor relations for the gig economy. App-based drivers in California have long been classified as independent contractors — a status cemented by a 2020 ballot measure backed by ride-hail companies, known as Prop 22 — which meant they had limited access to collective bargaining rights and many standard workplace safeguards.
Gig workers have pushed back, saying the contractor classification leaves them open to arbitrary changes to pay algorithms or sudden deactivations, as well as erratic benefits. Proponents say the new bill would establish formal mechanisms for drivers to equitably negotiate contract terms, demand pay raises and lobby for procedural protections.
“I drive for these platforms to support my family,” said a driver in Los Angeles and a member of a statewide gig workers union. “A lot of us feel like we have to bite our tongues, but if we are deactivated we lose our money. This bill would protect drivers to stand up for fair treatment without fear of losing their livelihoods.
The insurance requirements in SB 371 are meant to reduce platforms’ burden of carrying some state-mandated coverage costs that regulators and companies argue are prohibitively high. Platform leaders have tied those obligations to higher customer fares and lower driver earnings; state officials have indicated they would support tweaks as part of the broader deal.
Observers say the California deal could shape policies in other states. Massachusetts voters in 2024 passed a ballot measure that would allow ride-hail drivers to unionize and negotiate terms, advocates says that will pave the way in other jurisdictions home to large gig workforces.
Lawmakers next will advance the matched bills through the legislative process. If approved and signed into law, the measures would pave the way for a new form of organized labor in the state, while preserving the ability for tech companies to treat their armies of workers here as independent contractors — an arrangement that has long been the norm in the industry and has led to years of tension between tech platforms and labor unions.
Reporters and stakeholders agreed the compromise will be closely watched for what it means for driver earnings, consumer fares and the larger questioning over the future of gig work in the United States.