California has reached a landmark agreement with Uber and Lyft, giving app-based drivers a path toward unionization—a development that could influence similar efforts in other states.
The deal, signed off by Governor Gavin Newsom, allows rideshare drivers to pursue collective bargaining rights after years of resistance from both companies. Drivers in California are classified as independent contractors, which historically prevented them from organizing under traditional labor laws.
Under this new arrangement, drivers will have the opportunity to negotiate for higher pay and additional benefits. In return, the state will support legislation to reduce costly insurance mandates for ride-hailing companies, which Uber and Lyft argue have inflated fares and eaten into drivers’ earnings.
“This is a historic agreement between workers and business that only California could deliver,” Newsom said. “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.”
“This is a big damn deal, uplifting workers and the Golden State’s economy,” added state Senate Pro Tem Mike McGuire.
Labor advocates, particularly from SEIU, celebrated the deal as a major victory.
“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,” said SEIU California Executive Director Tia Orr.
The road to this agreement has been long. SEIU and other labor groups backed a 2019 law that would have classified drivers as employees, but the effort was overturned by a 2020 ballot measure, Proposition 22, which reaffirmed drivers as independent contractors. That measure, one of the most expensive ballot fights in California history, blocked unionization efforts for drivers.
Following the California Supreme Court’s rejection of an SEIU challenge to Prop 22, lawmakers began crafting legislation to expand labor rights for independent contractors. That led to AB 1340, sponsored by Assemblymembers Buffy Wicks and Marc Berman, which Newsom endorsed Friday. The bill provides a legal path for drivers to organize, select a union, negotiate work conditions, and seek additional benefits such as health insurance while remaining within Prop 22’s framework.
Uber and Lyft initially opposed AB 1340, pushing instead for SB 371, authored by Democratic state Senator Christopher Cabaldon. This bill aims to reduce the state-mandated insurance coverage for rideshare companies from $1 million for crashes caused by uninsured or underinsured motorists to $60,000 per person and $300,000 per incident.
“I think everyone came to the table, right? But I think that’s because of the pressure created by workers,” Wicks told POLITICO.
Newsom and legislative leaders pledged support for the insurance relief, which both companies say will lower fares.
“We’re encouraged to see these two bills advancing in tandem,” said Ramona Prieto, Uber’s head of public policy. “Together, they represent a compromise that lowers costs for riders while creating stronger voices for drivers.”
Cabaldon pointed out that the previous insurance requirements, set in 2015, were “outsized insurance requirements that don’t apply to any other forms of transportation, such as taxis, buses, or limos.” Uber and Lyft have consistently reported that fares in California are higher than elsewhere in the U.S. due to these mandates.
This agreement marks a significant step in balancing the needs of drivers, riders, and companies, giving app-based workers a stronger voice while addressing cost concerns for passengers.
Source: Politico
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