On October 8, 2025, California Governor Gavin Newsom signed a historic bill into law that grants over 800,000 and Lyft drivers in the state the right to unionize and engage in collective bargaining. This groundbreaking move is seen as a monumental step forward in labor rights advocacy, particularly within the gig economy, which has long been criticized for leaving workers without the benefits and protections typically afforded to traditional employees. The new law is expected to have significant implications not only for California but for the gig economy nationwide, potentially setting a precedent for other states to follow.
The legislation, Assembly Bill 1340, creates a legal framework for Uber and Lyft drivers to form unions while maintaining their status as independent contractors. This is a key provision of the law, as it allows gig workers to collectively negotiate for better wages, working conditions, and benefits, without requiring the companies to classify them as full-time employees. In exchange for granting union rights, the law includes a reduction in the insurance requirements that Uber and Lyft must carry. The new regulations lower the per-incident uninsured motorist coverage from $1 million to $60,000 and the per-accident cap from $300,000 to $300,000. These changes are expected to save the companies millions of dollars in insurance premiums, which could potentially reduce the costs of rides for consumers.
The passage of this bill is the culmination of months of negotiations between labor unions, including the Service Employees International Union (SEIU), state lawmakers, and the rideshare giants Uber and Lyft. It represents a carefully crafted compromise between labor and business interests, balancing the need for stronger protections for gig workers with the desire to keep costs low for consumers. Governor Newsom hailed the agreement as a model for how labor rights can be expanded without stifling innovation or economic growth. He emphasized that the new law would provide gig workers with a stronger voice in their industries while still allowing companies to remain flexible and competitive in the market.
Despite the praise from labor unions, some advocacy groups, such as Rideshare Drivers United, have expressed concerns that the law does not go far enough to ensure fair pay and better working conditions for drivers. These groups have called for additional measures to be included in future legislation, such as mandatory pay transparency and stronger enforcement of labor protections. They argue that while the right to unionize is a significant step forward, it does not address the underlying issue of low pay and precarious working conditions faced by many gig workers. Advocates for drivers are pushing for more comprehensive reforms that would ensure drivers receive fair compensation and adequate benefits, such as health insurance and paid leave.
The bill has also been met with mixed reactions from industry leaders. While Uber and Lyft have supported the legislation as a way to stabilize the gig economy and provide drivers with better protections, some critics argue that the new insurance rules could shift the financial burden onto drivers and passengers. By lowering the insurance requirements, the companies stand to save substantial amounts in premiums, but some fear that this could lead to less coverage in the event of accidents, potentially leaving drivers and passengers exposed to greater financial risks. While the state’s new insurance policy is designed to reduce operating costs, the reduction in coverage raises concerns about safety and financial protection for drivers and their passengers.
The passage of Assembly Bill 1340 is being hailed by labor advocates as one of the largest expansions of collective bargaining rights in California’s history. It provides Uber and Lyft drivers with a means to collectively advocate for their rights, which they have long lacked as independent contractors. With unionization, these drivers will have the power to negotiate for better wages, job security, and access to benefits like health insurance and retirement savings—protections that have traditionally been denied to gig economy workers. By allowing drivers to join forces and bargain collectively, the bill represents a significant shift in how labor rights are understood in the context of the gig economy.
This new law has the potential to set a powerful precedent for other states to follow. California, known for its progressive labor policies, is leading the charge in addressing the challenges faced by gig workers. As the gig economy continues to grow and more workers are employed under flexible, independent contracts, the need for stronger labor protections will only increase. California’s groundbreaking legislation could be the blueprint for other states that are grappling with similar issues in their own gig economies. If successful, this law could mark the beginning of a larger national movement to improve labor rights for gig workers across the United States.
Governor Newsom’s decision to sign this agreement underscores his administration’s commitment to finding innovative solutions that protect workers while fostering economic growth. As more workers in the gig economy seek greater stability and protections, the California model could become a key reference point in the ongoing debate over labor rights in the modern economy. With unionization now within reach for Uber and Lyft drivers, the landscape for gig economy workers is poised for significant change. The full impact of the law will unfold in the coming years, but for now, it represents a powerful victory for gig workers seeking better pay, working conditions, and protections.