On Friday, Governor Gavin Newsom ratified an agreement that allows many ride-share drivers to band together and negotiate unions, all while maintaining their status as independent contractors.

This legislation, which represents a unique compromise between labor unions and tech companies like those in Silicon Valley, gives Uber and Lyft drivers the right to collectively bargain. This development comes after a long struggle over the work status of ride-sharing and delivery drivers.

However, this law does not extend to other gig workers, such as those who deliver food through platforms like DoorDash.

Alongside collective bargaining rights, Newsom is also set to endorse laws supported by Uber and Lyft that will significantly lower insurance requirements for these businesses.

By signing this agreement, Newsom is positioning himself in contrast to former President Trump’s policies towards workers and unions, especially given Trump’s recent actions to restrict collective bargaining at several federal agencies.

“Donald Trump is taking the government hostage and stripping workers of protection. In California, we’re doing the opposite. That’s the difference between chaos and stability,” Newsom stated.

The Service Employees International Union (SEIU) in California, a prominent labor union, has been organizing drivers for years, and this agreement marks one of the most significant expansions of private unions in nearly a century, meaning that hundreds of thousands of gig workers can now have a voice at the bargaining table.

This process largely hinges on exemptions from state and federal antitrust laws that typically prevent independent contractors from acting collectively.

“The gig economy isn’t going anywhere, but the exploitation of workers doesn’t have to be part of it,” remarked David Green, the president of SEIU 721.

Ramona Prieto, who oversees public policy at Uber in California, commented via email that this compromise “will amplify drivers’ voices while simultaneously reducing costs, demonstrating how industry, labor, and lawmakers can collaborate for real solutions.”

Experts express that the union’s newfound power is allowing some gig workers to articulate their frustrations regarding their work conditions. But, the question arises: how does the process actually function? And what benefits do ride-sharing companies gain?

What do drivers need to form a union?

Under federal regulations, U.S. workers can elect or reach agreements with their employers, enabling some unions to represent them.

For California’s Uber and Lyft drivers, the process under the collective bargaining law, known as Congressional Bill 1340, diverges somewhat.

Groups can request to be recognized as negotiators for active drivers by gathering signatures from at least 10%. From there, they can petition the California Public Employment Relations Commission, which oversees the unionization efforts, to access the names and contact information of all active drivers in the state.

In theory, having this contact list simplifies the organization of drivers. If the group manages to get 30% of active drivers on board, they can petition for the union’s accreditation. If multiple organizations are gathering signatures, an election will occur to choose which organization represents the drivers.

Assembly member Buffy Wicks (D-Oakland), who co-authored the bill, emphasized that this new method empowers drivers to “negotiate for better wages and protections, ultimately aiming to shape a future that serves those steering the wheels.”

The law stipulates clearly which drivers are considered “active” based on their median rides completed in the past six months.

Currently, the numbers are fluctuating, and neither ride-sharing company has made its information public, leaving the total number of active drivers in California uncertain. Under the new law, Uber and Lyft must regularly submit data about active drivers to the state labor board.

This collective bargaining framework echoes a voting initiative that Massachusetts voters approved last fall, which also had SEIU backing.

Drivers backing the California bill noted they lacked protections similar to other workers if they were completing just 10 to 12 rides a day. They view this law as an opportunity to negotiate salaries and contract terms with their companies.

“Drivers had no means to contest passenger fares amidst the growing number of gig companies or to challenge unfair conditions just to make a living,” said Los Angeles gig driver Anna Barragan. “We worked long hours, faced rudeness, and felt silenced on the other end of the app.”

Some advocates for drivers express concern that the law may not be robust enough to ensure fair contracts.

Veena Dubal, a law professor at UC Irvine studying technology’s impact on workers, mentioned that the law doesn’t clarify the protection for drivers if they choose to collectively protest or strike, nor does it require businesses to disclose wage data.

“These factors are crucial for making the union strong and are fundamental needs for our members,” Dubal noted. “Failing to secure these elements would essentially be a win for Uber.”

Michael Reich, a professor specializing in wage dynamics and employment at Berkeley’s Labor Institute, has closely analyzed the gig economy. He considers these potential driver unions as a “Golden Chance” and regarding the law as favoring both sides appreciably.

What did gig economy companies gain from this arrangement?

The supported insurance bill, sponsored by Uber and Lyft and introduced by State Senator Christopher Cabaldon, reduces the insurance obligations for companies like Uber and Lyft.

In a blog on its site, Uber stated that this law would tackle “one of the major hidden costs affecting both passengers and drivers of ride-sharing in California.”

As it stands, companies are required to maintain $1 million in coverage for each ride-share driver for accidents involving uninsured or under-insured drivers. Companies have claimed that the high insurance requirement has led to lawsuits and increased passenger costs.

However, starting next year, passenger travel will only require $60,000 for uninsured driver coverage per ride-share driver, and $300,000 for accidents.

Uber has assured that it will still uphold $1 million in liability insurance for injuries or property damage caused, plus coverage for repairing a driver’s vehicle, regardless of fault.

Companies will also need to maintain $1 million in occupational accident coverage under Proposition 22 of the Gig Economy Act, intended to assist drivers with medical expenses in case of injuries while on the road, no matter what caused them.

What led to this outcome, and what role did Proposition 22 play?

After California updated its employment law in 2019, limiting when companies could classify workers as independent contractors, Uber and Lyft financed a ballot initiative to protect drivers’ status.

When voters passed Proposition 22—the initiative funded by these companies in 2020—drivers were classified as independent contractors without rights to organize under federal law. Prop 22 included explicit language barring drivers from negotiating compensation, benefits, and work conditions comprehensively.

Nevertheless, SEIU California claimed that the court’s ruling on Prop 22 created a pathway for the state legislature, allowing for a process enabling drivers to form unions and setting the stage for collective bargaining legislation. Uber and Lyft initially resisted the bill, but a contract was subsequently announced in August.