In a move hailed as historic for ride-hailing workers, California Governor Gavin Newsom on Friday signed legislation that creates a pathway for Uber and Lyft drivers to organize industry-wide and negotiate for better pay and benefits. The agreement positions California as only the second U.S. state, after Massachusetts, to allow app-based drivers to unionize, offering them an unprecedented voice in shaping their work conditions.

Story Highlights:

• California becomes the second U.S. state allowing Uber and Lyft drivers to unionize.

• AB 1340 outlines pay and benefits bargaining rights for drivers.

• SB 371 reduces insurance coverage requirements, lowering costs for drivers and riders.

• Union recognition earliest by May 2026; requires 10% sign-up and 30% vote.

• Proposition 22 limits bargaining power despite unionization efforts.

• Insurance currently accounts for 32-45% of ride fares in California.

Unlike Massachusetts, where unionization was achieved through a costly ballot measure, California’s deal emerged from months of negotiations involving Sacramento Democrats, labor leaders from SEIU, and representatives from Uber and Lyft. This approach allowed lawmakers to avoid a high-stakes campaign while securing terms that could benefit drivers immediately.

At a press conference, Newsom emphasized the importance of the deal for drivers’ futures.

“This agreement offers Uber and Lyft drivers a voice, to give them choice, give them dignity, and a say about their future,” Newsom said.

He added,

“I say that because it needs to be said: I’m not naive about how people are feeling about their future.”

The legislation, AB 1340, authored by Assemblymembers Buffy Wicks and Marc Berman and sponsored by SEIU California, sets clear terms for bargaining. It allows Uber and Lyft drivers to seek increased pay, health insurance, and other employee benefits previously unavailable to app-based workers. Tia Orr, Executive Director of SEIU California, contrasted the California approach with federal actions under the Trump administration, which she said sought to undermine workers’ rights.

“Trump is gutting workers’ fundamental right to come together and demand fair pay and treatment,” Orr said.
“But here in California, we are sending a different message: when workers are empowered and valued, everyone wins. Shared prosperity starts with unions for all workers.”

Alongside AB 1340, Newsom signed SB 371, a bill authored by Senator Christopher Cabaldon, which lowers insurance coverage requirements for Uber and Lyft vehicles involved in accidents caused by underinsured drivers. Under the new law, coverage drops from $1 million to $300,000 per incident.

Uber estimates that insurance costs currently make up 32 percent of an average fare in California, rising to 45 percent in Los Angeles County. Uber’s California policy head, Ramona Prieto, described the legislation as a balance between drivers’ rights and the cost of services for passengers.

“AB 1340 and SB 371 together represent a compromise that lowers costs for riders while creating stronger voices for Uber and Lyft drivers,” Prieto said.

Despite the legislative breakthrough, unionization will not be immediate. Uber and Lyft drivers cannot apply for recognition until May 2026 at the earliest. Labor leaders must first gather signatures from at least 10 percent of California’s roughly 800,000 ride-hailing drivers. After that, 30 percent of drivers must vote in favor of forming a union before negotiations with the companies can begin.

Even if a union is established, Uber and Lyft drivers will face limitations under Proposition 22, a 2020 state ballot measure that prevents app-based workers from being classified as traditional employees. Uber and Lyft spent over $200 million to pass the measure, ensuring that drivers remain independent contractors.

The dual passage of AB 1340 and SB 371 marks a significant moment in the evolving gig economy. Advocates say it gives drivers more agency and protection while still allowing companies to manage operational costs. For Uber and Lyft drivers in California, the deal signals a potential shift in how app-based labor is valued and represented across the nation.

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