California Lawmakers Strike Deal with Uber and Lyft for App-Based Drivers to Unionize

California lawmakers have reached a deal with Uber and Lyft, allowing app-based drivers to form unions and potentially making ride-hail fares more affordable. The agreement creates a model for drivers to organize for increased pay, job protections, and benefits in exchange for reduced insurance coverage mandates. This deal is a win for gig workers who have been classified as independent contractors and ineligible for certain protections.

California lawmakers have reached a historic agreement with Uber Technologies Inc. and Lyft Inc., paving the way for app-based drivers to form unions and potentially lowering ride-hail fares. The deal, announced on July 2, 2025, is a significant victory for gig workers who have long been classified as independent contractors, ineligible for certain protections.

The agreement includes passing a driver bargaining bill (AB 1340) and the rideshare industry-backed SB 371. AB 1340, sponsored by the Service Employees International Union (SEIU), will create a state-supervised way for drivers to unionize and collectively bargain on industry-wide pay and benefit guarantees. This legislation is similar to a ballot measure Massachusetts passed in 2019.

In exchange for this labor rights win, California leaders have agreed to support SB 371, which lowers the amount of uninsured motorist insurance the state requires the companies to carry for drivers. This insurance mandate has been a contentious issue, with ride-hailing companies arguing that it inflates fares and eats into drivers' incomes.

Governor Gavin Newsom (D) hailed the agreement as a "historic" victory for workers and the state's economy. "This is a big damn deal, uplifting workers and the Golden State’s economy," said state Senate Pro Tem Mike McGuire. SEIU California Executive Director Tia Orr also praised the deal, stating that drivers have been fighting for better working conditions for years.

Uber and Lyft have long opposed the idea of drivers unionizing, but the agreement marks a shift in their stance. Ramona Prieto, Uber’s head of public policy, stated that the companies are encouraged by the deal, which promises to lower costs for riders while creating stronger voices for drivers.

SB 371, authored by Democratic state Sen. Christopher Cabaldon, aims to slash the minimum insurance requirement to $60,000 per person and $300,000 per incident. Cabaldon argues that the existing rules are "outsized insurance requirements that don’t apply to any other forms of transportation."

The agreement is a significant step forward in the ongoing battle between gig workers and the companies they work for. It sets a precedent that could potentially be replicated in other states, further shaping the future of the gig economy.

References:
[1] https://news.bloomberglaw.com/daily-labor-report/california-lawmakers-strike-deal-on-uber-lyft-driver-unions
[2] https://www.yahoo.com/news/articles/california-reaches-deal-uber-lyft-170306122.html