California’s long‑running fight over who counts as an employee in the gig economy just hit a new phase, and Los Angeles is right in the middle of it. A new state deal gives rideshare drivers legal tools to bargain together, while the apps walked away with a major trim to their insurance obligations. In L.A., that means people who drive for Uber and Lyft remain independent contractors under Proposition 22, but for the first time have a clear legal route toward union-style representation. The shift could ripple through an industry built on flexible schedules and touch-screen dispatch, touching everything from pay and protections to how organizers reach drivers.
Gov. Gavin Newsom signed the package last October as part of a bargain with labor groups and the companies, and his office said the measures together open a path for more than 800,000 drivers to seek collective bargaining while reducing costs for riders, in a press release via the Governor's Office. Backers cast the outcome as a compromise that keeps the on-demand flexibility drivers say they value while finally giving organizers a legal way to negotiate industrywide terms. Critics counter that the deal gives away too much on core protections.
How the new system works
AB 1340 sets up a state-run representation process for transportation network company drivers, defined as people who transport passengers for the apps, and spells out notice, list, and certification steps for the Public Employment Relations Board. The law orders covered TNCs to hand over driver contact information on a quarterly schedule and authorizes the board to decide which drivers count as “active” for representation. Reporting begins with the quarter that ends March 31, 2026. Those mechanics appear in the enrolled bill text and the legislative summary for AB 1340, which detail the timelines and the board’s role in certifying a bargaining representative. According to LegiScan, the procedures also include safeguards for driver privacy and a framework for sectoral bargaining if drivers opt for that route.
Insurance trade-off
To bring the industry on board, lawmakers paired AB 1340 with SB 371, an insurance overhaul that shifts uninsured and underinsured motorist obligations back toward transportation network companies and reduces per-trip UM/UIM limits. Sponsor Sen. Christopher Cabaldon’s office said SB 371 cuts the UM/UIM requirement from $1 million to roughly $60,000 per person and $300,000 per incident and makes the TNC responsible for maintaining that coverage. The sponsor’s office has argued the change will help rein in fares that have been pushed up partly by state insurance mandates, while critics warn it leaves passengers with a thinner safety net if something goes wrong. The sponsor’s summary is posted by Sen. Christopher Cabaldon.
What drivers in L.A. should expect
On the ground in Los Angeles, the first shifts will be procedural rather than financial. Proposition 22 still classifies most app drivers as independent contractors, but AB 1340 hands organizers a formal playbook for outreach, recognition, and representation votes. The law’s quarterly reporting and notice requirements will provide an early test of whether unions and worker groups can actually reach a far‑flung, constantly changing workforce, and the certification process will depend on gathering enough valid support from “active” drivers, according to reporting by CalMatters. Local groups such as Rideshare Drivers United, along with national unions like SEIU, have said they are gearing up for outreach, but any sectoral deal would still have to be negotiated and would almost certainly encounter legal and political resistance.
The bigger picture
The new package is only the latest turn in a saga that has reshaped how gig work is treated under California law. AB 5 in 2019 wrote the strict ABC test for employee classification into statute, then Proposition 22 in 2020 carved app drivers out after companies spent more than $200 million on the ballot measure, according to the San Francisco Chronicle. Supporters of the latest laws say this compromise keeps drivers’ scheduling freedom intact and should help lower costs for riders, while opponents argue that thinner insurance requirements and continued contractor status leave both drivers and passengers exposed. As AP News noted, the measures amount to both a policy shift and a political truce that will only be tested once organizers start gathering authorizations and pressing for votes.
For now, drivers and riders will be watching the board’s initial data rounds and the organizing campaigns that follow. The law creates a slow, rules-driven path to bargaining, not an overnight change in job classification or pay. The coming months, starting with the driver lists that are due after March 31, 2026, will reveal whether organizers can turn newly granted legal rights into real contracts at the bargaining table.
