California ride-share drivers win right to unionize under new law

[Mobile app Uber on a Apple iPhone XR]
5./15 WEST/iStock Unreleased via Getty Images

California ride-hail drivers will now be able to unionize, after Gov. Gavin Newsom signed a bill Friday granting collective bargaining rights to workers for Uber (NYSE:UBER [https://seekingalpha.com/symbol/UBER]), Lyft (NASDAQ:LYFT [https://seekingalpha.com/symbol/LYFT]) and other gig platforms, the Associated Press reported.

The legislation, covering an estimated 800,000 drivers, allows unions to negotiate for wages and benefits at the industry level, rather than company by company. Known as sectoral bargaining, the model is rare in the U.S. and is viewed by backers as a way to lift standards across industries with high turnover or many small workplaces.

“Bargaining at the industry level raises standards on wages and benefits for all workers, and levels the playing field so companies are competing on quality,” said Tia Orr, head of SEIU California, which helped push the bill.

The law strikes a compromise: drivers remain classified as independent contractors -- a status gig companies say preserves flexibility. But they gain the right to organize and negotiate collectively. Uber (NYSE:UBER [https://seekingalpha.com/symbol/UBER]) welcomed the measure, noting it “does not take away what drivers value most: independence and flexibility.”

The fight over driver classification has been one of California’s fiercest labor battles. In 2019, state law mandated employee status for gig drivers, but Proposition 22, a 2020 ballot measure heavily funded by gig companies, reversed that by enshrining contractor status while setting a wage floor and partial benefits. Critics argue the protections fall short, since waiting time and expenses aren’t fully covered.

Newsom hailed the new law as proof of cooperation between labor and business. In a statement Friday, he contrasted it with Washington gridlock: “Donald Trump is holding the government hostage and stripping away worker protections. In California, we’re doing the opposite.”

Massachusetts is the only other state with a similar law, approved by voters last year, but California’s measure could provide a template for other states wrestling with how to balance gig-worker flexibility with stronger labor protections.

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