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California passes landmark bill that requires Uber and Lyft to treat their drivers as employees

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California legislators have passed a bill that would treat workers at so-called gig economy companies such as Uber and Lyft as employees, giving them access to improved wage and benefit protections.

The 29-11 vote passed on late Tuesday sends the bill — dubbed Assembly Bill 5, or AB 5 — back to the State Assembly for final approval. Democratic Governor Gavin Newsom, who has maintained his support for the bill, is expected to approve it.

The proposal, expected to go into effect January 1, had drawn sharp opposition from ridesharing companies and on-demand delivery firms. When Uber, which posted a record $5.2 billion in loss last quarter and laid off hundreds this week, filed to become a public company, it told the SEC that its business would be “adversely affected if drivers were classified as employees instead of independent contractors.”

The bill says that if a contractor’s work is part of a company’s regular business, then they must be designated as employees. And thus, these workers will get access to more protections such as minimum wage, the right to unionize, and overtime.

In an op-ed published in the Sacramento Bee on Labor Day, Newsom said he supports AB 5. “Reversing the trend of misclassification is a necessary and important step to improve the lives of working people. That’s why, this Labor Day, I am proud to be supporting Assembly Bill 5, which extends critical labor protections to more workers by curbing misclassification.”

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