California AB 1340 Bill: Rideshare Drivers Gain Union Rights, Employer Compliance Guide

Recently, California's labor rights legislation has made a key progress - the "Transportation Network Company Driver Labor Relations Act" ("AB 1340 Bill") has entered a critical stage of review. If this bill is officially implemented, it will break the existing labor-management relationship pattern in the ride-hailing industry, not only endowing drivers with new rights and interests, but also posing significant challenges to the operational compliance of relevant enterprises.

If you need to promote the optimization of enterprise wage and working hour compliance or formulate labor law solutions in line with the actual situation of your enterprise, please contact Richard Liu, Managing Partner at ILS, at, at contact@consultils.com.

Core Content of the Bill

AB 1340 Bill was jointly proposed by members of the California State Assembly. Its core innovation lies in granting ride-hailing drivers the right to form trade unions and engage in collective bargaining while maintaining their status as "independent contractors". This bill directly breaks the restriction of traditional labor laws that "independent contractors are not allowed to take collective actions".

According to the draft of the bill, the specific contents include:

• Right Endowment: Drivers can, with trade unions as representatives, negotiate with platforms on matters such as salary standards, platform agreement terms (e.g., Uber's order allocation rules, Lyft's order cancellation penalty), and workplace safety guarantees;

• Legal Exemption: Drivers' collective bargaining actions will be exempted from the constraints of California and federal antitrust laws (traditionally, collective negotiation on pricing or terms by independent contractors may be identified as "monopolistic agreements");

• Scope of Application: AB 1340 Bill covers all "Transportation Network Companies (TNC)" operating in California, i.e., platform enterprises that connect drivers and passengers through mobile applications, including mainstream ride-hailing service providers such as Uber, Lyft, and Wingz.

Legislative Background

The advancement of AB 1340 Bill is essentially a further response to the dispute over the rights and interests of ride-hailing drivers in California. It has a direct legal connection with Proposition 22, which took effect in 2020, and can be summarized as "continuing identity recognition and breaking rights restrictions" - that is, it does not change the drivers' status as "independent contractors", but breaks the restriction of "prohibiting collective bargaining" in Proposition 22. The formation of this connection is driven by multiple backgrounds:

• Proposition 22, through a voter referendum, identified ride-hailing drivers as "independent contractors" rather than "employees" protected by the California Labor Code, and at the same time prohibited drivers from conducting collective bargaining on salaries and benefits;

• In 2022, the California Court of Appeal ruled that the "collective bargaining prohibition" clause was illegal, holding that it improperly deprived the state legislature of its regulatory authority; in 2023, the California Supreme Court upheld the core content of Proposition 22, but did not overrule the conclusion that "the collective bargaining clause is invalid", paving the way for AB 1340 Bill;

• According to 2021 data from the Service Employees International Union California ("SEIU California"), approximately 600,000 ride-hailing drivers in California rely on platform income, but face problems such as "unstable hourly wages, no social security protection, and self-assumption of work risks", becoming the core force promoting the bill.

• Against the above background, AB 1340 Bill was officially proposed on February 16, 2023. The bill was jointly initiated by SEIU California and legislators who support the rights and interests of ride-hailing drivers, with the core goal of providing a legal collective bargaining channel for drivers.

• In the first half of 2025, AB 1340 Bill continued to advance: revised versions were launched in April and June successively, clarifying the rights of driver organizations and the bargaining obligations of platforms. Organizations represented by SEIU California also continued to put forward suggestions to improve the bill's enforceability and drivers' right to representation, effectively responding to the demands of drivers. These adjustments to clauses related to "drivers' rights and interests" and "platform obligations" will also directly affect the operation mode of employers such as ride-hailing platforms.

Impact on Employers

AB 1340 Bill is not a universal labor legislation, and its scope of impact is highly focused on Transportation Network Companies (TNC) and related industrial chain enterprises, specifically including three types of employers:

Core Affected Entities: Ride-Hailing Platform Enterprises

• Increased Direct Obligations: After the bill is passed, platforms must legally respond to collective bargaining requests put forward by trade unions and shall not refuse to negotiate on core matters such as salaries and agreement terms; if an agreement is reached through negotiation, the negotiation results shall be incorporated into the driver service agreements, and no unilateral modification is allowed;

• Rising Operating Costs: According to public calculations by Uber and Lyft, if drivers' salaries increase by 10%-15% through negotiation, platforms need to absorb the costs by adjusting pricing or subsidy mechanisms, which may lead to a 15%-20% increase in passenger-side fees, thereby affecting the scale of users;

• Increased Legal Risks: If platforms refuse to negotiate on the grounds that "drivers are independent contractors", they may face unfair labor practice lawsuits filed by trade unions, and the California Labor Standards Enforcement ("DLSE") may also intervene in investigations and impose fines.

Indirectly Affected Entities: Ride-Hailing Industrial Chain Service Providers

• Third-Party Dispatching/Management Companies: If enterprises provide services such as driver recruitment, order allocation, and compliance review for ride-hailing platforms, they need to cooperate with the platforms to implement the collective bargaining results (e.g., adjusting driver training content, optimizing order allocation rules) to avoid being involved for "assisting platforms in evading bargaining obligations";

• Car Rental/Insurance Service Providers: Some ride-hailing drivers obtain vehicles through rental companies or purchase accident insurance through platform-cooperative insurance. If trade union negotiations require "platforms to bear driver vehicle rental subsidies" and "increase insurance coverage", relevant service providers need to renegotiate cooperation terms with platforms and adjust pricing or service scopes.

Potentially Affected Entities: Other Sharing Economy Platforms

• Although the bill currently only targets the ride-hailing industry, California's labor rights protection shows a "from point to area" expansion trend. If AB 1340 Bill achieves significant results after its implementation, it may be extended to sharing economy fields such as food delivery (e.g., DoorDash, Instacart) and same-city freight transportation in the future, and relevant platforms need to pay attention to the legislative dynamics in advance.

Employer Response Suggestions

Facing the potential impact of AB 1340 Bill, relevant enterprises need to start from three aspects: "legislation tracking, process optimization, and risk prevention and control" to build a response plan in advance:

Pay Attention to Legislative Dynamics and Conduct Bill Impact Assessment

• Track Bill Progress: Currently, AB 1340 Bill is in the "Enrolled" status and was officially submitted to California Governor Gavin Newsom on September 9, 2025, awaiting his final decision. The governor has previously expressed support for the bill, bringing a positive expectation for its passage. If the governor signs it subsequently, AB 1340 Bill will officially take effect, and the ride-hailing industry rules and drivers' rights protection system in California will undergo major changes. Usually, after the bill is passed but before it officially takes effect, the affected entities will have a grace period of 30-60 days to complete internal compliance adjustments.

• Internal Research: Sort out the clauses of existing driver service agreements, identify the contents that need to be included in collective bargaining (e.g., hourly wage calculation method, order cancellation compensation rules, vehicle maintenance subsidies), and assess the impact of negotiations on costs and profits;

• External Consultation: Collaborate with labor law specialists to analyze the connection details between the bill and Proposition 22, clarify controversial points such as "compatibility between independent contractor status and union rights" and "scope of application of antitrust exemption", and avoid compliance risks caused by deviations in legal understanding.

• Prepare Legal Remedy Plans: If enterprises believe that the bill clauses conflict with federal laws (e.g., the National Labor Relations Act), they can, with the assistance of lawyers, assess the feasibility of filing a lawsuit, and at the same time formulate a "temporary compliance plan during the lawsuit period" to avoid violations due to lawsuit delays.

Establish a Collective Bargaining Response Mechanism

• Form a Specialized Team: Establish a "negotiation working group" jointly by the legal, human resources, and operation departments, and clarify the division of responsibilities (e.g., the legal department is responsible for reviewing the legality of clauses, and the operation department provides cost calculation data);

• Formulate Negotiation Strategies: Prepare the "list of negotiable matters" and "bottom-line clauses" (e.g., upper limit of salary increase, agreement modification cycle) in advance, and collect industry data (e.g., salary standards of competing platforms, regional operation costs) to provide support for negotiations;

• Connect with Trade Union Communication Channels: Proactively establish contacts with trade unions that may represent drivers, such as SEIU California, clarify the negotiation initiation process, time nodes, and communication methods, and avoid being identified as engaging in unfair labor practices due to "refusal to communicate".

Optimize the Driver Management Model and Reduce Performance Risks

• Adjustment of Agreement Clauses: Add a "clause for incorporating collective bargaining results" to the existing driver service agreements, and clearly stipulate that "if an agreement is reached through negotiation, the relevant contents of this agreement will be updated in accordance with the negotiation results" to avoid legal disputes over subsequent agreement modifications;

• Data Retention and Disclosure: Legally retain data such as driver working hours, salary calculation, and order allocation. If trade unions put forward data disclosure requests (e.g., "the proportion of platform's total revenue to drivers' salaries"), it is necessary to determine whether they fall within the "necessary disclosure scope" under the guidance of lawyers, balancing the protection of trade secrets and negotiation transparency.

From the current advancement stage of the bill, although the final outcome of AB 1340 is still pending the governor's decision, its impact on employers such as ride-hailing platforms is already clear: regardless of whether the bill is implemented, the adjustment of the "low-cost labor model" has become inevitable, and compliant operation and the establishment of a negotiation mechanism with drivers will be the key for enterprises to avoid risks and maintain stable operation. If the bill takes effect, platforms also need to quickly respond to new requirements such as the definition of drivers' organizational rights and the performance of negotiation obligations, to avoid falling into compliance disputes due to improper process connection. These challenges all require professional strategic support and implementation guidance.

We will continue to follow the legislative dynamics of the bill and release the latest progress in a timely manner; to ensure that you do not miss key information, you can subscribe to our platform to obtain real-time updates.

If you need to promote the optimization of enterprise wage and working hour compliance or formulate labor law solutions in line with the actual situation of your enterprise, please contact Richard Liu, Managing Partner at ILS, at contact@consultils.com.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

Richard Liu, Esq. is the Managing Counsel of ILS. He serves clients as a management-side defense lawyer specializing in employment and business litigation. Richard is also an expert on litigation prevention and compliance. He regularly advises Fortune 500 companies and startups on employment, labor, and commercial matters.

Email: contact@consultils.com | Phone: 626-344-8949