In a landmark move for the gig economy, California has enacted Assembly Bill 1340, a reform that grants rideshare and delivery drivers the right to organize and bargain collectively. This policy change is a direct response to years of legal friction regarding the status of app-based workers in the state. By establishing a formal process for unionization, California aims to give drivers a collective voice to negotiate for better pay, safety standards, and working conditions without requiring the platforms to reclassify them as traditional employees.
The passage of AB 1340 is the latest chapter in a long-standing history of disputes with respect to the employment and labour laws in California. To understand its significance, one must look back at Assembly Bill 5, the 2019 law that sought to classify most gig workers as employees under a strict “ABC test”. This was followed by Proposition 22 in 2020, a ballot measure funded by companies that successfully carved out an exemption for app-based drivers, keeping them as independent contractors but providing some limited benefits. AB 1340 effectively builds on this history, attempting to grant labor rights within the contractor framework established by Prop 22.
Breaking down the collective bargaining framework
The new law introduces a structured pathway for labor organizations to represent the interests of hundreds of thousands of drivers across the state.
Eligibility and scope
AB 1340 applies to drivers working for platforms that facilitate “prearranged transportation services” or “third-party delivery services”. This encompasses major industry players like Uber, Lyft, DoorDash, and Instacart. To be eligible for representation, a labor organization must prove it has the support of a significant portion of the driver population and obtain certification from the state.
The bargaining process
Once a labor organization is certified, the platforms are required to meet and confer in good faith. The scope of bargaining includes:
- Compensation standards: Negotiating minimum payment floors and expense reimbursements.
- Health and safety: Establishing protocols for driver safety and vehicle standards.
- Dispute resolution: Creating formal processes for handling deactivations and driver grievances.
What this means for skilled workers
For the individual driver or gig worker, AB 1340 represents a shift from individual advocacy to collective power. Historically, gig workers have had little to no leverage when platforms changed their algorithms or payment structures.
Under this new law, workers gain a seat at the table to discuss issues like “false self-employment” risks and the transparency of platform earnings. While they do not receive the full suite of protections afforded to employees — such as workers’ compensation or unemployment insurance — they can now use collective bargaining to win contract improvements that mimic some of these protections. However, drivers should remain aware that the transition to a unionized workforce will be gradual, as the certification and negotiation phases could take years to fully materialize.
What it means for employers
For companies operating in the gig economy or those hiring specialized contractors in California, AB 1340 adds a significant layer of regulatory complexity. The line between an independent contractor and an employee is thinner than ever, and California’s move to allow contractors to unionize is a global rarity that requires careful legal navigation.
If your business relies on a contingent workforce, this news underscores the critical need for a Contractor of Record (COR) like Multiplier. By partnering with a COR, employers can:
- Avoid misclassification risks: Multiplier ensures that your workers are properly classified according to the latest local definitions, protecting you from back taxes and penalties.
- Manage compliant contracts: Our platform generates watertight service agreements that reflect jurisdiction-specific clauses, including the unique labor nuances found in California.
- Ensure tax and IP protection: We handle complex tax filings like 1099s and ensure that Intellectual Property (IP) rights are strictly protected in every contract.
As labor laws evolve, an Employer of Record (EOR) or Contractor of Record (COR) partner allows you to scale your team without the administrative burden of tracking every new legislative change in every state or country.
Navigating the changing labour compliance
California’s AB 1340 is a bold experiment in balancing the flexibility of the gig economy with the protections of organized labor. While it offers a new path for driver advocacy, it also signals to businesses worldwide that the management of international and domestic contractors is becoming increasingly scrutinized.
Whether you are navigating unionization trends in the US or hiring developers in India and Germany, Multiplier provides Employer of Record Services, Contractor of Record (COR), and Global Payroll solutions needed to stay compliant, pay talent on time, and focus on your core business growth.
FAQs
What is California Assembly Bill 1340?
AB 1340 is a California law signed in late 2025 that establishes a legal framework for app-based rideshare and delivery drivers to form labor organizations and engage in collective bargaining with platform companies. It allows these workers to negotiate over pay, safety, and working conditions while remaining classified as independent contractors rather than employees.
How does AB 1340 differ from the previous AB 5 and Proposition 22?
AB 5 (2019) attempted to reclassify gig workers as employees using a strict "ABC test," while Proposition 22 (2020) was a ballot measure that overrode AB 5 for rideshare and delivery drivers, keeping them as independent contractors. AB 1340 is seen as a "middle-ground" approach that keeps the contractor status established by Prop 22 but adds the right to unionize, which was previously unavailable to independent contractors.
Which companies are affected by California's AB 1340?
The law specifically targets "transportation network companies" (TNCs) and "third-party delivery platforms". This includes well-known gig economy businesses such as Uber, Lyft, DoorDash, Instacart, and Grubhub that operate within the state of California.
What can drivers negotiate for under the new AB 1340 unionization rules?
Certified labor organizations can negotiate with platforms on a variety of topics, including minimum compensation levels, vehicle safety standards, driver health and safety protocols, and formalized processes for appealing account deactivations or resolving other driver grievances.
Does AB 1340 mean gig drivers are now considered employees?
No, AB 1340 explicitly maintains the independent contractor status of these drivers. While they gain the right to bargain collectively — a right typically reserved for employees—they do not automatically qualify for traditional employment benefits like employer-provided health insurance, overtime pay, or workers' compensation.
How can a Contractor of Record (COR) help companies stay compliant with California labor laws?
A Contractor of Record like Multiplier manages the entire lifecycle of a contractor relationship, ensuring that worker classification is accurate, contracts are locally compliant, and all state-specific tax and labor regulations are followed. This is vital in regions like California, where laws regarding gig workers and unionization are frequently changing and carry high risks for misclassification penalties.
