California passes bill that threatens Uber and Lyft’s business model

Enlarge / California Governor Gavin Newsom. (credit: Ray Chavez/The Mercury News via Getty Images)

Both houses of California’s legislature have passed sweeping legislation requiring businesses to treat more of their workers as employees rather than independent contractors. As a result, more workers will enjoy protections like the minimum wage and benefits such as unemployment insurance. The bill is now on its way to Governor Gavin Newsom, who is expected to sign it.

The law will apply across the California economy, but it could have particularly stark consequences for Uber and Lyft—both of which are based in the Golden State. The companies currently treat their drivers as independent contractors, and their entire business model is built around that assumption.

In the hours after the legislation cleared the California legislature, Uber and Lyft both blasted the law and vowed to seek changes.