California has passed a controversial bill that means gig economy workers are set to be classified as full-time employees.
The move, expected to be signed and passed into law by California governor Gavin Newsom, would pile pressure on companies like Uber and Lyft, which rely on self-employed workers.
It would make it harder for such firms to argue that workers are contractors and not full-time employees, who would be entitled to certain wages with paid holidays and health benefits.
Uber has fought against a similar law in the UK and both ride-hailing giants lobbied extensively against California’s AB5 bill.
They proposed paying drivers a $21 minimum wage as they sought to avoid the rising costs associated with the benefits of full-time employment.
Shares in both companies hit record lows since their recent floats at the end of last week as traders bet on the bill being passed into law.
Governor Newsom has already lent the bill his endorsement so passing it is expected to be a formality.
Uber has moved to cut 435 staff today as it seeks to slash costs.
AB5 passed with ease through California’s House of Representatives with a vote of 53-11 in favour, before passing today’s Senate session 29-11.
Some Republican lawmakers criticised the bill for picking “winners and losers”, Gizmodo reported, but Senator Maria Durazo retorted: “One job should be enough.”
Drivers for Deliveroo in the UK lost a High Court battle to gain union recognition in December, in a blow to gig economy workers.
Uber meanwhile, lost an appeal in Britain that same month against a ruling that drivers should be classified as workers and be paid to take holidays as well as be entitled to minimum wage.
Uber said at the time it would challenge the ruling in the Supreme Court.