California lawmakers passed legislation Tuesday evening that would reclassify many gig economy workers from independent contractors to employees, guaranteeing them labor protections and benefits and potentially upending the business models of tech companies like Uber and Lyft.

The California Assembly gave final approval to the bill on Wednesday, and it will next go to Democratic Gov. Gavin Newsom, who is expected to sign it .

The legislation, AB-5 , clarifies the conditions under which a worker should be considered an employee and therefore entitled to benefits like a minimum wage, unemployment and disability insurance, and a right to form a union. It follows an ABC formula that workers can be considered independent contractors (A) only if the workers are free from the control and direction of the company that hired them, (B) their work falls outside the usual business of the company and (C) they are engaged in work in an independent business of the same type as the companys.

It makes exceptions for certain groups of workers, including real estate agents, freelance writers, hairstylists and barbers who set their own rates and hours.

The language of the bill is based on a 2018 California Supreme Court decision in the case of Dynamex Operations , which established the ABC test for classifying workers as employees versus contractors.

The misclassification of workers as independent contractors has been a significant factor in the erosion of the middle class and the rise in income inequality, the bill says.

Major tech companies such as Uber and Lyft, whose hordes of drivers are currently considered independent contractors, have been lobbying against the legislation . Their companies bottom lines would be dramatically affected by having thousands of drivers newly classified as employees for whom theyd have to pay certain benefits, overtime, minimum wages and more.

A legal representative for Uber said in a press call Wednesday that the company would not be reclassifying drivers as employees when the bill goes into effect in January, claiming they are essentially exempt from the bills requirements because drivers work is outside the usual course of Uber s business.

Hundreds of Uber and Lyft drivers with the organizing group Gig Workers Rising protested throughout California in late August, demanding AB-5s passage and a union for drivers.

The legislation passed the California Senate in a 29-11 vote after overwhelmingly passing in the Assembly in May.