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The Senate’s Labor, Public Employment and Retirement Committee passed California’s groundbreaking gig-work bill, 4-1, at a hearing Wednesday. The contentious proposal, Assembly Bill 5, took center stage in Sacramento this week with hundreds of supporters and opponents rallying and testifying as the Senate committee weighed potentially turning hundreds of thousands of independent contractors in the state — such as Uber and Lyft drivers — into employees.

San Francisco officials are about to look in every nook and cranny of local law for ways to enforce worker protections for thousands of “gig workers,” following a state Supreme Court ruling known commonly as the “Dynamex” decision. That legal analysis is taking place even as the state legislature considers Assembly Bill 5, authored by Assemblymember Lorena Gonzalez (D-San Diego), which would cement the Dynamex decision in California law.

Faced with a looming threat to their way of doing business, Uber, Lyft and other major on-demand companies are trying something they’ve historically been reluctant to do: seeking compromise. Anxious to preserve the freelance work arrangements upon which they’ve built their vast workforces, these companies have been pushing for a grand bargain that will satisfy labor groups’ demands and stave off a California bill that could force them to treat workers in the state as employees — an outcome that would damage their hopes of long-term profitability.

California is currently moving to enact a new state legislation (Assembly Bill 5) that would codify and expand a 2018 State Supreme Court ruling, which states that a worker is considered an employee unless they qualify for an exception. The proposed legislation would alter the employment classification of rideshare drivers, who don’t qualify for an exception. Under the law, companies would be required to designate most independent contractors as employees and provide them with benefits like unemployment, health insurance, and workers compensation.

Uber and Lyft drivers held a rally Tuesday outside of Uber’s San Francisco headquarters to support new state legislation that could convert drivers from gig workers to employees. Assembly Bill 5, introduced by Assemblywoman Lorena Gonzalez (D-San Diego), would require companies to designate most independent contractors, or gig workers, as employees and provide them with benefits like unemployment, health insurance and workers compensation.