California legislation designed to make it more difficult to classify workers as independent contractors was signed into law on Wednesday by Gov. Gavin Newsom. It’s a law that had drawn concern from human cloud firms, including Uber Technologies Inc. (NYSE: UBER).

“Assembly Bill 5 is landmark legislation for workers and our economy,” Newsom wrote in a signing message.

“It will help reduce worker misclassification — workers being wrongly classified as ‘independent contractors,’ rather than employees, which erodes basic worker protections like the minimum wage, paid sick days and health insurance benefits,” Newsom wrote.

The law formally puts in place the “ABC” test for determining whether a worker is properly classified as an independent contractor. It takes effect in January.

Uber said it still plans to classify its drivers as independent contractors in California, even with the new legislation in place.

“Because we continue to believe drivers are properly classified as independent, and because we’ll continue to be responsive to what the vast majority of drivers tell us they want most — flexibility — drivers will not be automatically reclassified as employees, even after January of next year,” according to a statement by Tony West, chief legal officer at Uber.

The backer of AB 5, state Rep. Lorena Gonzalez, D-San Diego, said more than 1 million people in California have been misclassified as independent contractors and that the state loses out on an estimated $7 billion in annual payroll tax revenue per year.

The legislation exempted several occupations. However, Gonzalez noted that workers who will be covered by the bill include janitorial workers, construction workers, port truck drivers, home health aides, hotel and hospitality workers, and delivery and ride-hail drivers.