“Rideshare drivers deserve fair wages and safe working conditions,” Walz said in a statement announcing his first veto ever in his five-plus years as governor. “I am committed to finding solutions that balance the interests of all parties, including drivers and riders. This is not the right bill to achieve these goals.”

Uber threatened to offer only premium-priced service in the Minneapolis-St. Paul area and cut off service altogether in the rest of Minnesota if Walz signed the legislation.

“This bill could make Minnesota one of the most expensive states in the country for rideshare, potentially putting us on par with the cost of rides in New York City and Seattle — cities with dramatically higher costs of living than Minnesota,” the Democratic governor said in a letter to legislative leaders.

Uber and Lyft drivers had staged noisy but peaceful demonstrations outside Walz’s office in the Capitol in recent days to demand that the governor sign the bill. They were clearly audible through closed doors earlier Thursday as he signed a bill creating a paid family and medical leave system.

Ride-hailing drivers, like other gig economy workers, are typically treated as independent contractors not entitled to minimum wages and other benefits, and have to cover their own gas and car payments. A California appeals court ruled in March that companies like Uber and Lyft could continue to treat their drivers there as independent contractors.

But most gig workers in Seattle became entitled to paid sick leave and safe time under a first-in-the-nation law enacted there in March. And the Biden administration proposed new standards last year that could make it more difficult to classify millions of workers as independent contractors and deny them minimum wage and benefits. Ride-hailing and delivery driving are among the deadliest occupations in the country, according to occupational fatalities and injury data from the Bureau of Labor Statistics.

While Walz vetoed the bill, he also signed an executive order commissioning a study about the working conditions of ride-hail drivers and how potential changes could affect costs and access for riders.

His order also sets up a committee to make recommendations by Jan. 1 for legislation to ensure that drivers receive fair compensation, ensure due process before drivers are terminated, limit the impact on fairs and ensure continued operation of ride-hail services in Minnesota.

The bill was championed by Democratic Sen. Omar Fateh, of Minneapolis, who was lifted into the air by drivers outside the Senate chamber right after the bill passed Sunday. Fateh is the first Somali American to serve in the Minnesota Senate, and many Uber and Lift drivers come from the area’s large Somali and East African community.

The bill would have required that drivers be paid a minimum of $5 per ride, or at least $1.45 per mile and 34 cents per minute in the metropolitan area. Fares would have been slightly less in the rest of Minnesota. It also would have made it harder for the companies to “deactivate” drivers from their platforms because drivers said they could be terminated for no reason with no recourse.

But some Democrats complained as Fateh’s bill made its way through the process that it needed more work to address concerns.

Fateh tweeted that the veto showed “the power corporations hold on our government” despite Democrats controlling the “trifecta” of the governor’s office and both houses of the Legislature for the first time in eight years.

“The fight is not over, and I promise you I wont back down,” Fateh tweeted. “This will be my top priority going in to next session.”