Gov. Tim Walz of Minnesota on Thursday vetoed a bill that would have guaranteed a minimum wage and other protections for Uber and Lyft drivers.

“Ride-share drivers deserve safe working conditions and fair wages, and I am committed to finding solutions to these issues that balance the interests of all Minnesotans, drivers and riders alike,” Mr. Walz, a Democrat, wrote in a letter to the speaker of the Minnesota House of Representatives. But he said that the legislation, which passed the state legislature last week, “is not the right bill to achieve these goals.”

The bill had been seen as a significant victory for labor advocates, who have been fighting for greater benefits for gig drivers across the country. Uber and Lyft treat their drivers as independent contractors rather than employees, meaning the drivers are responsible for their own expenses and do not receive health care or other benefits. The companies say their business model allows drivers to maintain the flexibility they want.

The legislation would have required Uber and Lyft to pay their drivers at least $1.45 per mile they drive with a passenger, or $1.34 per mile outside the Minneapolis-St. Paul area, as well as $0.34 per minute. It also would have established a review process letting drivers protest cases where they were deactivated from the platforms.

Mr. Walz sided with the arguments of Uber and Lyft, which said the minimum pay was too high for a region like Minnesota and would require them to drastically curtail their ride-sharing businesses in the state as costs increased for riders.

Earlier on Thursday, Uber said it would pull out of Minnesota at the beginning of August if the bill passed, leaving only its premium service in the state’s largest metropolitan region.

“This bill could make Minnesota one of the most expensive states in the country for ride share, 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,” Mr. Walz wrote in his letter.

Aside from the veto — his first — Mr. Walz also issued an executive order establishing a commission to study the ride-share business in Minnesota and recommend policy changes to ensure drivers receive fair compensation.

Uber cheered the news and said it would support a different bill that would offer slightly lower minimum pay and ensure that drivers were classified as independent contractors rather than employees in Minnesota, a longstanding goal of the company that it has advanced in other states.

“We appreciate the opportunity to get this right, and hope the legislature quickly passes a compromise in February,” said Freddi Goldstein, an Uber spokeswoman.

CJ Macklin, a Lyft spokesman, added that “lawmakers should pass fair pay and other protections, but it must be done in a way that doesn’t jeopardize the affordability and safety of those who rely on the service.”

State Senator Omar Fateh, an author of the bill, criticized Mr. Walz’s decision on Twitter.

“Today, we saw the power corporations hold on our government,” he wrote. “The fight is not over, and I promise you I won’t back down.”

Kellen Browning

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