Both employers and labor complained that the current workers compensation system was too complex.
Labor wanted permanent disability benefits increased and better medical provider networks.
Employers wanted fewer court cases and psychological disorders off the table when considering claims.
Democratic Senator Kevin de Leon says the measure will increase injured workers benefits and decrease soaring legal and medical costs for employers.
"We achieved a historic agreement between employer groups and employees, labor and management and business."
He admits not everyone supported the legislation, including attorneys who represented injured workers.
"Some folks are unhappy, but by far and large you're not going to make everyone happy but the majority of folks are happy, folks who count are happy those are the employee groups, and those are the businesses that actually pay into the system.
Under the law, permanent disability benefits will increase by 30-percent.