Beginning September 16, 2014, a new law takes effect that requires motorists that are passing a bicycle on a highway to have at least 3 feet of clearance from the bicycle. Violations of this new Three Feet for Safety Act (AB 1371) can result in a $35 fine. The fine increases to $220 if the driver collides with the bicyclist while in violation of the law (which if you think about it how would they not be violating the law if they collided...hmm).
This law basically clarifies the existing law, which says cars must pass bicyclists at a "safe distance."
Now let's say you're driving on a two-lane highway like Potrero Road in Thousand Oaks where there's no bike lane and cars are coming the opposite direction as you approach a group of cyclists. What should you do? Obviously slow down so that you can pass with at least 3 feet of clearance after cars coming the other way have passed. Just make sure you're not crossing a double yellow line.
According to the California Bicycle Coalition, this law does not prohibit a bicyclist from passing a car by less than 3 feet. But that's because bicyclists present much less risk to car drivers than vice versa.
One may think, how in the world will anyone know if it is 3 feet vs 2 1/2 feet, etc. Short of attaching a yardstick to the side of your car, I guess we'll have to use our best judgment.