Employees of app-based taxi company Uber have won a groundbreaking case after employment tribunal judges ruled that they were not self-employed and should be paid the National Living Wage and be entitled to holiday pay.

The tribunal ruling also states the company must also pay national living wage with far-reaching implications for the gig economy and the app’s business model.

The case could open up the  firm to claims from all of its 40,000 drivers in the UK, and force other companies in the ‘gig economy’ to review the way that they are employing staff. It is likely that the firm will appeal against the finding.

The company had argued that the drivers were independent contractors who are self-employed and can choose where and when they work.

But an employment tribunal in London found that this was not the case. Nigel Mackay from the employment team at law firm Leigh Day which represented the drivers, said:

“We are pleased that the employment tribunal has agreed with our arguments that drivers are entitled to the most basic workers’ rights, including to be paid the national minimum wage and to receive paid holiday, which were previously denied to them

“This is a ground-breaking decision. It will impact not just on the thousands of Uber drivers working in this country, but on all workers in the so-called gig economy whose employers wrongly classify them as self-employed and deny them the rights to which they are entitled.”

Uber has more than 40,000 drivers in the UK who connect to people looking for a cab via a smartphone app. Currently they are all on contracts which describe them as self-employed contractors.

The legal action, which started over a year ago, was brought by the GMB trade union, which has more than 700,000 members, following claims that Uber had disregarded its drivers’ basic employment rights.

“This will have a hugely positive impact on over 30,000 drivers in London and across England and Wales and for thousands more in other industries where bogus self-employment is rife,” she continued.

The company has long championed its flexible offering to drivers, which does not require them to log in for a minimum number of hours or restrict them to working for Uber alone.

Sean Nesbitt, partner in the employment team at International law firm Taylor Wessing comments on how the decision will affect the wider gig economy:

[The decision] affects over 100,000 UK workers in related industries.  (Never mind the millions of other UK self-employed.)  While the judgment only applies to the 19 claimants in the specific case, Uber has a large and growing number of drivers, and there are a growing number of similar cases regarding the status of “workers” from other courier companies.  On 22 November 2016, one of four cases against courier companies begins in the same Central London Employment Tribunal which heard the Uber case.  Adding the 11,000 people engaging in those companies with the 8,000 Deliveroo and 10,500 Hermes couriers, there are nearly 70,000 in driving and courier industries.

 Third, policy makers are very interested in the gig economy, and this Judgment forms part of an important fact pattern that will set future policy. This goes beyond online: the Prime Minister has already appointed Matthew Taylor to produce a report on the implications of the gig economy, BEIS announced an inquiry on 26 October 2016 into the future world of work, HMRC is beefing up its enforcement unit and foster carers are already raising a challenge for worker status. Add health service work and the costs of these rights can significantly affect the State as a business partner – just as equal pay cases have.

 With conflicting data over the size and impact of the gig economy there is too much at stake for Government business, unions and the individuals who work in the gig economy for this to be anything other than the first in a series of battles.”