Uber suffered an important labor defeat in its largest European market on Friday when Britain’s Supreme Court ruled that drivers must be classified as workers entitled to a minimum wage and vacation time.
The case had been closely watched because of its ramifications for the gig economy, in which companies like Uber rely on a sprawling labor force of independent contractors to provide car rides, deliver food and clean homes.
Uber and other gig-economy companies say their model gives people flexibility to choose when they work, while critics say it has eroded job protections and the traditional company-employee relationship.
The court ruled that although Uber said it was only a technology platform that connected drivers with passengers, it behaves more like an employer by setting rates, assigning rides, requiring drivers to follow certain routes and using a rating system to discipline drivers.
“Drivers are in a position of subordination and dependency in relation to Uber such that they have little or no ability to improve their economic position through professional or entrepreneurial skill,” Lord Robert John Reed, president of the Supreme Court, said in reading the judgment. “In practice the only way in which they can increase their earnings is by working longer hours while constantly meeting Uber’s measures of performance.”
Uber fought the effort by drivers in Britain to be classified as workers for the past five years, appealing the decision all the way to the country’s top court. The ruling on Friday’ is expected to initially affect only the 25 drivers who brought the case, but is seen as setting a precedent for others across the country.
Following the decision, an employment tribunal will decide how to reward the drivers and how the ruling will affect other drivers going forward.
Uber sought to play down the decision, saying it would press the employment tribunal to limit its scope.
The company said the ruling should only affect a small number of drivers, and that it would not require it to reclassify all its drivers as workers.
The company said that it would argue to the tribunal that it had made a number of changes to its business model to provide more protections for workers since 2016, when the case was first filed, like offering insurance to drivers if they become sick or injured, and allowing drivers to reject taking certain rides without punishment.
“We are committed to doing more and will now consult with every active driver across the U.K. to understand the changes they want to see,” Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe, said in a statement.
But some employment lawyers said the decision had broader consequences than Uber was suggesting, and that it represented an important moment in the broader labor debate about gig workers, whose role in the economy has grown during the pandemic.
The case has “much wider implications than the Uber case alone and is likely to be seen as a watershed moment in employment rights for workers in the gig economy,” said Schona Jolly, a human rights and employment law barrister with Cloisters Chambers in London.
Nigel Mackay, a partner at Leigh Day, the law firm representing the drivers, said the decision would have a broad impact and that Uber must begin providing a minimum wage and holiday time to drivers or risk facing a wave of similar cases from others. He said none of the changes made by Uber since 2016 “would impact on the central findings of the Supreme Court that Uber drivers are workers.”
“Any Uber driver can now join the claim to seek compensation for Uber’s failure to provide paid holiday and to ensure the drivers are paid at least the national minimum wage,” he said.
Uber drivers are currently paid per ride, with Uber taking a 20 percent fee from each fare. Drivers must pay for their car, insurance and taxi license.
Uber and other gig economy companies have been fighting off efforts in other parts of the world to classify workers as employees with mixed success.
In France, Uber lost a decision in the country’s top court last year that a driver had the right to be considered an employee. But in California, Uber and other companies funded a successful ballot measure in the November election to exempt them from a law that would have required them to employ drivers and pay health care, unemployment insurance and other benefits.
Britain, where Uber has roughly 60,000 drivers, has been one of the company’s most important markets, but also a source of legal trouble. In London, where Uber cars are as ubiquitous as traditional black cabs, the city transportation regulator has twice taken steps to revoke Uber’s taxi license in recent years before the company agreed to new safety policies.
Mr. Mackay said he hoped the decision would provide support for workers and lawyers seeking stronger legal protections for gig workers in other countries.
“People around the world will be following this decision,” he said.