Uber has lost a key legal battle in the UK after a London tribunal upheld a ruling that the ride-hailing app must treat its drivers as “workers” entitled to the minimum wage and holiday pay.

The tribunal’s decision to reject Uber’s appeal is another blow to the US tech company, which has been embroiled in several battles in the UK, its most important European market. Uber is also fighting to keep its licence to operate in the capital after Transport for London, the city’s transport regulator, threatened to remove it.

“I am satisfied the [employment tribunal] did not err either in its approach or in its conclusions” by rejecting Uber’s argument that it was simply connecting independent drivers with customers, the appeal judge Jennifer Eady wrote.

However, Uber is planning to appeal again to the Court of Appeal and possibly to the Supreme Court. Lawyers say it could take years for the process to be exhausted.

Tom Elvidge, Uber UK’s acting general manager, said: “Almost all taxi and private hire drivers have been self-employed for decades, long before our app existed. The main reason why drivers use Uber is because they value the freedom to choose if, when and where they drive and so we intend to appeal.”

The ultimate outcome of the case is critical for Uber: if it was forced to treat its 50,000 UK drivers as “workers”, it would have to guarantee them minimum wage and holiday pay. Uber says this would probably mean it would have to schedule drivers for shifts rather than allowing them to “log on” to work when they wanted to. Uber could also face a substantially higher tax bill, because it may then have to pay employers’ national insurance contributions and value added tax.

Next week, a group of UK MPs plan to propose a draft bill that would strengthen the rights of gig workers. Frank Field, the chairman of the work and pensions select committee, said this bill would “make these individual, but important, skirmishes a thing of the past, as legislation would protect all workers in similar situations.”

Theresa May, prime minister, commissioned an independent review into the gig economy last year but has yet to announce whether she will implement its recommendations. One of the key suggestions was to change the law so that gig workers would have more rights, but platforms would retain some flexibility over the minimum wage rules.

There are also wider implications for the so-called gig economy. The Uber case is the most high-profile test in the UK of the premise that people who work on “gig” apps are independent and not employed by anyone.

James Farrar, one of the two Uber drivers who brought the case, said: “Uber cannot go on flouting UK law with impunity and depriving people of their minimum wage rights.”

Paul Jennings, a partner at Bates Wells Braithwaite, which acted for the drivers, said: “We are delighted with today’s judgment, which is ethically and legally the right outcome.” Mr Jennings said he now expected tens of thousands of drivers to seek backdated claims.

Deliveroo, a food delivery gig platform, is also facing a legal challenge from a group of couriers who say they are not truly self-employed. The “contractor” model is being challenged in other sectors too, with cases going through the courts against Pimlico Plumbers, taxi firm Addison Lee and courier company CitySprint.

Speaking before the judgment, the chief executive of one gig economy app said that it would “be tough for the on-demand economy as a whole” if Uber lost.

“I think it would be a shame if the politicians and courts together ignore what is the will of the hundreds of thousands of people who sign up for this kind of work, which is increasing week on week on week, all around the world,” said the chief executive, who declined to be named.

The original tribunal found in October last year that Uber drivers were its “workers” because the company exerted too much control over their work to class them as truly independent.

But Dinah Rose QC, the barrister who acted for Uber in the appeal hearing this September, had argued that the gig company was not doing anything unusual by treating drivers as independent contractors. She said many traditional minicab companies also acted as the intermediary connecting self-employed drivers to customers.

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