Setting a precedence that can be followed in other parts of the world, a UK employment court has ruled in a landmark case which could affect tens of thousands of workers in the gig economy that Uber drivers are not self-employed and should be paid the “national living wage”.

Driver in the U.K. for Uber are currently not entitled to holiday pay, pensions or other workers’ rights and following the ruling, the ride-hailing app could now be open to claims from all of its 40,000 drivers in the UK. Uber immediately said it would appeal against the ruling.

As the UK’s biggest union, Unite, announced it was setting up a new unit to pursue cases of bogus self-employment, employment experts said other firms with large self-employed workforces could now face scrutiny of their working practices.

Costing up to £314m a year in lost tax and employer national insurance contributions, as many as 460,000 people could be falsely classified as self-employed, suggests research by Citizens Advice. While delivery firm Hermes is under investigation by HM Revenue & Customs, cyclists who want similar recognition as staff employees and the rights that go with that status, have put fur courier firms against legal action.

The gig economy business model, where companies use apps and the internet to match customers with workers, a rethink could be forced by the Uber ruling. Many of the firms become huge global enterprises as they take commission from their earnings but do not employ the workers. With the company valued at more than £50bn, Uber now operates around the world.

Amid mounting concern within government about the growing trend towards self-employed workforces comes the decision of the employment tribunal. HMRC is setting up a new unit, the employment status and intermediaries team, to investigate firms and the government has recently announced a six month review of modern working  practices.

The status and rights of agency and casual workers and the self-employed for the purposes of tax, benefits and employment law, and how to protect them will be looked into as the MPs launched an inquiry last week into pay and working conditions in the UK.

19 Uber workers argued that they were employed by the San Francisco-based firm, rather than working for themselves and that case was taken by two drivers, James Farrar and Yaseen Aslam, on behalf of a group. Friday’s ruling by a London employment tribunal involved that case.

There were “repercussions” from the company if he cancelled a pickup. Farrar told at a hearing in July, where he further explained how he was put under “tremendous pressure” to work long hours and accept jobs.

Uber argued that its drivers were independent self-employed contractors who could choose where and when they worked and that it was a technology firm not a transport business.

“The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous,” the judges said. “Drivers do not and cannot negotiate with passengers … They are offered and accept trips strictly on Uber’s terms.”

“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 living wage] and to receive paid holiday, which were previously denied to them,” said Nigel Mackay from the employment team at law firm Leigh Day, which represented the drivers.

“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.” Mackay said.

(Adapted from The Guardian)