Two drivers, supported by the GMB union, brought legal action against the private hire firm, arguing that they should be entitled to holiday pay, a guaranteed minimum wage and breaks.
The Central London Employment Tribunal ruled in their favour on Friday, and the GMB said the outcome of the case could have “major” implications for more than 30,000 drivers across England and Wales.
The case centred on whether drivers with the firm, where passengers hail cars using an app, are employees.
Uber designates its drivers as self-employed workers, claiming it is a technology company rather than a taxi firm, and says the arrangements allow people to be their own boss and work flexibly.
But drivers argue they are actual employees of the organisation, rather than independent operators running their own businesses.
Nigel Mackay from law firm Leigh Day, which represented the drivers, said: “We are delighted that the employment tribunal has found in favour of our clients.
“This judgment acknowledges the central contribution that Uber’s drivers have made to Uber’s success by confirming that its drivers are not self-employed but that they work for Uber as part of the company’s business.
“Uber drivers often work very long hours just to earn enough to cover their basic living costs. It is the work carried out by these drivers that has allowed Uber to become the multi-billion-dollar global corporation it is.”
Speaking outside the tribunal in central London, he added: “The tribunal has found the claimants, the Uber drivers, are workers for the purposes of the legislation and that they are therefore entitled to minimum wage and holiday pay.
“This is contrary to what Uber was suggesting, which was that they were self-employed. But they should be entitled to basic workers’ rights like everybody else.”
Uber said it would be appealing against the judgment.
Jo Bertram, the company’s regional general manager, said: “Tens of thousands of people in London drive with Uber precisely because they want to be self-employed and their own boss.
“The overwhelming majority of drivers who use the Uber app want to keep the freedom and flexibility of being able to drive when and where they want. While the decision of this preliminary hearing only affects two people we will be appealing it.”
The TUC said the Uber case had exposed the “dark side” of the UK’s labour market.
TUC general secretary Frances O’Grady said: “The GMB deserve huge credit for shining a light on conditions at Uber and winning this landmark action.
“This case has exposed the dark side of so-called ‘flexible’ labour. For many workers the gig economy is a rigged economy, where bosses can get out of paying the minimum wage and providing basics like paid holidays and rest breaks.
“What is happening at Uber is just the tip of the iceberg. Lots of people are now trapped in insecure jobs, with low pay and no voice at work.
“We need the Government to get tough on sham self-employment. The Taylor review of employment practices must be a no-holds-barred investigation.
“And it must recognise the important role trade unions can play in ending precarious working.”
The GMB’s legal director Maria Ludkin said: “This is a monumental victory that 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.
“Uber drivers and other directed workers do have legal rights at work. The question for them now is how those rights are enforced in practice. The clear answer is that the workforce must combine into the GMB union to force the company to recognise these rights and to negotiate fair terms and conditions for the drivers.
“This loophole that has allowed unscrupulous employers to avoid employment rights, sick pay and minimum wage for their staff and costing the government millions in lost tax revenue will now be closed.
“Uber drivers and thousands of others caught in the bogus self-employment trap will now enjoy the same rights as employees. This outcome will be good for passengers too. Properly rewarded drivers are the same side of the coin as drivers who are properly licensed and driving well maintained and insured vehicles.
“GMB will be getting on with the business of campaigning and recruiting at Uber to ensure our members’ rights are respected.”
“GMB will give evidence to the new Taylor review on terms and conditions within the sectors of the economy offering precarious employment. We will make the case that average hours worked over the past 12 weeks should be deemed to be the contracted hours of work for those on zero hours as it already is for maximum hours of work under the Working Time Directive.
“GMB puts employers on notice that we are reviewing similar contracts masquerading as bogus self employment, particularly prevalent in the so-called ‘gig economy’.
“This is old-fashioned exploitation under newfangled jargon, but the law will force you to pay GMB members what they are rightfully due.”