Uber lost a key court ruling on Friday, which could hurt its business model in one of its biggest international markets.
The U.K.’s Supreme Court has decided that drivers of the ride-hailing app should be classified as workers, which means they are entitled to holiday pay and the minimum wage. In early premarket trade, Uber shares fell over 3%.
The crucial ruling from the country’s top court has broad implications for the so-called gig economy, and could mean Uber UBER, -2.98% faces large compensation claims.
The case about the employment rights of Uber drivers is similar to one brought to the courts in California last year.
In the U.K., Uber argued that it acted solely as a technology provider and was a booking agent for drivers who are approved by Uber London. The ruling says: “The Supreme Court disagrees.”
In a move that could have a major financial impact on the company, it also ruled that drivers were deemed to be working when they were looking for passengers and not just driving them.
The court documents said: “The Supreme Court also holds that the employment tribunal was entitled to find that time spent by the claimants working for Uber was not limited (as Uber argued) to periods when they were actually driving passengers to their destinations, but included any period when the driver was logged into the Uber app within the territory in which the driver was licensed to operate and was ready and willing to accept trips.”
The long-running case was originally brought in 2016 by drivers James Farrar and Yaseen Aslam in an employment tribunal.
Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe, said: “We respect the Court’s decision which focused on a small number of drivers who used the Uber app in 2016. Since then we have made some significant changes to our business, guided by drivers every step of the way.
“These include giving even more control over how they earn and providing new protections like free insurance in case of sickness or injury. 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.”
The firm added that the verdict does not reclassify all UK drivers as workers. The judgement only focused on the group of drivers who brought the claim at a 2016 employment tribunal, many of whom no longer drive on the app. It also said a worker is not an employee. Employee status was not claimed in the litigation and so this ruling does not find the claimants to be employees.
This comes just months after Uber won an appeal allowing it to continue to operate in London, its biggest European market, over concerns about its safety practices.