Thousands of taxi drivers for Addison Lee could be in line for compensation of £10,000 each after the Court of Appeal found that they were workers entitled to holiday pay and the national minimum wage.
The company had claimed that they were self-employed contractors who are not entitled to basic rights.
Lawyers said the result dealt "another blow to big firms operating in the gig economy" following a landmark Supreme Court decision in February which ruled that Uber drivers were workers.
Addison Lee drivers say that, after their costs were taken into account, they had received less than the statutory minimum. Current and former drivers will now be able to pursue claims for annual leave and underpayment of the national minimum wage.
Addison Lee had appealed against a 2017 Employment Tribunal ruling in favour of the drivers in 2017, and another judgment in 2018. The Court of Appeal said on Thursday that the company could not appeal again.
Addison Lee driver David Bollard, whose name has been changed to protect his identity, said that in his four years working for the company, its treatment of staff had deteriorated.
“There’s a revolving door of drivers which means they don’t really care about you as individuals because you’re easily replaced,” he said.
Liana Wood, a solicitor in the employment team at Leigh Day, said: "We hope that other companies with similar business models to Uber and Addison Lee recognise that they cannot continue to deny people basic rights such as holiday pay and the national minimum wage.”
The latest workers' rights case comes after large investors shunned Deliveroo's recent stock market listing, in part over concerns about the company's classification of riders as independent contractors.
The delivery company saw 30 per cent wiped off its value in the opening week of trading and has yet to recover.
Steve Garelick, a regional organiser for the GMB union said Addison Lee had "ample opportunity" to do the right thing by drivers and negotiate a deal with drivers.
"They chose instead to pay lawyers to try and argue the impossible.
“This judgment is not based just on law but good common sense and sends a further message to those who would continue to exploit workers through a bogus self-employment model.
Leigh Day also represents clients from delivery company Stuart in a similar workers’ rights claim.
In May 2018, a Stuart courier succeeded in a claim that he was a worker in the Employment Tribunal, with this decision upheld by the Employment Appeal Tribunal in December 2019.
A hearing date in the Court of Appeal has been fixed for October after a further appeal by Stuart.
A spokesperson for Addison Lee said the case was “historic” and related to three drivers who have stopped working for the company.
“Since then, we have changed our working practices and the way we engage with drivers to ensure we maintain the flexibility our drivers demand while continuing to provide the best earning opportunity for the highest calibre professional drivers.
“In the last 12 months, under new management, Addison Lee has invested heavily to support our drivers’ livelihoods and to keep them and our passengers safe during the pandemic.”
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