GMB won a “monumental victory” for low-paid workers yesterday when an employment tribunal ruled that Uber had broken the law by ignoring its drivers’ basic rights.

GMB, which represents the drivers, took its case to the Central London Employment Tribunal, which ruled that drivers are entitled to receive a guaranteed minimum wage, holiday pay and breaks.

The company claimed that its drivers are not employees but self-employed contractors, meaning that many drivers’ hourly earnings fall significantly below the minimum wage.

GMB argued that Uber also unlawfully deducts money from drivers’ pay, for reasons such as a customer having complained, often without informing the drivers in advance.

Yesterday’s decision will have major implications for over 30,000 drivers and thousands of other workers in industries where bogus self-employment is rife.

GMB legal director Maria Ludkin said: “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.”

Leigh Day employment lawyer Nigel Mackay welcomed the ruling, saying: “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 multibillion-dollar global corporation it is.”

Mr Mackay predicted that the “groundbreaking decision” would have a huge 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.”

Labour’s shadow digital economy minister Louise Haigh called the ruling a “great victory” for GMB and demanded government action “to ensure absolute clarity in the law” to protect workers.

She warned there was “a danger that big companies will still try to duck their responsibility by exploiting legal loopholes or appealing this decision.”

Ms Haigh tabled an amendment to the Digital Economy Bill, to be debated next week, which aims to write into law the rights of workers like those at Uber to enjoy the basic dignity of being an employee.

The Institute of Employment Rights (IER) also welcomed the ruling, with director Carolyn Jones saying: “The IER has argued for years that bogus self-employment is being used by employers to evade employment law, leaving vulnerable people without any rights in the workplace at all.

“The effects of further deregulation and the recession have led to more and more companies taking liberties with their workers, resulting in today’s gig economy in which hundreds of thousands of workers have no access to hard-won rights, including the minimum wage.”

General union Unite said it would set up a special bogus self-employment unit in the wake of the decision, saying it “paves the way for similar cases.”

And an Independent Workers Union of Great Britain (IWGB) spokesman welcomed the “fantastic” ruling for workers’ rights.

He said: “Uber is just the first domino to fall. We look forward to winning our similar case on behalf of bicycle couriers next month.”

Jo Bertram, manager of Uber in Britain, said: “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.”