Drivers for taxi firm Addison Lee are employees of the company rather than self-employed, the EAT ruled yesterday, in a move experts said demonstrated once again that “unrealistic” written agreements from employers could be legally trumped by the “in-practice” reality of working relationships.

The latest decision in a series of gig-economy cases confirmed drivers for the private hire business were not genuinely self-employed.

Judge David Richardson concluded: “The ET found that the drivers were workers by virtue of an overarching contract; but it also found in any event that they were workers when they logged on because they were then undertaking to do work or perform services.”

He said he was satisfied with the original tribunal’s conclusion that the driver contract did not entirely reflect the true agreement between the parties.

As they are classified as employees, the drivers will now be entitled to the national minimum wage and holiday pay. It is thought thousands of individuals could be affected. The company has not yet confirmed whether it will appeal.

Addison Lee said in a statement: “We note the appeal verdict, which we will carefully review. Addison Lee is disappointed with the ruling as we enjoy a positive relationship with the vast majority of our 3,800 driver partners. In common with most of the industry, the majority are self-employed, and with earnings at a record high.”

The ruling is the latest to confirm that businesses whose models rely on extensive self-employment may see employment status successfully challenged.

Harry Abrams, solicitor at Seddons, said it was another “nail in the coffin” of the gig economy, while Stefan Martin, employment partner at Hogan Lovells, added the decision was indicative of the direction of travel in a number of cases brought before the UK courts recently.

Martin said: “It is a reminder that, regardless of the legalese used in contractual documentation, the courts will look at the substance of a relationship to determine whether or not a person is entitled to workers’ rights.”

Associate director at Croner, Paul Holcroft, agreed the case served as further confirmation that employment status cases are won and lost “based on the reality of how the working relationship operates in practice.”

“Employers need to ensure they are correctly determining the employment status of their workforce,” he said. “Rather than solely relying on their contractual documentation, employers need to take note of the employment status tests.”

Holcroft added other factors would also be considered by a tribunal, such as whether someone can work for other employers, how they are integrated into the company, who carries the financial risk of a job being done poorly and whether pay can be negotiated by the individual.

Sue Harris, legal director of the trade union behind the case, said: “This is another huge win for GMB over bogus self-employment. Other employers should take note. We will not stop pursuing these exploitative companies on behalf of our members.”

In October 2016, the GMB won an historic case determining Uber drivers were workers entitled to basic workers’ rights. The firm took the decision to the Court of Appeal in October this year, disputing drivers’ rights to holiday pay and the national minimum wage, which would cost it £18,000 per employee. Earlier this year, Hermes couriers were also granted worker status.

Richard Fox, head of employment at law firm Kingsley Napley, said: “The direction of travel is all one way. All the recent cases have been finding the individuals concerned are workers, rather than being genuinely self-employed.

“All eyes now have to be on Uber’s appeal to the Court of Appeal,” he added. “It is a real shame Uber failed in its previous application to leapfrog the Court of Appeal and go straight to the Supreme Court.

“Until one of these specifically ‘gig workers’ cases gets there, employers really have to be concerned as to whether their claims to engage on a self-employed basis are bound to fail in the tribunals. That is almost certainly the case now.”

The outcome of Uber’s challenge to the courts has yet to be announced.