Taxi-hailing app firm Uber has lost an appeal against a ruling that its drivers should be treated as workers rather than self-employed.
Last year a tribunal ruled drivers James Farrar and Yaseen Aslam were Uber staff and entitled to holiday pay, paid rest breaks and the minimum wage.
Uber appealed, arguing its drivers were self employed and were under no obligation to use its booking app.
The firm said it would appeal against this latest ruling, too.
Uber which has up to 50,000 drivers using its app in the UK, claims 80% of them would rather be classed as self employed.
Uber said there were two further possible stages in the appeal process - the Court of Appeal and the Supreme Court.
The Employment Tribunal upheld its original decision that any Uber driver who had the Uber app switched on was working for the company under a "worker" contract.
It said they were therefore entitled to workers' rights.
Uber has faced regulatory and legal setbacks in a host of cities around the world.
In London, where it has the bulk of its business, it is fighting to retain its licence to continue operating.
James Farrar, from Hampshire, told the BBC how he was feeling: "Just huge relief. I really hope it will stick this time and that Uber will obey the ruling of the court.
"I'd like Uber to sit down and work out how as quickly as possible that every driver who is working for Uber get the rights they are entitled to."
How did the Uber case come about?
The law firm Leigh Day started the legal action against Uber on behalf of 25 members of the GMB union, which initially included Mr Farrar and Mr Aslam, although the two pursued this latest case with a different union, the IWGB.
Leigh Day is still involved in legal action against Uber and represents a total of 68 drivers in a group claim against the company.
The company's Nigel Mackay said, in theory, any Uber driver in the UK could benefit from Friday's tribunal ruling, should it stand uncontested: "The judgment directly applies to the original 25 claimants in the claim, and since then another 43 drivers have joined.
"However, given that all Uber drivers work in essentially the same way, then there is no reason why the same principles wouldn't apply across all drivers in the UK and they would all be free to join the claim and be entitled to compensation."
IWGB's general secretary, Dr Jason Moyer-Lee, said: "Today's victory is further proof, as if any more was needed, that the law is clear and these companies are simply choosing to deprive workers of their rights."
The GMB union said the ruling, by the Employment Appeal Tribunal (EAT), was a "landmark victory" for workers' rights, especially in the gig economy, a system of casual working which does not commit a business or a worker to set hours or rights.
Maria Ludkin, the GMB's legal director, said: "Uber must now face up to its responsibilities and give its workers the rights to which they are entitled.
"GMB urges the company not to waste everyone's time and money dragging their lost cause to the Supreme Court."
Tom Elvidge, Uber UK's acting general manager, said: "Almost all taxi and private hire drivers have been self-employed for decades, long before our app existed.
"The main reason why drivers use Uber is because they value the freedom to choose if, when and where they drive and so we intend to appeal."
He went on to say that EAT's decision relied on an assertion that drivers were required to take 80% of trips sent to them when logged into the app, but, he said, "as drivers who use Uber know, this has never been the case in the UK".
He also said a number of changes had been made to the app over the last year, and that Uber had "invested in things like access to illness and injury cover".