Deliveroo PLC (LSE:ROO) was fined alongside two of its former executives by a French court for abusing the freelance status of the food delivery platform's workers.
The ex-managers were given a suspended one-year prison term and fined €30,000 (US$32,380) each and Deliveroo was fined €375,000 (US$405,000) and told to publish the ruling on its French home page for one month, according to Reuters.
Deliveroo said it is appealing the decision.
Deliveroo imposed an almost permanent surveillance and control over riders' work while they were connected, judge Sylvie Daunis is quoted as saying in the article.
French law grants employee status rights such as unemployment benefits, social security and pension contributions.
Though the riders were freelancers, the court found Deliveroo unilaterally changed criteria under which pay increases were defined.
The company said the decision related to a previous version of its operating model and has no bearing on how it now conducts business.
Deliveroo withdrew from Spain last year when the government said couriers had to be employed by food delivery companies.
Reuters reported the decision could have ramifications beyond France because the gig economy is facing more and more legal challenges that are likely to reshape working conditions.
A European Commission proposal last year called for reclassifying gig workers, such as those at Deliveroo and companies like Uber Eats and Delivery Hero (ETR:DHER, OTCQX:DLVHF), as employees.
To make workers truly self-employed, the proposal could also require platform companies to relinquish some control.
Upon reclassification, these workers would be entitled to paid annual leave, collective bargaining, and other benefits.
According to the European Union, this change could cost the industry US$5.1bn and affect 4.1mln people.