A California authority has ruled that Uber drivers are employees rather than contractors, something that could threaten its business model. The company is fighting the ruling and argues it is not a precedent.

Uber uses a GPS-based app for passengers to request a ride from their current location to their chosen destination. Registered Uber drivers can use the app to accept the job. The fee is fixed by Uber (though the actual per-mile rate varies with demand) and paid through the app with Uber taking the cut, rather than any money changing hands in the car.

Whether workers are employees or independent contractors is often a gray area. Uber insists drivers are contractors, pointing to the fact they can work any hours they like, choose which rides to accept, and provide their own vehicle.

The California Labor Commissioner’s Office argued that was not the case and that Uber was “involved in every aspect of the operation.” It pointed to specific issues such as Uber providing drivers with a phone to run the app. It also highlighted the general principle that Uber’s business simply wouldn’t exist without the drivers.

The ruling only affects a single case, that of former driver Barbara Ann Berwick, who argued that the expenses she incurred left her making less than the minimum wage. She was awarded $4,152.20, covering mileage expenses for her vehicle, toll charges and interest. The commission refused her request for a payment to cover wages during the hours she was working.

Uber is understandably emphasizing the fact that this is a commission rather than court ruling and that it doesn’t set a legal precedent. It’s also pointing to at least five other cases across the country where the independent contractor status for Uber driver was upheld.

Were Uber to be more widely classed as an employer it would not only have to reimburse drivers for expenses, but could also have to pay some employer taxes. That would mean it either had to cut the actual pay drivers receive for their work or increase the amount it charged customers, both of which could make it harder to undercut licensed taxi services.