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App-based taxi service Uber has been dealt another blow in a legal row that questions the status of its drivers and threatens its business model.

It has emerged that a government body has already ruled that Uber drivers are employees not independent contractors.

The distinction is crucial because employees are entitled to a raft of benefits.

It could strengthen the case for Uber drivers currently taking legal action against the company.

The ruling emerged in court documents published by a lawyer representing the drivers - all based in San Francisco.

The California Employment Development Department (EDD) determined that a former Uber driver in southern California was an employee, not an independent contractor as the company had claimed.

Uber appealed against the decision, but both appeals were rejected - by an administrative law judge and then by the California Unemployment Insurance Appeals Board.

The EDD decision is the third such ruling on the status of Uber - which has quickly become a huge issue for the company.

Back in May, a Florida regulatory agency also agreed that drivers were employees, as did the California Labour Commissioner in June.

The current legal row was sparked when a federal judge in San Francisco ruled last week that drivers were entitled to sue Uber as a group.

No precedent

The company argues that drivers want independent contractor status because they want to be "their own boss".

An Uber spokesman denied that the EDD decision had "any wider impact or set any formal or binding precedent".

Some states have issued rulings that classify Uber drivers as independent contractors:

• Georgia
• Pennsylvania
• Colorado
• Indiana
• Texas
• New York
• Illinois

California also made such a ruling in 2012, but it applied to only one specific case.

City strikes

It has never been a smooth ride for Uber to establish itself as the on-demand alternative to traditional taxis.

It has faced anger from cab unions around the world, and cities have regularly been blocked by taxi drivers protesting about the way Uber operates.

The latest protest, in South America's largest city Sao Paulo, has led the council to vote 43 to three to ban Uber from operating there.

Meanwhile, at a rally against Uber in Melbourne, taxi unions promised strikes across the country next week.