Uber appealed, arguing its drivers were self employed and were under no obligation to use its booking app.
Uber said it would appeal against this latest ruling, too.
Any judgment applies to all the estimated 50,000 people across the UK who drive for Uber. Uber claims 80% of its drivers would rather be classed as self employed.
Uber has up to 40,000 drivers registered to it in London alone, where the company is fighting to retain its licence to continue operating.
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.
It has faced regulatory and legal setbacks in a host of cities around the world.
James Farrar 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."
The GMB union, which backed the case, 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".
More about: #Uber