A key legal ruling has awarded Deliveroo the right not pay its riders the minimum wage nor holiday pay, in a serious blow to campaigners and unions.

The Central Arbitration Committee (CAC), a body that resolves workers' disputes, ruled on Tuesday (14 November) that Deliveroo riders were self-employed contractors, as they had the right to pick a substitute to carry out their work for them.

Being unable to pick a replacement to do your work is a crucial point in the definition of a worker, a term which guarantees the right to the national minimum wage, union recognition and holiday pay.

"The central and insuperable difficulty for the union is that we find that the substitution right to be genuine, in the sense that Deliveroo have decided in the new contract that riders have a right to substitute themselves both before and after they have accepted a particular job," it said.

"We have also heard evidence, that we accepted, of it being operated in practice."

The case was brought against the delivery company by the Independent Workers Union of Great Britain (IWGB) earlier this year, after the latter had asked Deliveroo to recognise it as a union representing drivers in the London boroughs of Camden and Kentish Town and to start collective negotiations over workers' rights.

Once the delivery company refused, IWGB referred the case to the CAC.

Like most employed in the gig economy, Deliveroo riders are classified as "self-employed", which means they are not covered by minimum wage rules. That has attracted a lot criticism by unions, claiming riders were being exploited.

Deliveroo has previously argued its drivers make £9.50 per hour, £2 more than the current minimum wage, adding if it were to offer its workers contracts, they would lose the flexibility some of them cherish and that allows them to work for different gig-economy companies at the same time.

Dan Warne, the managing director for Deliveroo in the UK and Ireland, hailed the ruling as a victory for the company's couriers.

"This is a victory for all riders who have continuously told us that flexibility is what they value most about working with Deliveroo," he said.

"We want to work with government to update legislation and end the trade off between flexibility and security."

The union, however, maintained the ruling showed Deliveroo workers were in fact unhappy with their current working conditions and wanted holiday pay and sick pay to be recognised in their contracts.

"It seems that after a series of defeats, finally a so-called gig economy company has found a way to game the system," said IWGB General Secretary Dr Jason Moyer-Lee.

"On the basis of a new contract introduced by Deliveroo's army of lawyers just weeks before the tribunal hearing, the CAC decided that because a rider can have a mate do a delivery for them, Deliveroo's low paid workers are not entitled to basic protections."