California's Public Utilities Commission made an order Tuesday regarding Uber and Lyft drivers.
All drivers are "presumed to be employees" under AB-5, the state's new gig work law.
The agency said they must now comply with existing regulations related to employees.
The ruling is a significant defeat for Uber and Lyft, which had argued publicly and in lawsuits.
Their argument was that their drivers were properly classified as independent contractors.
Uber, Lyft, and other similar services have come under fire for their treatment of contractors.
