Uber has appealed a California labor commission ruling that declared employees of the ride-sharing company are employees and not contractors.

In its ruling, the California labor commissioner said Uber is “involved in every aspect of the operation”, negating the company’s longstanding claim that its drivers are contractors.

The decision appears to imply that Uber is in reality a transport operator and could have a significant impact on its business model. The company had argued that drivers were contractors, with Uber acting as a logistics software company.

If Uber drivers are employees, that opens Uber up to higher costs, including Social Security, workers’ compensation and unemployment insurance. That could affect its valuation, currently above $40 billion, and the valuation of other companies that rely on large networks of individuals to provide rides, clean houses and other services.

But the commission said Uber controls the tools driver use, monitors their approval ratings and terminates their access to the system if their ratings fall below 4.6 stars.

The company had appealed the commission’s decision to award Barbara Ann Berwick, an Uber driver in San Francisco, more than $4,000 in expenses.

The ruling was issued earlier this month and came to light when Uber filed its appeal in state court in San Francisco on Tuesday evening.

Uber supporters argued the ruling could have a negative impact on other so-called sharing economy companies that also use private contractors.

“This ruling will have a chilling effect on the entire sharing economy,” said Berin Szoka, President of libertarian think tank TechFreedom. “The independent-contractor business model helped drive the success of Uber, Lyft, Airbnb, and other sharing-economy companies. The commission’s ruling could force sharing-economy companies to scale back their offerings and increase prices, which could also rob consumers of the flexibility and broad range of choices currently offered by these companies.”

Reuters contributed to this report