AMSTERDAM - Uber drivers are employees entitled to greater workers' rights under local labour laws, a Dutch court ruled on Monday, handing a setback to the U.S. company's European business model.

It was another court victory for unions fighting for better pay and benefits for those employed in the gig economy and followed a similar decision this year about Uber in Britain.

The Amsterdam District Court sided with the Federation of Dutch Trade Unions, which had argued that Uber's roughly 4,000 drivers in the capital are in fact employees of a taxi company and should be granted benefits in line with the taxi sector.

Uber said it would appeal against the decision and "has no plans to employ drivers in the Netherlands".

"We are disappointed with this decision because we know that the overwhelming majority of drivers wish to remain independent," said Maurits Sch?nfeld, Uber's general manager for northern Europe. "Drivers don’t want to give up their freedom to choose if, when and where to work."

The court found drivers who transport passengers via the Uber app are covered by the collective labour agreement for taxi transportation.

"The legal relationship between Uber and these drivers meets all the characteristics of an employment contract," the ruling said.

The FNV hailed the ruling.

"Due to the judge's ruling, the Uber drivers are now automatically employed by Uber," said Zakaria Boufangacha, FNV's deputy chairman. "As a result, they will receive more wages and more rights in the event of dismissal or illness, for example."

Uber drivers are in some cases entitled to back pay, the court said.

The judges also ordered Uber to pay a fine of 50,000 euros ($58,940) for failing to implement the terms of the labour agreement for taxi drivers.

In March, Uber said it would improve workers' rights, including the minimum wage, for all of its more than 70,000 British drivers after it lost a Supreme Court case in February.

Uber also faced a legal setback in the United States, where the Supreme Court in May rejected its bid to avoid a lawsuit over whether drivers are employees and not independent contractors. 

($1 = 0.8483 euros)

(Reporting by Anthony Deutsch and Toby Sterling; Editing by Emelia Sithole-Matarise and Edmund Blair) ((anthony.deutsch@thomsonreuters.com;))