Food delivery company Deliveroo has been told by the Government that it must pay its workers the minimum wage unless it reaches agreement in the courts to treat them as self-employed.
The firm's proposed new pay deal has been described by Labour as "a return to a Victorian system which has no place in modern Britain".
Hundreds of its workers have protested over piloted plans to pay workers £3.75 per delivery rather than the current terms of £7 an hour and £1 per delivery.
The Department for Business, Energy and Industrial Strategy insisted employees must be paid the so-called "national living wage" (NLW) of £7.20 an hour unless a court or HM Revenue and Customs defines them as self-employed.
A spokesman said: "The Government is determined to build an economy that works for all - that includes ensuring everyone gets a decent wage. An individual's employment status is determined by the reality of the working relationship and not the type of contract they have signed.
"Individuals cannot opt out of the rights they are owed, nor can an employer decide not to afford individuals those rights. Employers cannot simply opt out of the NLW by defining their staff as self-employed."
The company delivers food from thousands of restaurants which do not have their own delivery service and counts the likes of Pizza Express, Byron burgers and Gourmet Burger Kitchen among its clients.
It charges customers £2.50 per delivery for its service.
Deliveroo has insisted the new pay deal is only being trialled in certain areas of London, with around 280 riders taking part out of more than 3,000 in the capital.
In a blog post, it said pilots of the pay-per-delivery system have led to a doubling of average hourly fees for riders during the busiest times.