Carers who have to sleep at their workplace in case they are needed overnight will not be paid minimum hourly rates after a Court of Appeal ruling.
In a decision which could have cost the UK care industry billions if it had gone in favour of workers, three leading judges said carers were only entitled to minimum wage when they were required to be awake for work.
At a hearing in March, the Royal Mencap Society challenged a tribunal decision made in favour of Claire Tomlinson-Blake, a Mencap support worker in the East Riding of Yorkshire.
The court was told that Mrs Tomlinson-Blake received a salary for her full-time job helping vulnerable adults living in their own homes, and sometimes had to work a sleep-in shift between 10pm and 7am.
For those shifts she was paid an allowance of £29.05, which included pay for an hour's work.
If she was woken in the night and had to work for more than an hour, she would receive extra pay for the time worked.
But the Employment Tribunal found she used her "listening ear" and her experience to know when she was needed, and was "working" even when she was asleep.
The tribunal said she was entitled to receive an hourly minimum wage, which would have been more than £60 per shift, a decision upheld by the Employment Appeal Tribunal (EAT) last year.
However Lord Justice Underhill, sitting with two other senior judges, said: "For the reasons which I have given I believe that sleepers-in... are to be characterised for the purpose of the regulations as available for work... rather than actually working... and so fall within the terms of the sleep-in exception.
"The result is that the only time that counts for national minimum wage purposes is time when the worker is required to be awake for the purposes of working."
The appeal was resisted by Mrs Tomlinson-Blake.
The court also rejected an appeal by a Surrey care home worker who failed to convince the Employment Appeal Tribunal that he should have been paid the minimum wage for shifts when he was "on call".
Care England, the body which represents independent care providers, said the case could have cost the sector £400 million in back-dated pay and £200 million a year from 2020 if the court had ruled workers should be paid the minimum wage.
And lawyers for the Local Government Association, which represents councils, said its members would face "very significant unfunded historic liabilities" if Mencap's appeal was not allowed.
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