Today's judgement ruled that the national minimum wage does not apply to sleep-in shifts unless the worker is awake for the purpose of working.
Care providers will breathe a sigh of relief today as a vital court of appeal verdict went in its favour.
Some £400 million was owed by the sector this year to fund backdated pay to sleep-in workers.
Today's judgement ruled that the national minimum wage (NMW) does not apply to sleep-in shifts unless the worker is awake for the purpose of working.
"The only time that counts for NWM purposes is time when the worker is required to be awake for the purposes of working," said the Lord Justice.
The Court handed down its judgement in two cases, one of which involved learning disability charity Mencap.
"The Court’s decision has removed the uncertainty about how the law on the National Living Wage applies to sleep-ins," said Mencap Chair Derek Lewis.
"The prospect of having to make large unfunded back payments had threatened to bankrupt many providers, jeopardising the care of vulnerable people and the employment of their carers," he said.
"Many hardworking care workers were given false expectations of an entitlement to back pay and they must be feeling very disappointed. We did not want to bring this case. We had to do so because of the mayhem throughout the sector that would have been caused by previous court decisions and government enforcement action, including serious damage to Mencap’s work in supporting people with learning disabilities."
"What is clear though, is that dedicated care workers deserve a better deal. They work hard and support some of the most vulnerable people in society, but many are among the lowest paid."
"We and many other providers have been paying for sleep-ins at a higher rate for over a year now, and we intend to continue despite the Court’s decision."
"We now call on Government to fulfil its responsibilities by legislating so that all carers are entitled to this, and their employers are funded accordingly."
"We also call on Government to ensure that the social care sector and, in particular, the specialised support that is required for people with a learning disability is properly funded and its workers are paid what they deserve in the future."
Care England Chief Executive Martin Green added: "We welcome the Appeal Court ruling and hope we can now move forward, without a huge back pay liability hanging over the sector and threatening the ongoing care of thousands, to ensure we focus on getting social care services funded properly for the future."