Workers have won a groundbreaking case at the Employment Appeal Tribunal to include overtime in holiday pay.
This means all people working voluntary overtime could claim for additional holiday pay. Currently, only basic pay counts when calculating holiday pay.
The details of the ruling, particularly on whether claims can be backdated, have yet to be released.
The ruling could be appealed to the Court of Appeal, meaning a final decision may be years away.
"Up until now some workers who are required to do overtime have been penalised for taking the time off they are entitled to," said Howard Beckett of Unite.
"This ruling not only secures justice for our members who were short changed, but means employers have got to get their house in order."
The ruling has widespread implications for all companies paying overtime to their staff.
The government estimates that one-sixth of the 30.8 million people in work get paid overtime. This means around five million workers could be entitled to more holiday pay.
The coalition and business groups had argued strongly that overtime should not be included in holiday pay calculations.
If claims can be backdated, businesses stand to lose billions of pounds, some estimates suggest.
Financial implications"This is a real blow to UK businesses now facing the prospect of punitive costs potentially running into billions of pounds - and not all will survive, which could mean significant job losses," said CBI director general John Cridland.
"This judgment must be challenged. We need the UK government to step up its defence of the current UK law, and use its powers to limit any retrospective liability that firms may face."
Given the financial implications for companies, lawyers suggested an appeal was likely.
"The potential financial implications for many employers will be significant," said Jean Lovett, Employment and Incentives partner Linklaters.
"We envisage that the tribunal's decision will not be the last word on this issue. As significant sums are involved, we expect the decision to be appealed."
"Due to the costs involved many employers may now look to reduce the availability of overtime, where feasible."
The cases centre on the interpretation of the EU-wide Working Time Directive, and in particular the Working Time Regulations implemented in the UK in 1998.
The tribunal ruling suggests that UK companies have been interpreting the EU directive wrongly.
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