The European Court of Justice (ECJ) has ruled that time spent travelling to and from first and last appointments by workers without a fixed office should be regarded as working time.
This time has not previously been considered as work by many employers and the government admits the decision will drive up costs for businesses.
It means firms including those employing gas fitters, care workers, plumbers and sales reps, among others, may be in breach of EU working time regulations.
The judgement amounts to a significant tightening of European labour rules, and could force thousands of British companies to hire more workers to remain in the law.
The ruling could also force companies to pay higher salaries to avoid breaking minimum wages laws, as well as giving employees more breaks.
BBC legal correspondent Clive Coleman said it could have a “huge effect”.
“Employers may have to organise work schedules to ensure workers’ first and last appointments are close to their homes,” he added.
The court said its judgement was about protecting the “health and safety” of workers as set out in the European Union’s working time directive.
One of its main goals is to ensure that no employee in the EU is obliged to work more than an average of 48 hours a week.
It comes as David Cameron has scaled back plans to regain Britain’s opt-out on the working time directive as part of his renegotiation with the European Union.
The Telegraph reported that Mr Cameron has stepped back from seeking a full opt-out over social legislation, and is now seeking a more modest declaration that employment law is a national competence.
Under UK government guidelines, time spent travelling at work does count towards the target, but “normal travel to and from work” and “travelling outside normal working hours” does not.
The court ruling contradicts that. The ruling came about because of an ongoing legal case in Spain involving a company called Tyco, which installs security systems.
While workers drove for up to three hours to clients’ premises, the company counted their working day for the purposes of the directive from the moment they arrived at the first client to the moment they left the last one.
The company shut its regional offices down in 2011, resulting in employees travelling varying distances before arriving at their first appointment.