Employment tribunal fees will be immediately scrapped after the Supreme Court ruled they were unfair, especially for people on lower incomes.
The case was brought by the trade union Unison, which had lost previous rulings in the High Court and the Court of Appeal. The Supreme Court verdict cannot be appealed.
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As a result, thousands of people who paid up to £1,200 to challenge their employers since 2013, when the fees were first introduced, will be reimbursed for any fees not already recovered.
It is estimated this will cost the government around £27m, although Tim Forer, a partner in the employment law team at Blake Morgan, says the figure could be as high as £31m.
Judges cited a 70 per cent fall in employment tribunal cases since 2013 and said the fees were also "contrary to the Equality Act 2010 as they disproportionately affected women".
A drop in cases relating to maternity discrimination was noted, despite steady rises in the number of cases reported to Citizens Advice.
Under the regime, workers had to pay at least £160 to issue a claim, rising to £250 for serious claims such as unfair dismissal. If a hearing was granted, a further £230 to £950 was charged.
Total costs could add up to £1,200 to bring a case and £1,600 to appeal a ruling.
If they won, these charges would in many instances be repaid along with any damages ordered. But campaigners argued the high upfront costs and risk of losing hard-to-prove cases were putting people off.
Frances O'Grady, general secretary of the TUC, said: "This is a massive win for working people. Too many low-paid workers couldn't afford to uphold their rights at work, even when they've faced harassment or have been sacked unfairly.
"Tribunal fees have been a bonanza for bad bosses, giving them free rein to mistreat staff. Any fees paid so far should be refunded as soon as possible."