The UK supreme court will hand down judgment on Wednesday morning in what is expected to be the final chapter in a long-running dispute between the Department of Work and Pensions and former jobseeker Cait Reilly over the legality of so-called workfare schemes.

In what has come to be known as the Poundland case, the court will decide whether it was lawful for the government to force tens of thousands of jobseekers to work for free for between two and twenty-six weeks, including at the discount retailer.

The DWP appealed against the verdict of three judges at the Royal Courts of Justice in February, who unanimously declared that almost all the government's "work for your benefit" employment schemes were unlawful.

The three judges, Lord Justice Pill, Lady Justice Black and Sir Stanley Burnton, found that the work and pensions secretary, Iain Duncan Smith, did not have the power to create new employment programmes and schemes at a stroke of the pen and should have issued parliament with the full details of the coalition's growing number of schemes.

In the judgment, Burnton said parliament was "entitled to encourage participation in such schemes by imposing sanctions". "However," he added, "any scheme must be such as has been authorised by parliament."

After the ruling struck down the legal basis of the DWP's employment schemes, the department was expected to be liable for a £130m rebate to jobseekers who had been sanctioned using the powers of the scheme.

However, in order to avoid paying back rebates to around 250,000 claimants, the government introduced a controversial emergency law that retroactively made hundreds of thousands of sanctions legal.

Campaigning group Boycott Workfare told the Guardian that because of a backlog created by the case, sanctions first raised over a year ago were only now being docked from claimants, causing confusion and distress.

Following the emergency law, Public Interest Lawyers – which have been representing Reilly and her co-claimant in the case, unemployed lorry driver Jamieson Wilson – lodged a judicial review accusing Duncan Smith of conspiring to undermine basic human rights by enacting the retroactive legislation. That judicial case was put on hold pending the outcome of Wednesday's supreme court ruling.

In a short statement, Public Interest Lawyers said: "We are awaiting the supreme court's judgment after what have been lengthy proceedings."