Hundreds of workers who want to work beyond the age of 65 were dealt a blow yesterday after campaigners lost an important round in their legal battle to banish Britain's compulsory retirement age.

A preliminary legal opinion at the European Court of Justice in Luxembourg rejected a claim by Age Concern that to compel people to stop work at or after 65 without compensation breaches EU equality requirements.

Although the opinion could yet be overturned by the full European Court, it will dismay hundreds of people who have been forced to retire and who are claiming compensation through employment tribunals.

If the opinion is upheld by the European Court, employees who want to work beyond 65 will continue to need the agreement of their bosses. About 260 tribunal claims are on hold, awaiting the outcome of the test case, and thousands more claims could follow if pensioners are forced to retire.

Jan Marzak, the Advocate-General of the court, most of whose opinions are followed by the court, argued yesterday that a fixed retirement age was not necessarily contrary to EU rules. He agreed with Age Concern that British rules on mandatory retirement were covered by the EU directive. But he said that discrimination on the ground of age could be justified in certain circumstances in the context of a country's labour market and employment policy.

He said that to allow employers to force workers to retire at 65 or over “can in principle be justified if that rule is objectively and reasonably justified in the context of national law by a legitimate aim relating to employment policy and the labour market, and it is not apparent that the means put in place to achieve that aim of public interest are inappropriate and unnecessary for the purpose”.

Employers welcomed the opinion, saying that it would enable them to plan their workforce and ensure a “dignified exit” for employees whose performance was starting to decline.

Help the Aged said that the opinion was very disappointing and condemned it as flying in the face of fairness and common sense, as well as the trend towards greater life expectancy. Kate Jopling, the charity's head of public affairs, said: “Allowing companies to show loyal workers the door just because they are 65 or over makes a mockery of age discrimination laws which are there to make clear that age is just a number, not an indicator of your competency.

“There is simply no justification for allowing a 65th birthday card to come hand in hand with a P45, regardless of competency or previous track record.” Lawyers for Age Concern told a hearing this year that the Employment Equality (Age) Regulations breach the EU's Equal Treatment Directive, which bans employment discrimination on various grounds, including age.

The regulations, introduced in 2006, ban discrimination on the ground of age but exclude pensioners, who can be dismissed at 65 without redundancy payments, or at the employer's mandatory retirement age if it is above 65.

Government lawyers insisted that the exception was a national matter and that rules on retirement-age workers should not be governed by the EU directive.

One of Age Concern's member organisations, Heyday, took the case to the High Court, which sent it to the EU court for a ruling. The “opinion” is not legally binding, but is followed by the EU judges in about 80 per cent of cases. The final verdict is due in about six months.

The Advocate-General also rejected Age Concern's claim that national governments should have to provide a specific list of which differences of treatment in retirement age are justified.

A victory for Age Concern - not ruled out but now unlikely - could lead to a far-reaching change in domestic employment law, and a flood of compensation actions in addition to the 260 now pending. About 25,000 workers are estimated to face “default retirement” at 65 in Britain every year, when they would be happy and able to carry on.

Explore Law

• Columnists

• Law Panel

• Law Reports

• Student Law

Times Recommends

• BGC 'set aside £40m to lure Tullett brokers'
• Legal aid review to ensure value
• Fears as 21 magistrates' courts face closure