The European Court of Justice (ECJ) has ruled that the UK's compulsory retirement age of 65 years is not in breach of EU legislation.

The case against the legislation, Age Concern England v Secretary of State for Business, Enterprise and Regulatory Reform, had been made by charity Age Concern which, through its 'Heyday' campaign, challenged the right for employers to dismiss employees at the normal retirement age of 65 years without good reason. Age Concern had claimed that this was in breach of the EU's Equal Treatment at Work Directive.

However, the ECJ ruled that employers can continue to retire employees at 65 years with no redundancy pay, without being treated as discriminatory, if it is a "proportionate" means of achieving a legitimate employment policy.

Kathleen Healy, employment partner at law firm Freshfields, said the ECJ judgement could spare employers from a huge number of age discrimination claims. "Today’s outcome derails a huge number of potential claims against employers who now retain their legal right to enforce retirement at 65 years], providing they follow the correct procedure Employers can now continue with their current financial and succession plans – two of the main areas which prompt them to forcibly retire older employees.

"The ECJ’s ruling will, however, come as bad news for some employees. Those whose age discrimination and unfair dismissal claims have been on hold in anticipation of the Heyday ruling are now unlikely to succeed in those claims. The Employment Tribunals Service estimates there are currently around 260 such stayed claims in the UK. Not only this, employers are now spared from many more potential claims by former employees who may have felt they were forced into retirement unfairly."

But the announcement has been met with disappointment by campaigners. Catharine Pusey, director of the Employers Forum on Age, said: "We are disappointed, though not surprised, by today's judgement. This further proves that both the ECJ and government regulations are completely behind the times in recognising the changes and pressures in the modern workforce and society.

The case will now return to the High Court for a decision on whether the default retirement age can be objectively justified by the UK Government. "The time this whole process could take is yet another delay in the way of the changes needed to stop this barrier to longer working lives, and its outcome is of less significance the closer we get to 2011, when the government has already agreed to review the default retirement age,” said Pusey.