Government faces legal challenge to equality law threatening plans for major reform.

The European commission has said parts of UK law fail to protect people from discrimination at work. Photograph: Federico Gambarini/EPA

The government faces legal action for failing to protect people from discrimination at work, throwing doubt on any proposals for a new law on equality.

The European commission has said parts of UK law, including provisions on sexual orientation and disability, are inadequate. It could refer the situation to the European court of justice.

The claim, set out in two reasoned opinions sent to the government last month, includes a warning that the law that applies to faith-based organisations, schools and adoption agencies allows too much scope for discrimination on grounds of sexual orientation.

"This could be difficult for the government," said Robin Allen QC, head of Cloisters chambers. "The extent to which religious organisations are exempt from the rules of sexual orientation discrimination is a particularly difficult issue. The government will certainly resist any strengthening to the current law in an election year."

Other parts of UK law singled out by the EU's equal opportunities commissioner include the lack of a ban on "instructions to discriminate", where a person is discriminated against because of the actions of a third party, and the lack of clear provisions for class actions.

"The government has kept promising to address group claims and, as a matter of good practice, lawyers have been saying it should happen. But no one had picked up that failing to do so would breach the EC directive ? this came as a total surprise," said Rachel Harfield, an employment law solicitor at Russell Jones & Walker.

Last month, the long-awaited equality bill was included in the Queen's speech for a second year and was presumed to be compliant with EU requirements. News of the warning from the commission means the UK is the only European country to have failed to implement two key EU directives on discrimination.

"This directive was agreed unanimously by all EU countries in 2002 but, to be effective, it needs to be fully and correctly transposed into national law," said Vladimir Spidla, EU commissioner for equal opportunities. "We call on the UK government to make the necessary changes to its gender equality legislation as soon as possible so as to fully comply with the EU rules."

The government has two months to respond. A spokesman for the government's Equalities Office said: "We take our European legal obligations seriously. We will be studying the reasoned opinions carefully and will reply to the commission in the new year. The equality bill will be continuing its progress through parliament during the fifth session."

The criticism is likely to embarrass the government. The bill, which replaces nine existing laws and more than 100 other measures, was intended to be consolidate all legislation on equality.

"One of the criticisms of the existing equality legislation is that there are too many pieces of legislation," said Harfield. "The equality bill is supposed to be a consolidation ? the last thing the government would want is to introduce an equality bill as it stands, and then have to introduce new legislation further down the line. That would make a mockery of what the bill is supposed to do."

Experts have welcomed many of the bill's provisions, but some see it as a "missed opportunity" for failing to develop the law on equal pay or to allow claims with more than two grounds.

Allen said: "One of the biggest issues with the equality bill is the attempt to redraw the lines between gay people and evangelicals ? there will be concerns that any further demands for changes could interfere with the legislative process."