A landmark European court ruling has dashed hopes of equal pay for agency lecturers.

But the decision by the European Court of Justice could give thousands of British staff employed via agencies the right to join the state-backed teachers’ pension scheme.

The judgement is the latest in an eight-year legal battle fought by technology lecturer Debra Allonby, sacked by a college in 1996 only to be re-employed via an agency at a lower hourly rate. Mrs Allonby claimed she was entitled to the same pay and benefits as a male lecturer directly employed by the college and that, though not an employee, she should be part of the teachers’ pension scheme.

The court ruled that she was not entitled to equal pay, but the decision on pensions has been referred back to the UK Court of Appeal.

Both lecturers’ union Natfhe, who backed her claim, and Protocol Professional, the agency that employed her, are claiming victory. Natfhe general secretary Paul Mackney said: “This landmark decision is a significant victory that moves forward employment rights for agency teachers. The Government must now act to comply with European legislation and extend full pension and employment rights to agency teachers.”

But Tim Johnson of KLegal, Protocol Professional’s solicitors, said: “This decision ends Mrs Allonby’s substantive claim for equal pay with college lecturers.

“It also means that if Mrs Allonby wishes to pursue her claim for admission to the pension scheme any further, it will be primarily against the Government and not Protocol Professional.”

Ms Allonby had used sexual discrimination law to argue for equal treatment with a male colleague on the payroll at Accrington and Rossendale College in Lancashire, where she was employed part-time from 1990-96.

She lost her job when the college decided not to renew the contracts of its 341 part-time, hourly-paid staff: 231 of these were women.

The court confirmed the verdicts of the original employment tribunal, appeal tribunal and Court of Appeal that the claim was not valid. Natfhe admitted it was “disappointed” at the decision on equal pay, but pledged to fight on to win pension rights for agency lecturers. Michael Scott, Natfhe’s solicitor, said: “We feel that the government must now review the Teachers’ Pension Scheme in the light of this ruling and admit agency staff. We feel that... the current scheme will be found to be out of line with EU law.”

He said that the whole reason why colleges use agencies is to avoid the costs of pensions, maternity pay, sick pay and redundancy rights. “If these benefits were awarded to agency staff, the costs would have to be met by the colleges in higher fees, and the cost reason for colleges using agencies would be diminished,” he added.

Julie Mellor, Chair of the Equal Opportunities Commission, said: “This is a welcome decision on pension rights. However, we are disappointed that colleges can still get away with paying lecturers less by employing them via an agency. It’s vital that the Agency Workers Directive covers pay as well as conditions, and is adopted in the UK as soon as possible.”

Dr Joanna Martin, Managing Director of Protocol Professional, said: “We are delighted by the outcome of this case. I am particularly pleased that it has been decided that Protocol Professional is not responsible for any discrimination and that our business model has been shown to be robust.”