Firms have been warned they could face a "legal backlash" over age discrimination if they do not tackle the problem of ageism.

Campaigners hope that age discrimination in employment will be outlawed under a European directive due to come into force by 2006.

The move could cause "mayhem" and lead to an increase in employment tribunal cases unless employers are prepared well in advance, according to a new report.

The Employers' Forum on Age, which campaigns against ageism, has helped draw up a code of practice to help stamp out discrimination.

Sam Mercer, the forum's campaign director, said: "As the population ages, the problem of low participation among older workers and age discrimination throughout the EU becomes increasingly critical.

"It is essential employers consider the implications for their businesses and learn from each other."

The code includes practical information on flexible working, training and recruitment.