Thousands of religious schools, charities and organizations could face legal action if they refuse to employ atheists or sack staff who become Satanists under proposed Government regulations.

The laws, which are based on a European Union directive and which have to be implemented by December, ban discrimination in the workplace on the grounds of religion, belief or sexual orientation.

But a report from the Christian Institute says the laws will restrict the freedom of religious organizations to employ solely staff who are practicing believers.

Christian groups are particularly angry that the Government has chosen to exempt political parties from the laws, so that the Labour Party will be able to continue its policy of employing only party members.

"While the Vegetarian Society can refuse to employ meat-eaters and the RSPCA can sack an executive who is found to have invested in the fur trade, churches which employ Christians could now face legal action for doing so," the institute said.” They could face the possibility of crippling legal actions just for following their beliefs."

Under the new regulations, all religious organizations, including schools, charities, parishes and mosques, will need to have a very strong case to require recruits to share their beliefs.

The laws could, for example, prevent Christian bodies refusing to employ practicing homosexuals or bisexuals on the grounds that sex outside marriage is against Christian teaching. Moreover, the regulations protect existing staff, so that if a youth worker employed by a Christian Church converts to Islam, but argues that he can still do the job, the Church cannot dismiss him.

Teachers in maintained schools escape the regulations on religion or belief but not sexual orientation. Vergers, youth workers, evangelists, pastoral staff in parishes and caretakers could all be seriously affected, however.

In its report the institute said that the proposed regulations undermined religious freedom.

One of its authors, Prof Ian Leigh, of Durham University, a human rights lawyer, said: "The Government regulations have all the potential seriously to undermine freedom of association for religious people. They place the modern concept of 'equality' over and above religious liberty."

By Jonathan Petre