A judge dealt a setback Thursday to state employees who went to court to stop a new law that would change how unused sick leave is handled upon their retirement.

However, the employees say they will file an appeal with the Utah Supreme Court.

Currently, many state workers can exchange one eight-hour day of sick leave for a month's worth of medical insurance after they retire.

But this year the Legislature passed HB213, which lets workers get a dollar-for-dollar exchange for unused sick days. The bill also requires workers to cash out one-quarter of their saved sick leave and put it into their 401(k) retirement savings plan.

The Utah Public Employees Association and five state workers went to court to stop the law from taking effect Jan. 1, 2006, and 3rd District Judge William Barrett heard five days of testimony over a two-week period.

Barrett on Thursday said employees do not have a contract with the state until they are vested, which does not happen until they retire or become disabled, so any change in their benefits is not a breach of contract.

Also, since employees do not have a contract with the state until retirement, they cannot claim their personal property is being taken, the judge said.

Barrett also denied the workers' request for an injunction that would prevent the law from going into effect. Barrett said an injunction would harm the public because it would stop the Legislature from enacting laws and controlling its own budget.

The judge said he sympathized with workers who will be negatively affected by HB213, noting a former clerk who worked for him for 10 years has a considerable number of unused sick days and probably will not fare well under HB213.

But Barrett said he swore to uphold the law when he became a judge and cannot let emotion cloud his decision.

Robert Anderson, a state Department of Health employee, said outside the courtroom that he feels "betrayed" by the Legislature and state officials.

"For the last 25 years, they've promised certain things: If I conserved my sick leave, I could turn that in," Anderson said. "Now they're going to renege on that promise."

Anderson, 58, said he has more than 2,000 hours of sick leave that he deliberately saved for retirement that he will not be able to use the way he has been told for decades. During his 34 years with the state, he has used vacation time when sick in order to build up the bank of sick days for the retirement plan he believed would be in place when he finally retires.

The UPEA represents 8,500 members, of which 5,000 are state workers. About 25,000 people work for the state.

Legislators had argued the change in benefits was needed because the plan made sense 20 years ago when health care costs were less expensive, but today expenses for health care are escalating dramatically. Rep. Dave Clark, R-Santa Clara, who sponsored HB213, said keeping the existing system in place would ultimately create a liability of about $250 million for the state.

But Audry Wood, UPEA executive director, said the Legislature adopted the bill without doing an actuarial study to see what financial effect it would have.

She also predicts the state will experience a brain drain of experienced workers if the new law goes into effect.

"What this means is there will be a lot of employees who will retire sooner than they would have otherwise to maximize their benefits," she said. "That's sad. It's expensive to train new employees and the state is losing a lot of people who have been steady, long-term workers. You can't put a cost on that and the cost is going to be astronomical."

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E-mail: lindat@desnews.com