In a unanimous decision released Thursday, the justices concluded worker benefits are subject to change based on legislators' discretion.

"As a general rule, public employment is governed by statute and legislative policy, and is therefore subject to change as thought best by the people, acting through their legislative representatives," Justice Michael Wilkins wrote.

The ruling ends 10 months of legal wrangling between lawmakers and state workers over a 20-year-old policy that allowed state employees to trade eight hours of unused sick leave for a month of post-retirement medical benefits.

The Utah Public Employee Association sued last May to block implementation of legislation adopted last year phasing out the benefits. A district court judge dismissed all of the employees' claims in December, just a week before workers' Dec. 15 deadline to retire and retain the retirement benefit. UPEA appealed and the State Supreme Court issued an injunction pending their ruling in the case.

In the meantime, some state lawmakers had suggested holding back about $20 million in employee raises this year to cover any tax liability for the state - just in case the justices ruled against the state. And in a footnote in their last court brief, state attorneys warned justices to consider the implications of tying lawmakers' hands.

The justices said legislators and state attorneys overstepped the constitutional separation of powers with such legal strategies. In an unusual statement within the ruling, the justices chastised the heavy-handed tactic.

"If media reports are accurate of threats by members of the Legislature to withhold salary increases for all state employees generally, and judicial salaries in particular, in an effort to force this court to act more quickly or to reach a certain result, then those making such threats fail to grasp the very core of the separation of powers doctrine and the value to the people of our state of a truly independent and responsible judiciary," Wilkins wrote.

Attorney Clark Waddoups, hired by the state to defend the change in benefits policy, said the justices misunderstood his legal point.

"There was nothing in the briefs that should have been perceived as a threat," he said. "But the court needed to think about the fact that if it tied the Legislature's hands, it may have an effect on the ability of the Legislature to deal with benefits in the future."

UPEA attorney Benson Hathaway said he had never seen such language in a ruling from the state's top court. Although the court ruled in the state's favor, Hathaway figures lawmakers' creative legal maneuvering backfired.

"These are independent, intelligent, thoughtful people that are going to act independent of any threats they might receive," he said.

Lawmakers insist they had to cut off the generous benefit. If it had continued, they estimate the state would spend more than $800 million over the next 20 years, paying ballooning health insurance premium costs for retired workers.

On the other side, some public employees will lose years of insurance coverage - either as they retire early or stay on the job and lose much of the value of their sick leave anyway. More than 800 state workers retired last year to retain their benefits.

The court concluded public employees cannot claim a constitutional right to those benefits. Wilkins said the policy has been applied inconsistently and changed several times by lawmakers - in 1983, 1998 and 2004. And state law is "ambiguous" about when employees have a right to claim their banked sick leave.

Although the state had committed to provide workers with a sick leave benefit, employees were not guaranteed 100 percent of the value of that sick leave, the justices concluded.

"Employees have no protectable property interest in redeeming all or any of those hours for medical and life insurance until they reach actual retirement," Wilkins wrote.

Robert Valerio, a plaintiff in the suit and one of the state workers forced to retire early, was disappointed by the ruling. The 45-year-old veteran of the Department of Social Services has gone back to school to "retrain."

"The disappointing thing is: This is happening to people nationwide," Valerio said. "You spend your whole life dedicated to one company, one government. And they make promises that make you stay. Then, they take them away. There's no safety net for people as they get older."

The court issued an injunction blocking implementation of the law until the justices could rule. Any remaining employees still eligible for the benefit have 30 days to retire and collect the full value of their sick leave. Those who don't retire now will have to purchase state insurance using a formula based on the value of their banked sick leave and their hourly wage.

State lawmakers lauded the ruling. "This was not an easy decision for the court. But it was even a harder decision for us last year," said Senate President John Valentine, R-Orem. He said lawmakers consider state workers "part of our family."

And Santa Clara Republican Rep. Dave Clark, the sponsor of the original legislation, said he was sorry for any hardship the case caused for state employees. "I don't think you see us doing cartwheels over this," he said. "But we do have a responsibility to manage this state wisely."

But advocates for employees urged state workers to show their displeasure at the ballot box.

"This is who represents state employees right now: People who don't appreciate their efforts or the time they put into their jobs," said UPEA director Audry Wood. "They don't represent the employees like they should."

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Tribune reporters Matt Canham and Glen Warchol contributed to this story.

The history:

During the 2005 legislative session, lawmakers adopted legislation to phase out a 20-year-old retirement benefit offered to state workers, cutting off employees' ability to trade unused sick leave for medical benefits. The Utah Public Employees Association sued in May to block implementation of the law. In December, 3rd District Court Judge William Barrett threw out the employees' suit. UPEA appealed to the Utah Supreme Court, which ruled Thursday that the workers' constitutional rights were not violated. Meantime, more than 800 workers retired in an effort to collect their benefits. Those still eligible for the benefit have until mid-March to decide whether to retire early.