The Islip Town workers union, which failed to obtain a restraining order in State Supreme Court Monday to stop the scheduled layoffs of 32 union members, reached a settlement with town officials to extend those workers' health benefits through June 30, town and union officials said.

The jobs of 39 workers, seven of them nonunion, will be terminated on Friday, Islip officials said.

And Justice Peter Mayer instructed the town and union to move quickly through an arbitration process to resolve a dispute over whether the town followed contract rules when identifying positions for elimination.

The health benefits, which otherwise would have ended on Dec. 31, will cost the town an extra $80,000, said Ernie Stolzer, an attorney representing the town.

Islip Supervisor Phil Nolan said the town agreed to the benefits extension to avoid a drawn-out court battle that could have kept the 32 employees on the payroll.

"We could have lost months of savings of salaries," he said, "which at the end of the day would have caused even more layoffs next year."

He said the extension "doesn't have a really big impact on our budget."

Town officials have said that the layoffs were necessary because of a projected $10 million shortfall.

The town board initially voted to eliminate 97 positions, but whittled down the number as employees took an early retirement incentive or left for other reasons. The board also approved a lag payroll for management positions, which saved two jobs.

The town and the union, Teamsters Local 237, have reached an agreement on a new arbitration process and designated a pool of five independent arbitrators.

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The agreement comes after the union in June filed a court petition seeking to vacate a decision by a Suffolk County Labor Department arbitrator who failed to disclose that, as a Democratic committeeman, he had campaigned for Nolan.

The town countered that the arbitrator, Willard Christy, had ruled just as often for the union as it had for the town. That case is still pending.

The two sides will now split the cost of all labor arbitration proceedings. Previously, the county covered the cost.