Parents had requested their children be taken out of James D. Merrick's eighth-grade science class because they objected to his homosexuality.
Although a school district must consider parents' opinions about their children's class placement, a placement cannot be based on the teacher's actual or perceived sexual orientation, according to the commission decision.
By granting parents' requests to remove their children from Merrick's class, the Rio Bravo-Greeley Union School District "fostered different treatment in an aspect of employment based upon (his) perceived sexual orientation," wrote Chief Deputy Labor Commissioner Jose Millan.
The ruling would prohibit the district from discriminating against Merrick in any aspect of employment. It would not expressly require the return of students to his class, but would prohibit further removals.
"The decision vindicates all of us who believe that bigotry and hate have no place in the classroom," said Myron Dean Quon, a lawyer for Lambda Legal Defense and Education Fund, a gay-rights organization that has represented Merrick.
The one-campus rural district, with about 800 students, is on the west side of Bakersfield, about 100 miles north of Los Angeles.
The district hired Merrick, a teacher for 40 years, in 1994. The Bakersfield Chamber of Commerce once named him teacher of the year.
In a recent interview, Merrick said he had not publicly declared his homosexuality, but did not deny he was gay.
He became a center of controversy after challenging comments by the Rev. Douglas Hearn, a member of the Kern County Human Relations Commission. Hearn said last May that homosexuals are sick and shouldn't be teaching children.
Merrick wrote a letter to a local newspaper, then became involved in a campaign seeking Hearn's resignation.
In September, some parents started pulling their children out of his classes, saying the students were uncomfortable with Merrick's mannerisms and public discussion of homosexuality. The removals continued through December 8.
Because he is the school's only eighth-grade science teacher, the 15 students were assigned to study hall, leaving about 100 in Merrick's six classes.
Principal Ernie Unruh said he told the parents that sexual orientation wasn't a legal reason for a student transfer, but he removed the students anyway, saying he was following district policy.
Superintendent Gerald Higbee said the district gives parents "the last say about their kids." The school board upheld their actions in January.
When Merrick filed a complaint with the state, the district said it wasn't discriminating against him but was merely acquiescing to the parents' requests.
The labor commissioner agreed that state policy recognizes "the special nature and importance o parental involvement in their children's education by requiring the district to consider parents' request in class placement." But placements cannot be determined solely by a teacher's actual or perceived sexual orientation, the ruling said.
"No issue other than (Merrick's) perceived sexual orientation was raised by any of these parents," Millan said.