Violates? I never really saw it like that. They're free to wear it but not to be exposed during class. I believe the reasoning they used was that it could be distracting to other students. **** excuse but somewhat legit.
"Distracting other students" is not an exception to the free extercise clause.
Basically, there are two standards for dealing with with extercise issues.
If it's a case of de jure discrimination (in other words, religion is specifically targeted or is disproportionatly impacted enough that reveals a discriminatory intent) then it becomes a subject of the three pronged strict scrutiny test, and it must satisfy all of these standards.
1. Compelling governmental interest.
2. Narrowly tailored to achieve that interest.
3. Must be the least restrictive means for achieving that interest
If it's a case of de facto discrimination (in other words, religious action is the chance target of broad legislation that doesn't disproportionately impact religion and is not intended to target religion) then a rational basis test is applied (however with bite). In this case it must satisfy only one prong.
1. A legitimate governmental interest.
Which brings me to my next point, this is obviously targeted at religion, and at the very first prong of strict scrutiny it fails. Preventing the minute possibility of students being distracted is not a compelling government interest. It seems narrowly tailored. However it's definately not the least restrictive means because students are legally responsable for their classroom actions so compelling students to not get discracted by religious symbols under threat of disciplin is sufficent.
The only way that it would be legal if there was a strict uniform, because that's obviously de facto discrimination and there are plenty of possible legitimate government interests for that (the distraction thing is legitimate, but not compelling for example).
So no, the policy was absolutely 100% illegal and the school could easily get sued. Yes I can cite case law to prove this.