A federal appeals court has reversed a lower court's decision, ruling that a public school district in Tennessee did not violate the US Constitution's Establishment Clause when it hired a Christian school to provide alternative education to its students.

In July 2013, a US District Court for the Eastern District of Tennessee ruled against Jefferson County School district, saying it violated the Establishment Clause for hiring Kingswood School, a Christian school, to run its alternative school. It also awarded damages and an injunction.

The case stemmed from a lawsuit filed by teachers David Kucera and Vickie Forgety who lost their jobs when the school district abolished its own alternative school in 2003 due to funding shortfall.

Tennessee law requires each local school district to provide alternative school services to students who are suspended or expelled from their schools.

Abolishing the alternative school would save the board about $170,000 per school year. The contract for Kingswood ran until 2010.

The appeals court said to show that the school district violated the Establishment Cause, it should be considered, among others, "whether the relationship between the School Board and Kingswood had the primary effect of advancing religion."

In the case of the school district and Kingswood, it ruled that "there is no suggestion that the Board's association with Kingswood coerced students to partake in religious activity of any kind, either directly or through peer pressure."

It said the meetings between the students and a pastor did not touch on religion and classroom activities did not include religious instruction or prayers.

"In light of these facts, we find the district court's conclusion that the atmosphere was coercive to be clearly erroneous," it said.

It also ruled that the agreement between the school district and Kingswood did not constitute an endorsement by the government of a religion.

"The evidence indicates that students in the day program were not exposed to any religious instruction, prayer, or any mentions of religion at all. Their school building was devoid of any religious imagery," the appeals court said.

The court said the arrangement became beneficial to all.

"Viewed in this context, it is clear that the taxpayers, School Board, parents, and students all benefited from the relationship between the Board and Kingswood. While this benefit was being conferred, parents and children received only slight exposure to religious content," it said.

It added that the contract was "purely educational, and the religious references merely incidental."

"In sum, this case involves a secular legislative purpose, does not give rise to a governmental endorsement of religion, and does not entail an excessive entanglement between the government and religion. There is no violation of the Establishment Clause, and we therefore reverse the judgment of the district court," the appeals court ruled.

It also reversed the district court's decision to give injunction, award damages and grant attorney's fees.