The case decided today dates to 2000, when Christiane Ebrahimian was working in the psychiatric department at a public hospital in Nanterre.
She learned that her contract would not be renewed because patients had complained about her refusal to remove her headscarf.
France's secular government bars public employees from displaying religious beliefs on the job - a ban that has since been extended to schoolchildren and even parents who want to accompany a class outing.