Glenda Partridge was sacked from the pound;2,400-a-term junior school at Arnold Lodge school, in Leamington Spa, after other teachers reported seeing her mimicking silly walks and swearing about the senior staff at the independent school. But the GTC ruled that the allegations against Mrs Partridge had not been proven because there had been insufficient evidence and a lack of credible witnesses.
At an earlier hearing, Chris Newman, the site manager whose father owns the school, said he had overheard Mrs Partridge making derogatory comments during a staff meeting in January 2004.
The comments were alleged to include "stupid cow" and "stuck-up bitch" in reference to the school's principal Elizabeth Hickling and vice-principal Lucy Wheeler.
An investigation was launched and Mrs Partridge was sacked in March 2004 following a disciplinary hearing at the school.
The teacher, who joined the staff of the school six years ago, said she became suspicious of a plot to get rid of her in favour of a cheaper teacher when she failed to receive her annual pay rise in 2003, even though other members of staff had received an increase in salary.
After her dismissal, Mrs Partridge's position was not filled and the teaching structure at the school was reorganised.
She lodged an appeal against the decision, which she lost, and later filed a claim to an employment tribunal claiming unfair dismissal, but settled for an undisclosed payment from the school.
Richard Walker, representing Mrs Partridge, dismissed the evidence of Christine Dixon, the principal's personal assistant, who said she had watched Mrs Partridge acting out a silly walk while pretending to mimic Hickling. "I would only suggest the lady has some sort of vivid imagination," he said.
Mrs Partridge is now teaching at Spon Gate primary in Coventry, but earns 30 per cent less than her previous salary.
In a statement, the head of Spon Gate said: "(Mrs Partridge's) attitude towards staff is of the highest professional standard. I can unreservedly recommend her."