In Kentucky, yet, not exactly what you'd think of as a hotbed of antireligious sentiment. Yet it's true — while there's plenty of hostility to atheists, and some legal discrimination against atheists and atheist speech, there've also been plenty of cases where the government has unconstitutionally tried to suppress religious speech.
The most recent one I've read involved the Logan County Public Library in Kentucky. At first, the library just banned its employees from wearing "clothing depicting religious, political, or potentially offensive decoration." This might be permissible, I think, because it doesn't single out religious advocacy for worse treatment than other ideological advocacy (so there's no unconstitutional discrimination against religion) and because it restricts a form of speech that may well prove disruptive of the library's function: Such T-shirts tend to be somewhat in-your-face, and are not unlikely to alienate quite a few patrons precisely because of the prominence of the message. I'm not positive that the rule is constitutional (though a neutral rule that required more professional dress likely would be), but at least there's a decent case for it.
But then the library changed the policy to prohibit religious ornaments as well, and applied it to bar an employee from wearing a cross on her necklace. (Obviously the same policy would also ban stars of David and other religious symbols.) The library's justification? "[T]he policy is necessary to protect librarian impartiality on issues that could be the subject of patron inquiry," and "the policy is required to avoid the appearance of religious favoritism and to avoid violating the state's duties under the Establishment Clause."
Really? Aren't library patrons able to realize that the clothing and jewelry that one wears — especially among librarians who pretty clearly don't have fixed uniforms — is usually selected by the wearer as a citizen, and not by the government? When I see a Kentucky state employee wearing diamond earrings, I don't think the state is endorsing De Beers; when I see her wearing a cross necklace, I assume she's the one who chose it, just like she chose her other jewelry.
As to "librarian impartiality," surely we all know that librarians have beliefs about controversial topics. We may hope that they set aside those beliefs in some measure when asked for impartial advice; we may expect that they don't set them aside entirely; but their potentially judgment-clouding beliefs are present whether or not they wear religious jewelry. (Of course, if you take the librarian impartiality argument seriously, you'd have to refuse to hire anyone who even dresses or wears his or her hair in religiously distinctive ways; no orthodox Jewish men with yarmulkes, no Sikhs wearing turbans, no Muslim women wearing distinctively Muslim garb.)
Finally, though the line between T-shirts and jewelry is one of degree, symbolic jewelry tends to be much less obtrusive, and also much more commonplace and therefore familiar even in quite professional circles. Whatever professionalism objections there may be to the T-shirts, it seems to me that they don't apply to the jewlery. The court quite rightly concluded that the library's concerns about any possible disruption or even controversy were purely "speculative and hypothetical." The government acting as employer must have some authority to control on-the-job expression by its employees; yes, the answer might well be different for T-shirts and for jewelry, for pins saying "Fuck You" and for cross necklaces. But that there is some such necessary authority doesn't mean that the government should have absolute authority to suppress all religious self-expression by its employees merely based on entirely speculative fears.
In any case, the federal district court quite rightly held the policy unconstitutional. Draper v. Logan County Public Library, 2005 WL 3358686 (W.D. Ky. Aug. 29). Too bad it had to take a lawsuit to get the library to treat its employees properly.
UPDATE: Though WESTLAW showed this as an August 2005 case, someone familiar with this litigation has told me that it's actually an August 2003 case. The substantive analysis remains the same, of course.