The school has a policy that allows the utterance of the word if the subject matter necessitates it. The Professor is the sort who wants to flaunt his use of the word under the university’s commitment to free speech and he tried to back door an opportunity to repeatedly utter the word in class, and to do so in a manner that would make some students uncomfortable because that was apparently his goal.
The school realized they couldn’t censure the tenured professor, but they also realize his behavior isn’t the sort they want their university to be known for. So the university removed any “required classes” from the professor’s workload. That way, no student would be forced to take a class with a professor who apparently delights in using that word in particular to offend some students, AND the professor gets to keep his job and continue teaching students who sign up for his class load that now includes only non-required courses.
I think it was an even-handed way to handle the situation. Doing nothing is not a stance a diverse and modern institution should take. And firing the professor would lead to lawsuits and even more unwanted attention on the university. Their solution is good for students because by removing all required courses from his load, it ensures no student is forced to take a class with a professor some view as bigoted. It’s good for the professor (and others who hope the university can maintain a balanced handling of Free Speech) because it ensures he can continue his role as a professor at CMC. It’s good for the university because they can make a claim of being “fair” to all sides.