The state Supreme Court upheld a lower court decision last January that blocked the five-member commission from forcing terms on the Philadelphia Federation of Teachers.
Union leaders called the ruling a rebuke of a power grab, and a spokesman for the commission and Superintendent William R. Hite Jr. said no further legal action would be taken.
"We hold, at least insofar as teachers are concerned, that collective bargaining agreements are 'teachers' contracts' which are excepted from a school reform commission's cancellation powers," five justices wrote in an opinion.