Is it 'right' to limit PDA in school? Sure. For reasons as you expressed here.
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The school can legally tell you not to hug other students while you are at school. The school has two, maybe three, primary concerns about this kind of behavior.
(1) The school is worried about possible sexual harassment claims brought by the parties themselves. Today, the two of you are getting along fine. But what happens if you break up next week? Sometimes people who have experienced bad breakups file false sexual harassment claims against their exes. The school doesn't want to be on the receiving end of a complaint like this, so they tell you not to hug each other at all while you are on school property.
I realize it may sound silly to you that the teacher is concerned that one of you might file a false sexual harassment claim against the other if the two of you break up. But people like me who work in this area see that kind of thing happen more often than you would imagine.
(2) The school is worried about possible sexual harassment claims brought by other students who don't want to be subjected to PDAs while they're on the school campus. The school has to draw the line somewhere, and the most obvious place to draw the line is by telling students the rule is no hugging at all.
(3) The school wants you to learn how to comply with adult social norms when the time comes for you to enter the work force. Hugging is not okay in the workplace. The teacher is trying to get you to develop good habits.
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