They are dutchbags, but employers should have the right to determine how employees dress, particularly if they are near other employees or the public.
Set the religious angle aside for a second. If she had wanted to work barefoot and they prevented it, would that be allowed? What if she wanted to wear a shirt that showed all but her nipples? Maybe she has a really cozy pair of sweat pants and a floppy shirt that still shows her muffin-top oozing over the sides. Should they be able to correct that?