Peggy loses her job as a substitute teacher after she spanks an unruly student.
Peggy receives a telephone call from the dispatch office. She is asked to fill in for a Spanish teacher at Bobby's school and warned of a "surprise" in-class evaluation. As the session gets under way, unruly students Dooley and Clark Peters pull a series of pranks on Peggy, causing her great embarrassment and frustration. When Peggy returns home, she shows her family the results of the in-class evaluation, which concludes she "needs improvement." The next day, Peggy takes a more proactive approach with the bullies. But Dooley nonetheless manages to pull down Peggy's pants in front of the class. Furious, Peggy grabs Dooley, places him over her knee, and gives him a spanking. A short time later, the school nurse informs Peggy that she is to report to the principal's office the next morning.
Hank attempts to assure Peggy that she will not lose her job over the incident. He recalls how, as a child, he was disciplined with a paddle nicknamed "Ol' Spanky." Despite Hank's words of reassurance, Principal Moss promptly fires Peggy the next morning. Cotton spies Peggy crying about her dismissal and turns to his friend Jeter Turbeville, who disciplined thousands of students during his tenure at the Middle School. Turbeville and his fellow veterans circulate a petition in an effort to get Peggy reinstated. Shortly thereafter, the school board votes on the matter and Peggy wins back her job. But when Peggy returns to school, she brings Ol' Spanky along for good measure--much to the concern of her students.
Bobby approaches his father about his mother's aggressive attitude. He explains that fear of the paddle is giving his friend Joseph nightmares. Meanwhile, word of "Paddlin' Peggy" spreads throughout town, and a local television news channel stops by the house to tape a segment on the famous substitute teacher. Peggy begins to panic when she realizes the paddle is nowhere to be found. She discovers it protruding from Dale Gribble's trash, and immediately assumes that his son, Joseph, tossed it there. Joseph strongly denies the accusation, but Peggy is certain he is the culprit. She raises the paddle over her head, prepared to strike the boy. Suddenly, Dale confesses it was he who stole the paddle. Peggy, horrified by a nearby reflection of herself, realizes she has gone too far. She returns to the school hoping to find her old self--the one who could teach children without "scaring the bejesus out of them." When a student again makes her the brunt of a practical joke, she swings a mace over her head, and then recounts how innocent people were brutally punished with just such a device during the Spanish Inquisition, even though they did nothing wrong. Later, Joseph aids Peggy in her garden, and helps spread a mulch made from chips of Ol' Spanky.