A kitchen hand wrongly given the chop for her dangerous parsley preparation technique at a Dunedin police cafe has won a $9700 payout.

The accused parsley chopper, Karen Smith, was found to have been unjustifiably sacked from her job as a kitchen hand for Sweet as Nut, which operates a cafe in the Dunedin Central Police Station and a catering business servicing the Otago region.

The Employment Relations Authority (ERA) ordered the business to pay her $9700 in lost wages and compensation after it found it had failed to properly investigate or substantiate the allegations.

The incident occurred on July 6 last year when Sweet as Nut boss Scott McCreanor said he observed Smith using a 40cm knife to cut parsley on a chopping block positioned between two benches "in such a way there was no solid surface supporting a majority of the block", according to the ERA's decision.

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McCreanor said he expressed his concern and told her to desist from chopping the herb, which she did.

Smith gave contradictory evidence. When asked what she was doing, she said she'd told McCreanor she was "making a cheese ball" and could not recall chopping parsley on the precariously-placed block.

"Mr McCreanor said he noted the incident in his diary. He said he then sought advice from his solicitor."

Despite McCreanor's apparent concerns, Smith performed her normal duties the following day. However, as she was finishing her shift McCreanor gave her a letter headed: "Disciplinary Meeting – allegation of Serious Misconduct – Proposal to Stand You Down on Pay".

The letter alleged serious misconduct for failing to observe health and safety guidelines and deliberately disregarding health and safety policy.

"The letter did not particularise what these 'guidelines' or the 'policy' was," the ERA decision says.

"Mr McCreanor did not appear to have health and safety 'guidelines' or a 'policy' for the cafe. Instead he sought to rely on a contractor safety induction promulgated by the New Zealand Police which Ms Smith [had] signed."

The letter further advised Smith to keep the information it contained confidential, but when she first read it she happened to be in a lift with another employee.

"She said she may have verbalised some of [her] shock, but did not discuss the contents of the letter with [the other employee]," the decision says

However, the other employee, Jo Bray, said the pair had discussed the letter in the lift and as they walked to their parked cars. Bray said Smith had referred to the letter in an "excited manner" and suggested "getting the sack was better for her than having another job to go to".

Bray further claimed that once she was in her car, Smith had called someone on her phone and said words to the effect of, "You will never guess what just happened". Smith denied this.

Bray then informed McCreanor, leading to new allegations of breach of confidentiality.

During the resulting disciplinary meeting, McCreanor provided parties with a photograph of the chopping block and the parsley.

"However, this was a reconstruction based on his view of the facts and was provided ... for illustrative purposes."

McCreanor said the decision to dismiss Smith was "not an easy one to make", rejecting her assertions that the decision was predetermined.

The ERA identified several defects in McCreanor's employment investigation which were "not minor and they resulted in Ms Smith being treated unfairly".

"I have found Mr McCreanor carried out an unfair and inadequate employment investigation," said ERA member Andrew Dallas, awarding Smith $2689 in lost wages and $7000 compensation for humiliation, loss of dignity and injury to feelings.

Smith's advocate, John Cuttance, said his client regretted that the matter had taken so long to resolve but she was pleased with the outcome.

"Naturally she thought [the way she was treated] was quite unreasonable and unfair ... and I think it's pretty clear from the authority's decision what it thought of the whole affair."

McCreanor has been approached for comment.