The pilot and flight attendant were working a flight to a Pacific destination which involved an overnight lay-over on August 17, last year, the Employment Court decision said.
The flight attendant had started working for the company the month before and this was her first lay-over job.
She said the flight crew were staying together at a hotel and had dinner and drinks together, then spent time together by the swimming pool at the hotel the following day.
The flight attendant left the group who were swimming at the pool and went back to her room.
She and pilot gave different accounts of the events surrounding the incident to the fleet manager who conducted interviews following the formal complaint, the decision said.
The pilot said he was invited in to her room, sat on her bed and accidentally touched her leg with the outside of his hand.
The flight attendant said the pilot came in to her room uninvited, sat on the bed next to her and touched the inside of her leg from her knee to near her groin.
She later told other members of the flight crew what had happened and made a formal complaint about the incident when she was back in New Zealand, the decision said.
The fleet manager favoured the flight attendant's account of what happened, and the ERA found the touch to the leg was sexual and that the pilot had been justifiably dismissed.
But Employment Court Judge Bruce Corkill said there were flaws in the company's investigation.
That included the failure to consider a case which involved similar conduct and the failure to consider adequately other alternatives.
He ordered the pilot's reinstatement to his former position no later than four weeks and to begin paying him a wage in two weeks.
The pilot was to co-operate fully with any reasonable requirements of the company to facilitate his return to work, Judge Corkill said.
It was also recommended the pilot be the subject of a written warning in respect of his acknowledged error of judgment.
