Mr Simpson's action was deliberate, considered, and made in light of a full knowledge of the protocols, the authority ruled.
Mr Arthur said the council chief executive failed to genuinely consider Ms Walters' explanation and failed to deal with her in good faith prior to her dismissal.
Ms Walters-Gleeson was awarded $31,684 in lost wages and a further $6000 as compensation for humiliation, loss of dignity and injury to her feelings.
In dismissing Ms Walters Mr Simpson said she had "seriously breached" the council's code of conduct and its election protocols for employees by signing a nomination form for Mr Semenoff on August 15 last year.
Ms Walters' actions had the potential to damage the council's reputation and its ability to operate as "an impartial administrator", he said at the time.
While the council's eleciton protocol stated it was not appropriate or acceptable conduct for employees to align themselves with or support candidates, the authority found these protocols to be "inherently contradictory" and at odds with those at other councils.
Ms Walters admitted not having read the protocols, which the authority found to be "negligent" on her behalf. It noted she had not been given the opportunity to attend staff briefings about what was expected during an election.
Regardless, the authority said a fair and reasonable employer would not have applied such "irrational provision or policy".
It found Ms Walters' dismissal was unjustified for three main reasons: Simpson had imposed a double standard, failed to genuinely consider her explanation of having made an error, and breached the statutory obligation of dealing with her in good faith.
Mr Simpson had taken no action against another of his staff Mr Watson, who, with his approval, had done work for a second mayoral candidate Mr Syers.
The authority found that even though Ms Walters might have been thoughtless in signing Mr Semenoff's nomination form, her error did not amount to "serious misconduct".
