The way a company dismissed a man for alleged racial abuse was unsatisfactory and flawed, the Employment Relations Authority (ERA) has found.

Authority member James Crichton, sitting in Christchurch, ordered Moda Pietra Ltd to pay Matthew Newble more than $7000 in compensation and costs for his unjustifiable dismissal.

Mr Crichton said despite the participation of company director Peter Carroll in an ERA directions meeting and various telephone contacts, the company did not appear at an ERA investigation meeting.

Mr Newble told the ERA he was employed to help another employee in the operation of a machine known as the CNC machine. CNC stood for computer numerical control.

The machine enabled a computer literate operator to design and produce benchtops from a variety of substances for the homewares market. Venkatesh Munireddy operated it.

Mr Newble was supposed to understudy Mr Munireddy and assist him in production. But the pair had communication difficulties.

Mr Newble said everyone in the factory had communication problems with Mr Munireddy.

In the final working week before the Christmas break in 2007 there was an altercation between the two workers that Mr Carroll witnessed.

The three men were discussing product off the machine and Mr Newble said that an item could not be sent to the customer in its present form.

"Mr Newble recalls Mr Munireddy mumbling something and, in frustration, Mr Newble made some reference to monkeys," Mr Crichton said.

"Mr Newble told me, and I accept, that his intention in referring to monkeys was not a racial slur on Mr Munireddy but was in the context of a comment about Mr Munireddy's competence, not his colour.

"Mr Newble told me that his observation was in the pay peanuts get monkeys context, not a racial slur on Mr Munireddy's colour."

There was no response from the company at the time, even though Mr Carroll was present, but on January 11, 2008, Mr Newble was called to a meeting with Mr Carroll.

He was told that he was not communicating well with Mr Munireddy, that the lack of communication was bad for business, and on that basis his employment would not be continued.

Mr Crichton said that he had no difficulty in concluding the company's procedure in addressing the issue was completely unsatisfactory.

Mr Newble had been summoned to a meeting without warning, had not been told his employment might be jeopardy, was not given a chance to get independent advice or a support person, and given no opportunity to explain himself.

Mr Crichton said the process adopted by the company was fatally flawed.

He ordered the company to pay Mr Newble $5000 in compensation, $1760 in lost wages, $750 legal costs and a $70 filing fee.