A Bay of Plenty trust for people with mental illness must pay $13,000 plus a year's earnings to a woman unfairly sacked while on stress leave, the Employment Relations Authority (ERA) has ruled.

Whakatane's Serious Fun 'n Mind Trust must also reinstate Sherrie Dunnings as administration manager, the ERA said in a decision.

"The trust was aware of Ms Dunnings state of health, in particular that (she) was suffering from stress; however the trust, an organisation with a strong awareness of mental health issues, had nonetheless proceeded to... terminate (her) employment summarily," ERA member Eleanor Robinson wrote.

The fines include $10,000 for compounding the humiliation with "unfounded accusations" that Ms Dunnings may have been intending to take trust money, "unjustifiably besmirching" her reputation for honesty.

Another $3000 was for hurt and humiliation, along with lost earnings dating back to October last year.

The fallout began last July, when the trust - which promotes equity, respect and inclusion for those with mental illness - hired a new acting manager, Veronique Stewart-Ward.

Mrs Stewart-Ward made a number of changes without consulting Ms Dunnings, who was told to stop attending meetings. There were also problems over fees charged by the trust's accountants, which Ms Dunnings had been handling.

That matter was taken over by Mrs Stewart-Ward, with no consultation.

After returning from a holiday during which several more changes were made, about which she was not notified, Ms Dunnings was, without warning, given a verbal warning for failing to follow instructions.

Distressed, she said she was encouraged to take sick leave but upon her return given a written warning for "serious repeated failure to follow a reasonable instruction" with no opportunity to discuss it.

Shortly after, Ms Dunnings took stress leave, providing medical certificates. The trust then tried to terminate her employment claiming lack of notification, but then offered mediation.

As no date had been set by the time she was cleared to return to work two months later, Ms Dunnings sought advice from the trust's auditor, who suggested she check with the bank to see if she was still a co-signatory. The bank contacted the trust, which decided to dismiss her that day after the chairwoman Gwenda Paul feared she may have intended to steal money.

The ERA found the trust "departed so far" from basic procedural fairness - failing to investigate its fears or ask Ms Dunnings to explain why she was at the bank - that the dismissal was "unjustifiable".

Nor was there discussion about her alleged failure to follow instructions or keep accurate financial records. As she had been away on sick leave, there was no chance for her to fail to follow instructions and no justification for the written warning.

The trust was ordered to reinstate and reimburse her immediately.

- NZPA