The ERA found Mrs Hill was unjustifiably dismissed, but Workforce Development lodged a challenge at the Employment Court.
The court heard how Workforce Development looked for a new position for Mrs Hill elsewhere after she had been barred from the prison but could not find anything elsewhere.
Judge Christina Inglis found the employment agreement Mrs Hill had agreed to stated her employment could be terminated fairly in this situation.
Mrs Hill gave evidence that it did not occur to her to seek legal representation for the meeting with Corrections, although she accepted in cross-examination that she understood her job was in jeopardy.
The court heard that during an investigation meeting with Corrections, Mrs Hill said her relationship with the prisoner was professional and she had sent the postcard to encourage and motivate the prisoner's learning.
Judge Inglis did not accept Mrs Hill had felt she could not have comfortably raised any concerns in the meeting. She had been supported in the meeting by her husband.
Judge Inglis overturned the ERA's decision, which had awarded Mrs Hill $11,128 in lost wages and $8000 in compensation.
"While WDL could have done more at various points of the process it did not breach any of its obligations as an employer in the way in which it dealt with Corrections' investigation and subsequent events," Judge Inglis said.
A decision on costs would be ordered by the court if it could not be reached between the parties.
