The Employment Relations Authority found that while the Gateway Trust acted fairly on one level, it failed on others during a restructuring after new managers took over in 2016.
Carolyn McFadden was found to have been unjustifiably dismissed from her role coordinating a service for young people, which she had set up in 2010 under the Gateway umbrella.
Gateway maintained she was justifiably dismissed by reason of redundancy following a restructure.
It is currently the largest NGO provider of mental health services in the top of the South Island, and employs around 60 staff with services in Nelson, Blenheim and Motueka.
It also provided a service called Snapshot which offered support for young people in the community who did not fall within the mental health criteria. Referrals were accepted from Oranga Tamariki - Ministry for Children, school councillors, police, GPs, and other community agencies.
The Snapshot service was set up by Ms McFadden in early 2010 under a contract with the Ministry of Social Development, and she was appointed its coordinator in December 2010.
In July 2016 a new senior management team was appointed at Gateway, and soon after embarked on a business analysis of the organisation and its service delivery.
A decision was made to restructure, to cope with an expected doubling of demand for mental health services over the next decade, while available resources to fund the services was expected to increase by only 30 to 40 percent.
The ERA found gaps in the process, including around the offer of alternative roles, and a lack of understanding of the pressure placed on Ms McFadden, who had to take leave during the process because of the stress.
ERA member David Appleton found that no fair and reasonable employer could have decided to have dismissed Ms McFadden in the circumstances that prevailed at the
time without having first met with her face to face after she had recovered from her illness, and ascertained her intentions after she had the chance to reflect on her position in a calm and collected manner.
On that basis, the dismissal was unjustified procedurally, he said.
It was also unjustified substantively, as it could not be safely concluded that Ms McFadden would not have decided to have taken a role offered, if she had thought things over more calmly, after her initial shock had subsided.
"The fact that she was seeking reinstatement until the very end of the investigation meeting suggests that this may well have been the case," Mr Appleton said.
He believed that, if the entire and overall effects suffered by Ms McFadden were to be compensated for, he would be looking to award around $25,000 but that sum was excessive when considering the effects that were able to be compensated for, from the dismissal alone.
Ms McFadden was awarded $15,000 in compensation plus $6,106 in lost wages and $488 in holiday pay.