Mr Fredericks voiced concern to his supervisor Gregory Harmon, who told him to carry on working, the authority said.
Later that day, Mr Fredericks said he felt something hit him.
"I looked down and realised there was a 90mm nail in my chest."
Mr Fredericks was rushed to hospital by Mr Harmon and had surgery before being discharged the following day.
He told the authority doctors had said the nail had pierced a fluid sac around the heart and punctured a lung.
An independent investigation into the incident concluded the extent of Mr Fredericks' injuries were an "aberration caused by unusual circumstances that nullified the gun's safety functions". The investigator also concluded the incident did not need to be reported to Worksafe NZ.
Mr Fredericks' partner Sioux Ashley, who also worked for the company, had some heated meetings with the company about the incident, and reported it herself to Worksafe, the authority said.
She also told the company there was a psychological side to Mr Fredericks' injury that had an impact on his abilities, which resulted in VIP locking him out of the workplace on health and safety grounds.
A psychological assessment on February 26 last year cleared Mr Fredericks to return to work, but he did not show the assessment to employer for two weeks.
However, through a lawyer, Mr Fredericks said he had lost trust and confidence in his employer and resigned.
Authority member Michael Loftus said the instruction for Mr Fredericks to "keep an eye on" Mr Sim was inadequate and as a result VIP unreasonably failed to provide a safe workplace.
He dismissed the claim that Mr Fredericks was constructively dismissed.
He ordered VIP to pay Mr Fredericks wages for the time he was away from work, until February 26, when he had been cleared to return.
He also awarded $6000 compensation for humiliation, loss of dignity and injury to feelings.
Mr Fredericks' lawyer David Beck said his client was not happy with the decision and was considering taking the case to the Employment Court.
"We are convinced that our client was unjustifiably dismissed in a constructive fashion because of an unsafe workplace."
Mr Loftus found there was an unsafe workplace, but did not find that was enough for Mr Fredericks to resign, Mr Beck said.
He was also disappointed with the amount of compensation, which was "on the low side", he said.
Nobody from VIP was immediately available for comment.