Employment law expert Max Whitehead said if neither Smith nor the staffer knew they were being recorded it would be a breach of the Privacy Act and could not be used as evidence in an employment investigation without their consent, unless a privacy policy existed stating otherwise.
"I would have thought in this case Parliamentary Service would be well aware of that legislation, would not use the recording and would also caution the individual who made the complaint," employment lawyer Max Whitehead said.
"I don't think the recording could or should be used. They should be relying on evidence from individuals involved.
"Readers will be interested to compare it to John Key and John Banks and their discussion recorded after a reporter left a recorder on the table, which they tried to later use. The Privacy Commissioner frowned upon that immensely."
However, an employer has an obligation to investigate any allegations of bullying that are raised in the workplace, regardless of who raised them, he said.
If the complaint turned out to be "frivolous" though, the complainant themselves could face discipline.
"It could be frivolous if talking in raised voices is deemed part and parcel of a culture that has developed between individuals, provided no one is offended.
"The courts have looked at cases like this before. There is robust language used in some workplaces and it can be acceptable provided no parties were offended.
"It would be interesting to see how the individual responded, whether they have just moved on and this is another disgruntled individual who has gone out of line.
"That staff member themselves could be disciplined for legal mischief, given a warning to send a message to staff not to raise frivolous complaints."
Smith, who will retire next week, has gone on leave and continues to decline interviews or say whether he will return to Parliament before he retires.
"I have no comment to make. I have nothing further to add to the press release I put out on Monday," Smith told the Herald.
National Party leader Judith Collins also went to ground on Wednesday following morning media interviews.
In her interview, she wouldn't confirm or deny whether she had told Smith on Friday of an imminent media story into his alleged bullying in the workplace, which he has cited as a reason for resigning.
"Any discussions that I had with Nick Smith, other than what I've already said, are entirely between Nick and me and I will not go down that track," she told RNZ.
Smith had said he was advised on Friday that the inquiry and its details were leaked to media and were due to be released on Tuesday.
A Politik article also claimed that Collins had warned her caucus early last month that media were "about to break a scandal" involving one of the party's MPs, though she didn't name Smith.
The Herald has been told by other National MPs that Collins' warning did take place.
Collins told RNZ this morning that she did not disclose what happened in caucus.
The verbal altercation between Smith and one of his staffers is understood to have happened in July last year, right before Collins took over the party leadership and around the same time the scandals involving Hamish Walker and Andrew Falloon were hitting the headlines.
At the governance and administration committee today, Gonzalez-Montero was asked by National MP Ian McKelvie about the leaking of details of employment investigations.
Gonzalez-Montero said when these investigations occurred every single party involved was asked to maintain confidentiality over all matters.
"I am not at all concerned and have not found any evidence of leaks coming from staff around here or employed by Parliamentary Service," he said.
Speaker Trevor Mallard told the committee he only found out about the investigation into Smith through his press statement on Monday.
"What I have been briefed, is that no parliamentary staff member other than the complainant had a copy of it.
"This thing allegedly leaked was done by someone independent and I understand the report was in draft form but had not come back to anyone in Parliamentary Service."
