Mrs Gazely was suspended without notice, then dismissed on September 30, 2011.
A review of all residents at Woodlands found no evidence of abuse, however an incident some months earlier, for which Mrs Gazeley had received a written warning, was reported to police.
In that incident, Mrs Gazeley and another staff member were alleged to have used moderate physical force to administer medication. Police took no further action.
The Employment Court found there was no evidence this occurred, rather that she had saved a resident from falling and helped her into a chair.
Oceania also alleged residents and staff had complained of physical and verbal abuse from Mrs Gazeley, and that she called residents for dinner by saying: "Teatime, teatime, jellimeat for dinner".
The decision by Employment Court Judge Mark Perkins said that had been "turned into something sinister", when those who heard it thought it was banter.
"Things she said in jest to lighten the atmosphere at the facility have been deliberately misinterpreted and used against her."
Judge Perkins found Oceania did not properly investigate the allegations or give Mrs Gazeley a proper opportunity to respond.
Her managers failed to have regard to the evidence, and reached a decision "which a fair and reasonable employer could not take".
The court ordered she be reinstated to her former position, that Oceania manage her reinstatement within 28 days, and resume her salary and benefits immediately.
She was also awarded lost pay and benefits, plus interest, and compensation of $20,000.
