The Industrial Relations Commission heard evidence that Steven Fraser, who has been a prison officer for 26 years, became suggestive towards the inmate while she was in the cells at Taree court, in northern NSW, on May 11, 2012.

The inmate recalled Fraser said "Show me your boobs", and words to the effect of "You have a nice butt".

When Fraser was handcuffing the woman, he reached through the cell door and touched her on her left breast, saying "I would like to do more with you and with these cuffs", the commission heard.

The commission was told Fraser later touched the inmate's buttock when she climbed into a prison van, leaving the woman feeling "helpless and shameful".

A female officer gave evidence that she heard Fraser say "see what you do to me" and saw him on his knees, with both arms in the door slot.

The officer said she suspected immediately Fraser was acting inappropriately, and monitored him from then on, and made notes about the incident when she got home from work that day.

Another officer said he did not see any inappropriate behaviour.

Fraser was dismissed in September 2013, after an investigation into the incident, but the commission found Mr Fraser not guilty of the allegations, and ruled his dismissal was "harsh, unreasonable and unjust".

Corrective Services appealed that decision and on Friday the full bench of the commission found the allegations against Mr Fraser were proven, partly because the inmate was "clear and unshaken" while giving evidence.

The appeal was in part based on Corrective Services' assertion that the original judgment ignored evidence that Fraser had a "tendency" to harass women.

The commission heard that Fraser was accused previously of rubbing an officer's leg, sexually harassing an inmate while she showered, and greeting colleagues by saying "Hey lesbians".

He was placed on a performance management plan, which said he must "refrain from any sexualised comments, sexual innuendo and banter; and not  to touch female staff members (or female offenders) or accidentally brush against them".

However, because Corrective Services did not call eyewitnesses about those previous incidents, the full bench said there was insufficient evidence to prove they amounted to sexual harassment.

The full bench said the original judge erred in how he considered several aspects of the evidence, and found Fraser guilty of misconduct that amounted to sexual harassment.

The commission asked for more submissions from the parties about whether Fraser's dismissal was unjust, and what further action should be taken.