The man touted as a future coalition partner for National was once accused by an employee of preaching that being short is a sin.
Colin Craig denied preaching the message at a weekly prayer meeting for staff in 2007.
An Employment Relations Tribunal found he didn't make the reference - but still awarded trust account manager Jacky Stiekema $3000.
Millionaire property manager Craig said she made ''various claims'' but it was the only employment dispute he had in 21 years.
''The employee made various claims, including saying she was forced to attend prayer meetings, and that being short was a result of sin,'' he said.
''We have weekly team meetings, which are usually closed with a short prayer, shorter than the prayer they say to open Parliament. As for being short that's obviously a result of genetics. If I had anything against short people I'd be in trouble with my wife who isn't especially tall.''
He says he is a Christian - but doesn't attend church.
''I realise some people see a prayer as controversial, but I'm really relaxed about it...We were happy with the ERA decision, which found these and other allegations were unfounded.''
Stiekema was awarded compensation by the Employment Relations Authority after they found Craig's Centurion Management Services company didn't follow process. They disciplined her after finding she spread rumours about fraud.
ERA documents note Stiekema became upset when Craig preached ''that physical shortness was a consequence of the sin of forebears.''
According to the judgement a close family member ''is not tall'' and she took the reference as a personal attack. It is understood the relative is her son.
But she didn't raise the attendance at weekly meetings until the day she resigned, the ERA found.
Craig denied the reference and the tribunal concluded the bible passage doesn't refer to shortness.
Key today confirmed the Conservative Party is a potential support partner for a centre-right government after ACT's John Banks was engulfed by a donations scandal.
Fairfax Media revealed over the weekend that National Party president Peter Goodfellow was seeking out Craig.
* An earlier version of this story put the amount awarded to Jacky Stiekema at $6000, however that was incorrect.