The payment is to 'compensate her for both emotional harm and lost earnings', according to the country's human rights commission.
The case serves as an important reminder that all workers, regardless of the type of work they do, have the right to freedom from sexual harassment in the workplace, said Michael Timmins, director for Human Rights Proceedings.
The identity of the s.e.x worker, who was represented by Timmins' office, and of those involved in the settlement, is confidential.
'We encourage all business owners and employers to ensure that they understand and respect those rights,' said Timmins in a statement.
The s.e.x worker filed the sexual harassment proceedings in the Human Rights Review Tribunal which had earlier ruled in 2014 that prostitutes are protected from sexual harassment under the country's Human Rights Act.
'Context is everything. Even in a brothel language with a sexual dimension can be used inappropriately in suggestive, oppressive, or abusive circumstances,' the tribunal said in its judgement.
'It follows that it is not possible to ask whether a “reasonable sex worker” would find the behaviour unwelcome or offensive.
'If in a brothel language or behaviour of a sexual nature could never be considered unwelcome or offensive sex workers would be denied the protection of the Human Rights Act.'
The settlement announced has been hailed as a milestone for sex workers.
'It's great to see a settlement of this type has been awarded in the context of sex work to a sex worker,' Dame Catherine Healy, national coordinator of the New Zealand Sex Workers, told the BBC.
'It takes courage to stand up in the work, any workplace,' she added, describing the case as a 'wake up call' for businesses.
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