The independent expert panel recommended the politician be suspended from the House for two days after the incident at a work social event in 2016.
The Independent Expert Panel (IEP) said his behaviour marked a “significant breach” of Parliament’s sexual misconduct policy in a ruling on Tuesday.
Mr Grady was said to be “under the influence of alcohol” before inappropriately touching the man in the Water Poet pub in London in 2016.
"Mr Grady, under the influence of alcohol, made a sexual advance to the complainant in the mistaken belief that this advance would be welcomed. The advance included the touching and stroking of the complainant's neck, hair and back. The respondent states that when it became apparent that his conduct was not welcome, he desisted.
"The second critical factor here is that in seeking to initiate a relationship, the respondent did so by direct physical contact, stroking the complainant’s hair, and his neck, and rubbing his back. We accept there was no intimate touching, but this was nevertheless clearly sexual in intent and manner, and clearly inappropriate."
The staffer made complaints through Westminster’s independent complaints and grievance scheme.
He also alleged another MP had pestered him in Westminster’s Strangers’ Bar in January 2020.
According to the report, the fact the breach was a “one off” and Mr Grady had undergone training were mitigating factors.
It said: "This factor was exacerbated by the fact that the context was public, and drink had been taken. The respondent accepts these points.
“An unwanted physical touching, with sexual intent, from a senior MP to a junior member of staff, even on a single occasion, is a significant breach of the policy. It must be marked by some period of suspension from the House.
“However, for all the reasons we have set out, in this case it should be short, and will be somewhat shorter than it might have been by reference to the breaches of confidentiality by the complainant.
"We also record our conclusion that the respondent was not merely disturbed and embarrassed by this whole turn of events, and regretful of the consequences for his political career, but genuinely remorseful."
Mr Grady apologised in a statement in the Commons, adding he accepted “in full and without reservation” the findings.
He said: “I was wrong to make assumptions about the social and personal relationship that existed or had potential to exist between myself and the complainant, and wrong to act on those assumptions.
“Blurring personal and professional boundaries in a work environment can be highly problematic, causing confusion, embarrassment, upset and distress and I should have been aware of that.
“I should have been far more cognisant of the significant age gap of 17 years between myself and the complainant and I should have been far more appreciative of the perceptions other people have of me as an elected representative and the real and perceived power that we hold.”