White boss used racial slur, but Black employee was disciplined

The scenario: A Black woman was deeply offended during a conversation she had with her white male supervisor that started when her boss asked her what she thought of the N-word.

The woman said the word was ugly and that no one should be saying it. The boss asked her whether she knew that the N-word referred to Black people, then pulled out his phone, looked up the word and showed her that it meant Black folks.

However, the supervisor misspelled the word, so a nearby coworker told him that the word included two g’s, then slowly said, “It’s n-gg-r.” Both white workers burst out laughing.

When the Black woman complained about the use of the N-word, the employer launched an investigation. However, the investigator didn’t interview the coworker involved in the conversation, then concluded that the white supervisor hadn’t used the slur.

Amazingly, the white boss was told to counsel the Black woman on inappropriate work topics. The Black staffer quit, then sued. A jury found the employer liable for race bias and awarded the woman $20 million in punitive damages. An appeals court reduced the award to $1 million.

Legal challenge: The company and the woman appealed the award.

The ruling: The employer lost. The court increased the award to $4 million because the company’s conduct was “reprehensible.” The employer conducted a sham investigation and incomprehensibly disciplined the Black woman rather than the boss who used the N-word.

The skinny: Remember the importance of thorough investigations of discrimination allegations. As the organization in this case learned the hard way, slipshod investigations can end up costing big bucks.

Cite: Holmes v. American HomePatient Inc., U.S. Court of Appeals 3, No. 24-2888, 8/27/26.

(From the September 18, 2026, issue of HR Manager’s Legal Alert for Supervisors. To start your no-obligation trial subscription to the publication right now, please click here.)