Can a co-worker's single racial slur result in employer liability?

"Yes," according to yesterday's California Supreme Court decision in Bailey v. San Francisco District Attorney's Office (California 07/29/2024) [PDF].

I am unaware of any other court decision, and the California court did not cite one, that holds that a single use of the N-word by a co-worker can be severe enough to create a hostile environment for which the employer can be responsible.

An African-American employee claimed that a co-worker – on a single occasion – called her the N-word.

The court rejected a lower court's conclusion that a one-time slur from a co-worker – rather than a supervisor – cannot be actionable under California law.

To determine whether this incident was severe enough as to alter the conditions of employment and create a hostile work environment, a court must take into account the totality of the circumstance. Only one circumstance – a “significant factor” in assessing the severity of harassing conduct – is the status of the speaker.

This employee alleged that she and the co-worker shared an office and job duties. She also said that the co-worker was friends with an HR person and that the co-worker's actions against two other African-American women caused them to be reassigned or to separate from the employer.

Your results may vary. If you have this issue, consult a good employment lawyer.
(Not me, I'm an arbitrator.)