His racism is not the subject of dispute here. The racism that the story focuses on is the one that created a hostile workplace and is the subject of legal action.
Why isn't it? The use of racism regardless of any factor is wrong. You are still condoning one person's use of racism over another. Setting does not dictate when racism is okay.
Edit: Also legal action? Im sure his use of "dumbwhite motherfucker" in court will go over very well. Come on...