This is a difficult situation and creates a disparate impact where you could be perceived as being complicit with harassment or racial epithets because they originate with a minority.

We recommend ammending both your progressive discipline and harassment policies to contain some zero-tolerance language.

As well, you need to understand that the burden of proof is to prove the harassment took place and not accept heresay or one side as binding testimony.

Is this something that can be resolved through a mediated discussion with both parties in the room where you guide the discussion about how the comments are being perceived although they may not be intended as such. Remember to avoid words like race and harassment, if the participants bring it up, allow the conversation to progress, but mediate the emotion.

You will more likely get a better resolution from that than from trying to pursue progressive discipline when you do not feel you haave met the burden of proof.