Im shocked there is any other context.
Like... Im so aghast I do not believe you or anyone else who says that if they are familiar with the phrase.
Is this thread a social experiment?
I never heard of the term, but I am not American.
Reading the wikipedia entry on it, I am convinced it wasn't racist in origin. It seems to be a common thing in South American, West African and Native American fairytales/stories. However if you look at the word itself, it is easy to imagine it being taken and altered into a racial slur.
If the boss lady of the op had just talked about that fairytale, I would have given her the benefit of the doubt...however considering she was talking about 'Too PC' I am pretty sure she was indeed aware of the fact that Tar baby can be used as a racial slur.