Leprechaun is a slur used to describe Irish in a derogatory way. From the well-known old Irish myth of the chubby green-clad gnome (what happens when you mix Catholicism with Paganism). Popularized in America by Lucky from the Lucky Charms cereal and St. Patrick's Day.
The word Leprechaun is a racial slur that has been used historically to degrade and dehumanize irish. The word is still used by some people for this purpose, and it is seen as offensive and hurtful to irish. If you are unsure about whether or not it is appropriate to use the word Leprechaun, it is best to err on the side of caution and avoid using it in any situation.