Abstract
Supervisor ostracism is a subtle yet damaging form of workplace injustice with consequences that extend beyond its immediate targets. This study examines the hospitality sector in Pakistan (N = 330), a setting characterized by strong hierarchical authority, close interpersonal contact, and a constant demand for proactivity. Drawing on deontic justice theory, we adopt an observer-centric perspective to understand how third parties react when they witness unethical supervisory behavior. Observing supervisor ostracism creates an uncertain and morally unsettling environment, disturbing employees’ sense of fairness and triggering moral distress that extends beyond self-interest. We propose that such moral distress motivates observers to voice concerns about violations of moral norms, thereby shaping their perceptions of deontic justice restoration. In addition, we highlight the role of psychological standing, arguing that employees who perceive themselves as legitimate moral actors experience stronger moral concern, which intensifies both their distress and their willingness to speak up. Using a time-lagged research design, our findings show that observers perceive deontic justice to be restored when psychological standing is high, as they act as moral agents in response to witnessing exclusion. These results underscore that even covert mistreatment produces spillover effects in service contexts, where relational dynamics and ethical climate are critical for sustained productivity.