Breach not only affects you: the influence of coworker psychological contract breach by the supervisor on third-party perceptions of supervisor interactional justice

Understanding and effectively responding to employee psychological contract (PC) breach is a critical task for human resource (HR) managers. Drawing on social information processing theory and the deontic theory of justice and using two separate studies, Study 1 (an experiment) and Study 2 (a two-wave field study), the study proposes and tests a conceptualization that helps to explicate the implications of PC breach from the perspective of the third-party employee. Specifically, supporting our hypotheses, we found that when a third-party observer perceives a coworker's PC breach perpetrated by their common focal supervisor that this negatively influences the third-party's perceptions of the supervisor's interactional justice (i.e., both interpersonal and informational) and that such a relationship is moderated by the extent of the third-party's guanxi with the supervisor. Moreover, our findings further reveal that when a third-party observer with high guanxi with the supervisor also has a high power distance orientation (PDO), that the negative effects associated with the perceived coworker PC breach will be weakened. The study not only responds to scholars' calls but it improves understanding of how the relational context may distort third-party perceptions of social treatment and justice-related behavior. Implications to theory, practice, and future research are discussed.