Although almost all employees have heard of or witnessed their colleagues being mistreated, we have an incomplete understanding of how employees perceive and respond to such events. Whereas past research has established that observer emotions can be congruent with victim emotions, we examine observer schadenfreude, an incongruent emotion that is also prevalent in organizations. Based on appraisal theories of emotion, we propose a process model of schadenfreude emergence and development: initial schadenfreude occurs when observers appraise mistreatment incidents as relevant and conducive to their goals; this initial feeling evolves into either righteous or ambivalent schadenfreude, depending on observers' secondary appraisals of victim deservingness. We also address the implications of schadenfreude for observer behavior and the moderating effects of observers' moral foundations and organizational civility climates. Our model extends current knowledge about observer reactions and helps us understand the persistence and pervasiveness of workplace mistreatment.