PurposePeople develop general stereotypes and beliefs about how people look and behave, and discrepancies in perceptions of warmth and competence can lead to incongruence in expected behaviors during service interactions. These perceptions can contribute to negative outcomes for employees; therefore, this study aims to examine how perceptions of warmth affect both customer reactions to employees who are Asian and the work stress, strain and attitudes of employees who are Asian toward their jobs.Design/methodology/approachTo investigate the phenomenon, the authors conducted three studies. The first study examined whether occupational-racial stereotypes influence customers’ evaluation of employees’ service recovery performance. The second study temporally examined whether employees who are Asian engage in more emotional labor strategies to counter these occupational-racial stereotypes and as a result experience more negative outcomes. And a third study investigated the cumulative effects of negative perceptions on employee outcomes.FindingsThe results suggest employees in the hospitality industry who are Asian are perceived as less warm during service failure interactions and, thus, must work harder to regulate their emotions. As a result, employees who are Asian reported experiencing more negative outcomes, supporting the notion that occupational-racial stereotypes contribute to racial disparity and act as challenges and barriers for employees in the service industry.Research limitations/implicationsThese findings emphasize the need to understand and address occupational-racial stereotypes for employees who are Asian to mitigate racial disparities in the service industry. Organizations can promote diverse work climates, provide emotional support and foster high-quality relationships to support employee well-being and satisfaction.Originality/valueThe results provide insight into how stereotypical warmth perceptions of employees who are Asian may affect the demands they face when engaging in service recovery, and how these increased demands may reduce the quality of their work experiences.