What Is an Agency Shop vs. a Union Shop?

HR Has Special Challenges When Working With a Union

Workers voting to form a labor union.
The National Labor Relations Board strengthened labor unions. Here, workers vote to unionize in Tennessee. Department of Energy/Ed Westcott

Working in a union environment is different than having a job in a typical at-will business that most HR people are accustomed to. Just understanding some of the terminologies can help you become a better HR person—especially if you are ever faced with a union drive or want to work in an agency shop in a union environment.

Unions are governed under the National Labor Relations Act (NLRA), which is headed by the National Labor Relations Board (NLRB) and sets laws for and protects the rights of both union and non-union businesses in the private sector. 

There are different types of union "shops" that have different rules and responsibilities. Here's what you need to know to add this terminology to your HR and management acronyms.

Union Fees Basics

Unions collect fees from members and others whom they support. These fees pay for benefits that unions provide such as health insurance, and cover various expenses including political lobbying and campaign contributions. However, unions have strict regulations imposed by the NLRB on what they can and cannot charge, which some within say can hamper their ability to truly represent the people.

Closed Shop

In a closed shop, you must join the union before joining a company. If you are not a union member, you will not receive a job offer. The United States outlawed the closed shop in the 1947 Taft-Hartley Act, which prohibits unions from exercising such control over a business. This law allows you to require people to join the union within 30 days of starting a job—known as a union shop (see below).

The Taft-Hartley Act also prohibited unions from charging excessive dues or initiation fees, making it cost-prohibitive for new members to join. 

Even though this law is decades-old, its restrictions still stand, and if unions violate them, you can file a complaint with the NLRB.

Union Shop

A union shop requires that every eligible employee join the union. This is technically allowed under Taft-Hartley, but only in states that have not passed certain “right-to-work” laws. 

Most states do not allow union shops—where everyone must join the union if they work at a unionized company. But, if you do, union membership is not optional if you take a union job. This means you must pay dues, and the union represents you.

Agency Shop

Agency shops are the result of right-to-work laws and are union-protected workplaces. If you live in a right-to-work state, which now comprises the majority of the U.S., you cannot force an employee to join a union. The employee does not have to pay union dues, but the union still represents them. The employee, though, may have to pay the union if he or she uses any of its services. 

In non-right-to-work states, employees still have to pay union dues, even if they disagree with or do not want to join the union. These are called "agency fees." However, the Supreme Court ruled in Janus v. American Federation of State, County, and Municipal Employees, Council 31, that unions could not collect "Agency Fees" from public sector employees who were represented by a union, but who had not joined the union. 

This decision substantially changed all states to right-to-work states as far as public sector employment is concerned.

Interacting With a Union

If you are a Human Resources manager for a unionized company, make sure you build a good and positive relationship with the union itself. Union employees have different rights than at-will employees. For instance,you can only terminate union employees for reasons set out by their contract. Layoffs must proceed according to the formula that was negotiated in the union contract, which can also dictate who gets raises and promotions.

Each contract is different, so do not assume that you can jump into a new job without reviewing the contract for the specific union. Some companies even have multiple unions, so be careful. 

A university, for example, because of the far-flung duties of its employees, may have to negotiate with six or more unions.

Regardless of the union contract, you need to know whether you are dealing with a union shop or an agency shop. Your payroll system should deduct union dues automatically, but be prepared to answer questions from your employees regarding these deductions. In the process, you may even have to deal with a union representative who could have the right to accompany an employee to a disciplinary hearing

The Bottom Line

Knowing the different types of union shops and the differences between them can ultimately prove beneficial to those looking to develop and strengthen employee-employer relations and gain a deeper understanding of Human Resources management.