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Shops and Establishment

What is Agency Shop in Labour Law?

Agency shop is simply a union security declaration that empowers an employer to recruit any professional disregard of the fact they are a union member or not. In this article, let us obtain in-depth knowledge about agency shop agreements.

The agency shop has been defined as a union security declaration where the hirer may recruit non-union or union employees and workers. The workers have to participate in the union affairs to maintain their employment. On the other hand, the non-union employee pays a fixed fee to compensate for collective bargaining costs. This amount furnished by a non-union member actively working in the company is called the agency fee.

An agency shop is common in public sector unions to ensure a fair deal between the union and all hired professionals. The policy demands non-union staff to make payments in the form of a reasonable share cost to manage the expenses of the employees’ union’s associated bargaining tasks. This fair share concept is like the agency shop; the only difference is that the policies regarding fixing chargeable amounts are decided internally and thus are generally more restrictive. However, the ILO does not recognise the legality of this provision. The judicial standpoint of agency shop bonds dramatically varies from one nation to another. In some countries, there is complete abolition of these agreements, while in some places, the concept is not mentioned or is prevalent.

Different Phrases That We Come Across in Labor Law

  • Attrition: Shrinkage in workforce or workforce of a firm due to natural consequences like voluntary resignation, death or volume retirement. The range of causes does not include laying off or firing the workers by the employer. Attrition margin usually plays a major part in employees’ union status along with pension withdrawal liability.
  • Automation: This term refers to the mechanisation of the organisational departments, i.e., replacing manual labour law with machines and other infrastructural benefits that are on par with current industry trends.
  • Back loaded: This phrase comes into play when the collective bargaining declaration generally delivers more wages at the term ending of an employment contract.
  • Base rate: This signifies the timely payment rates without considering different forms of compensation such as bonuses, merit pay, incentives, premiums, etc.
  • Blocking charge: If an individual or group files a ULP or unfair practice charge, elections usually get postponed as long as the ULP is not resolved. National Labor Board also participates in this initiative.
  • Broadbanding: When a pay grade or salary structure comprising a limited “band” takes over a system with multiple levels and grades, this term is utilised to describe the business phenomenon. The new bands portray broader pay range spreads compared to the old system.
  • Call-in pay: An exclusive compensation scheme designed to reward the employees who attend their workplace but are later asked to head home. For example, in collective bargaining documents, call-in pay instances are addressed via “show up pay”. This payment is due from an employer when a worker is called to report to work beyond his fixed duty hours and then returned. This happens when the management predicts that there will be work pressure in subsequent shifts, but it does not occur eventually.
  • Card check: This is a way of coordinating a union without implementing a closed ballot election. Attested authorisation cards are verified against an approved list of workers expected to join a future bargaining unit to evaluate whether the union has convinced most workers to sign on the authorisation card.
  • Common Situs Picketing: This term is encountered when workers of a stationed hirer who operates at a definite location with workers of a bare minimum of one neutral recruiter may picket at their entrance to the workplace. Therefore workers of neutral employers should access the workplace via other entry points. We also refer this to as a dual gate mechanism. In most cases, picketing is a common issue that gives rise to secondary boycotting.
  • COLA or Cost for Living Adjustment: It is an abbreviation used in the books of the collective bargaining agreement. It defines wages act and depreciation concerning the expenses involved in maintaining a lifestyle. COLAs are evaluated by finding the price of living index. This term is used synonymously with the escalator clause.
  • Fringe Benefits: These benefits are widespread welfare perks extended to the workers who live on extra pay. Some fringe benefits include paid vacation period, health insurance, travel allowances, recreational arrangements and bonuses.
  • Geographic Wage Differentials: This is nothing but a comparative disparity that you will notice in the wage rates fixed for workers from various geographic destinations to the employer’s offices. A difference in pay is noticed for two employees who share the same job profile.
  • Hot Cargo deals: This is an agreement that hinders an employer from continuing trade with any non-union organisation. Suppose the director passes an order to buy raw inputs or goods from a non-union agency or even delivers products to them. In that case, the union will have the full right to refuse to access those resources. Hot cargo agreements are now strictly discouraged all over India.

Landmark Judgment Involving Agency Shop

In a court case involving the American State Federation and Janus, the Supreme Court turned down Abood to nullify the agency shop that prevailed to date (2018) for every public sector worker. As the non-union members needed to bear the compulsory service charges, many issues cropped up that spoke against the taxes and government budgets. All this came to cease after the court passed this historical judgement.


The employer’s board and the union may create an agency shop when workers refuse to participate in union activities. At the same time, they continue to be a fragment of the collective bargaining bodies. These workers usually pay a certain amount, and here is the major catch many legal restrictions are linked with levying such fees. Under this situation, the employee can either participate in the union committee by paying the membership costs and settling the full amount or he can resort to furnishing only the service charges to make up for the direct expenses linked to collective bargaining processes.

To know more on legal matters related to labor laws, you can read our most recent and most celebrated blogs of Vakilsearch on this topic. We look forward to viewers’ feedback so that further refinements are possible.

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