How an Agency Shop Works

The legal status of agency shops usually varies from one place to another. Overall, most developed countries highly regulate such agreements to ensure they benefit the worker.

Often, agency shops are known to operate in places like the school environment. In a situation where employees decline to enroll as union members but remain subject to collective bargaining agreements, a school board might enter into an agency shop agreement. In such cases, state regulations require these employees to pay service fees; sometimes, this causes significant litigation disputes touching on collective bargaining matters.

Under agency shop arrangements, the authorities often give employees the option to join a trade union and pay the fees in full or pay token service fees to cover collective bargaining costs. Many stakeholders consider the agency shop ideal since employers can engage both union and non-union employees without harming the trade unions. Hence, many trust the agency shop as a practical form of professional and union security.

Real-World Example of an Agency Shop

In 1977, the US Supreme Court made a significant determination in a case involving the agency shop arrangement; the case was Abood v. Detroit Board of Education. In its decision, the Supreme Court upheld the regulations governing non-union employees' requirement to pay the agency shop service fees; the decision conclusively defended its legal admissibility. The court maintained that the union and a government employer were free to strike a deal obligating employees to pay some agency service fees to cover the costs of grievance adjustment, contract administration, and collective bargaining.

In his submission, Abood cited the constitutional right of non-union employees who objected, saying they had a right to withhold their payment of any agency fees that would channel to support political and ideological causes. In this reasoning, the objecting employees could only be compelled to pay expenses directly related to the collective bargaining ideals. Further, the unions could not use the mandatory agency service fees to subsidize political or ideological perspectives or causes unrelated to their exclusive duties as bargaining representatives.

Later in 2018, while affirming its position, the Supreme Court held that the union's collective bargaining business was a matter of great public importance affecting public policies, government taxes, and budgets.

Significance of an Agency Shop

The National Labor Relations Act (NLRA), which works under the National Labor Relations Board (NLRB), generally governs all union matters, including agency shop operations. These institutions are responsible for setting laws and protecting union and non-union enterprises' rights in the private sector.

Many agency shops collect service fees from members and others whom they represent. The payments collected usually pay for benefits the unions provide; these include insurance and health. Sometimes such fees cover various expenses, including campaign contributions and political lobbying. However, the National Labor Relations Board (NLRB) imposes strict regulations on what agency shops and other unions can charge their employees.

Agency shops can foster a positive working relationship between the employer and the employees. They also protect workers since the employer cannot terminate their services without considering the agency shops' relevant contractual terms. In some cases, the agency shop arrangement has benefited employees by facilitating salary increments and promotions.

Agency Shop vs. Union Shop

Agency shops are essentially union-protected workplaces governed by right-to-work laws. Hence those who live in a right-to-work state (most US states) can't force employees to become union members or pay union fees. Regardless, the union is obligated to represent the employee.

In contrast, a union shop compels every eligible employee to join a union if they work in a unionized company. The union shop arrangement mainly works in states that have not passed specific right-to-work laws. However, most states don't allow union shops.