Functions and Purposes of Closed shop and Agency Shop Agreements

Functions and Purposes of Closed shop and Agency Shop Agreements

The Labour Relations Act 66 of 1995 defines and explains the difference between Agency and Closed Shop Agreements.

Section 25 (1)-(10) sets everything out with regards to Agency Shop Agreements. An Agency Shop Agreement is when a representative trade union and an employer or employers’ organisation concludes a collective agreement. This requires the employer to deduct an agreed agency fee from the wages of employees identified in the agreement who are not members of the trade union but are eligible for membership thereof.

A representative trade union is one or more registered trade union acting jointly, whose members are a majority of the employees under the employment of an employer in a workplace or by the members of an employers’ organisation (a collective organisation of employers of wage labour) in a sector and area in respect of which the agency shop agreement applies.


Agency Shop Agreement

The requirements for an agency shop agreement to be binding include the following:

  • Employees who are not a part of the representative trade union are not to be forced to become members of that trade union

The agreed agency fee must be equivalent to or less than;

  • The membership subscription fee payable to the representative trade union 
  • If the membership subscription is calculated as a percentage of an employee’s salary, then that percentage, or
  • If there are 2 or more representative trade unions party to the agreement, the highest amount of the subscription that would apply to an employee.
  • The amount deducted must be deposited into a separate account administered by the representative trade union, and
  • No agency fee deducted may be;
  • Paid to a political party as an affiliation fee


Contributed in cash or kind to a political party or person standing for election

Used for any expenditure that would not advance or protect the socio-economic interests of the employees.

This Section states that despite any other law; this deduction may be taken from an employee’s wages without the authorisation of said employee’s. However, a conscientious objector (someone who objects to something for reasons of conscience) may request that this deducted amount be paid into a fund administered by the Department of Labour. As mentioned above, the amount deducted from the employee’s salary must be paid into a separate account; this account is subject to the inspection of the auditor’s report from any person.

Finally, if an employer or employers’ organisation alleges that the trade union is no longer representative of the employees in the company, they must give the trade union written notice of such allegation, from which the trade union has 90 days to respond in order to establish itself as representative. Should the trade union fail to establish this, the employer must give the trade union, and the employee’s covered by the agency shop agreement 30 days’ notice of termination, after which the agreement will terminate.

Closed Shop Agreements

Now that agency shop agreements have been dealt with, we can move on to closed shop agreements. Closed shop agreements are dealt with in Section 26(1) - (17) as follows:

A closed shop agreement is a collective agreement between a representative trade union and an employer or employers’ organisation in which all employees covered by the agreement are required to be a member of the representative trade union.

Section 26(3) of the Act sets out the requirements for a closed shop agreement to be binding as follows;

  • A ballot has been held of the employees to be covered by the agreement, of which two thirds of the employees have voted in favour of the agreement
  • There is no provision in the agreement requiring a person to become a member of the trade union prior to the date of which his/her employment commences
  • Further, the amount deducted may not be paid or spent on the same bodies as mentioned above for agency shop agreements.

No trade union who is party to a closed party agreement may refuse an employee membership or expel an employee from the trade union unless it is done in accordance with the trade union’s constitution, or that the refusal or expulsion was fair in the sense that the employee acted in a way which would undermine the trade union’s collective exercise of its rights. On this note however, it is to be noted that an existing employee at the time that the agreement has been entered into may not be dismissed for the reasons of refusing to join the trade union, nor may an employee be dismissed if refusal to join the trade union is on the grounds of a conscientious objection, however, they may still be liable to pay an agreed agency fee.

If a trade union represents a substantial number of persons covered by the closed shop agreement, it may apply to become a party to the closed shop agreement. If it is denied being a party to the agreement and wishes to dispute the matter, it may be referred in writing to the Commission. The Commission must attempt to resolve the dispute through conciliation; however should this not be possible it may be referred to the Labour Court for adjudication.

The process of terminating this agreement is the same as mentioned above for an agency shop agreement.


Duncan O’connor

Candidate Attorney