In Industrial relations and unions, Closed Shop is referred to such an industrial establishment which holds a contract between the employer and the trade union permitting only the members of the trade union to be employed in the company. This implies that in order to maintain employment with the organisation, the employee has to remain a member of the trade union as well.
The concept of ‘Closed Shop’ gained popularity after the emergence of trade unions after the sudden spurt in industrial activity in the 19th century. The number of workers sharply increased to meet the rising consumer demands, but the employees were left at the mercy of the owners. To safeguard the interest of workers, trade unions evolved. The first signs of unionisation in India were seen when mill workers in Bombay formed an association called ‘Bombay Millhands Association’. In 1927, the Indian Trade Unions Act was enforced. Closed shop is considered illegal due to a number of reasons like Closed shop imposing restrictive conditions over employees.
Closed Shop was made illegal by the Taft-Hartley Act, also known as Labor Relations Management Act in the United States.
A Closed Shop can be considered as a shop being closed to non-union workers. To explain the term clearly, let us consider an example. Say, Mr. X has an appointment with a prospective employer. During his interview, the HR Head is very impressed by his résumé. However, he rejects the candidate because he notices that Mr. X is not a member of a Y union which has a closed shop clause with the company. In such a situation, Mr. X can file a complaint because such behaviour is legally punishable.
A similar term is ‘Union Shop’ wherein an employee need not necessarily be a member of the mentioned union at the time of joining the organisation, but he has to seek membership with the same within a defined period of time.