Closed-Shop Contract Law and Legal Definition

Closed-shop contract is a labor agreement requiring an employer to hire and retain only union members and to discharge nonunion members. The term "closed shop" is used to signify an establishment employing only members of a labor union. The union shop indicates a company where employees do not have to belong to a labor union when hired. However, it is necessary for them to join a labor union within a specified period of time in order to keep their jobs.