This issue has been added to the bug tracker, but it's apparently down right now.
http://joomlacode.org/gf/project/joomla/tracker/?action=TrackerItemEdit&tracker_item_id=33691&start=0

Steps to reproduce the issue

$query1 = $db->getQuery(true);
$query2 = $db->getQuery(true);

$query1->select('block');
$query1->from('#__users AS u');
$query1->group('u.id');

$query2->select('user_id');
$query2->from('#__user_usergroup_map AS uum');
$query2->group('uum.user_id');

$query1->union($query2);
echo $query1->dump();
return $query1;

Expected result

SELECT block
FROM kscr_users AS u
GROUP BY u.id
UNION
( SELECT user_id
FROM kscr_user_usergroup_map AS uum
GROUP BY uum.user_id)

Actual result

Syntax error check manual for correct syntax near GROUP BY u.id

SELECT block
FROM kscr_users AS u
UNION
( SELECT user_id
FROM kscr_user_usergroup_map AS uum
GROUP BY uum.user_id)
GROUP BY u.id

System information (as much as possible)

PHP Built On Linux ds2.sbthosting.com 2.6.18-348.3.1.el5PAE #1 SMP Mon Mar 11 20:30:57 EDT 2013 i686
Database Version 5.1.73-cll
Database Collation utf8_general_ci
PHP Version 5.3.28
Web Server Apache/2.2.26 (Unix) mod_ssl/2.2.26 OpenSSL/0.9.8i mod_bwlimited/1.4
WebServer to PHP Interface cgi-fcgi
Joomla! Version Joomla! 3.3.0 Stable [ Ember ] 30-April-2014 14:00 GMT
Joomla! Platform Version Joomla Platform 13.1.0 Stable [ Curiosity ] 24-Apr-2013 00:00 GMT

Additional comments

union is so close, but so far away