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Likud MK Haim Katz is expected to be reelected to his third straight term as head of the Israel Aircraft Industries' union in elections today.

Katz and the IAI have been accused by the MK's opponent, Haim Azulai, of illegally deducting 5 percent of employees' annual stipend for vacation (dmei havra'a), which also violates the workers' collective bargaining agreement.

Azulai said the deductions total NIS 150 million, and have been made without employee knowledge or approval since 1987. He said that at the time, the union agreed to the arrangement with management, with IAI contributing matching funds.

"The money was earmarked for the Mivtahim veteran pension fund to allow the fund to increase the employees' pension benefits," Azulai said. "But in reality, Mivtahim announced it was unable to carry out the agreement, since the pension benefits had to be purchased retroactively from the time the employees started work."

The idea of increasing the pension benefits was never implemented, and the money never reached Mivtahim. Instead, the funds remained in the IAI's coffers and appear on the company's balance sheet, Azulai said.

"The IAI's management and union led by Katz must return the money to the workers, but they haven't done it."

In response Katz said: "Azulai is throwing dirt at the factory that has employed him so well. He is a straw candidate put up for political reasons. We wanted to increase employee pensions by deducting 5 percent from the workers' annual vacation funds. We negotiated with Mivtahim for years over purchasing additional pension benefits for workers, but we never reached an agreement. Therefore, starting in 2000, the deductions are paid into a provident fund, while the deductions for 1987-2000 are available for every worker who can receive the money back with interest and linkage," Katz said.

The IAI's spokeswoman responded: "The deductions were made legally. We have no intention of interfering in the battle preceding the union elections."