You nailed it! What this means is that the other 500 non-muslem employees, out of 1200 union employees in this plant, are forced to observe a muslem holiday. If the muslems are so keen on observing this day, let them take a vacation day, and keep the good old American holiday, Labor Day, instead.
I don’t know about forced to “observe” a muslim holiday, they get the day off work, what they do with that time off is up to them. Really most people don’t do much “observing” of these Monday holidays, you stay up late the night before because there’s no work tomorrow, sleep in, maybe if the weather is nice go do something fun. And if they really don’t like it they should quit the union, nothing bad about that.