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With Python 3.4.1:
$ mkdir foo; zip -r foo{,}; python -mzipfile -e foo.zip dest
 adding: foo/ (stored 0%)
Traceback (most recent call last):
 File "/usr/lib/python3.4/runpy.py", line 170, in _run_module_as_main
 "__main__", mod_spec)
 File "/usr/lib/python3.4/runpy.py", line 85, in _run_code
 exec(code, run_globals)
 File "/usr/lib/python3.4/zipfile.py", line 1799, in <module>
 main()
 File "/usr/lib/python3.4/zipfile.py", line 1777, in main
 with open(tgt, 'wb') as fp:
IsADirectoryError: [Errno 21] Is a directory: 'dest/foo/'
Note that zipfile is actually able to unzip the file:
$ python -c 'from zipfile import *; ZipFile("foo.zip").extractall("dest")'
works fine.
If the zip file is created by "python -mzipfile -c foo.zip foo" then there is no problem. Likewise, if there are no folders in the zip file (but just a collection of files) then there is no problem.

The reason behind this was that zipfile.py currently handles empty directories in zipfiles incorrectly.
On lines 1774 - 1778 in Lib/zipfile.py:
tgtdir = os.path.dirname(tgt)
if not os.path.exists(tgtdir):
 os.makedirs(tgtdir)
with open(tgt, 'wb') as fp:
 fp.write(zf.read(path))
In the case described above, tgt is 'dest/foo/' because the directory is empty. For non-empty directories, tgt would be a file in the directory i.e. 'dest/foo/a'. In the empty directory case, the directory will be created, but then opened as file (which will throw the error shown above).
When compressing the file with 'python -mzipfile -c', zipfile.py would not add empty directories to the zipfile. Hence, the zip file generated is empty.
This patch fixes both issues. In the decompression case, I utilize the Zipfile.extractall() function instead of extracting each file manually. The extractall() function handles empty directories correctly. For the compression case, I added a check to add an empty directory to the zip file.

New changeset ffa5bfe75c3a by Serhiy Storchaka in branch '2.7':
Issue #22201: Command-line interface of the zipfile module now correctly
http://hg.python.org/cpython/rev/ffa5bfe75c3a
New changeset 7b933005c492 by Serhiy Storchaka in branch '3.4':
Issue #22201: Command-line interface of the zipfile module now correctly
http://hg.python.org/cpython/rev/7b933005c492
New changeset dc77ad3a17aa by Serhiy Storchaka in branch 'default':
Issue #22201: Command-line interface of the zipfile module now correctly
http://hg.python.org/cpython/rev/dc77ad3a17aa 

Applied first part of the patch. Thank you Ryan. For the rest please open separate issue.