Canadian steelmaker Stelco is pushing back against the federal government’s threat of legal action over planned job cuts, insisting that the layoffs do not violate the employment commitments made when the company was acquired by its U.S. parent in 2024. In a letter to Industry Minister Mélanie Joly, Stelco denied allegations that it had breached its legally binding obligations under the Investment Canada Act. The company said it remains compliant with the terms of the takeover agreement and intends to proceed with layoffs affecting up to 500 workers at its Hamilton and Lake Erie facilities in Ontario.
The dispute follows Ottawa’s demand that Cleveland-Cliffs, the U.S.-based steelmaker that acquired Stelco in a $3.4-billion deal, provide a plan explaining how it would honour its employment commitments. Joly warned that the federal government could pursue legal action if the company failed to meet its obligations.
Canada approved the acquisition in 2024 subject to conditions intended to protect Canadian employment. According to the federal government, Cleveland-Cliffs committed to maintaining at least the same number of unionized employees and the vast majority of non-unionized positions for five years. Stelco argues that the agreement does not prohibit layoffs in all circumstances. In its response, company president and general counsel Paul Simon said the employment undertakings do not establish a requirement to avoid layoffs or guarantee that employment levels must remain above a specified threshold on every day of the five-year period. The company also said the federal government had been informed about the difficulties facing its operations well before the current dispute. Stelco pointed to discussions with senior government officials in September and communications dating back to July, arguing that Ottawa was aware of the market pressures affecting its business. The planned job cuts are linked to the impact of U.S. President Donald Trump’s 50 per cent tariffs on Canadian steel imports, as well as weaker demand and competition from imported products. Stelco says the tariffs have sharply reduced sales to U.S. customers, making it increasingly difficult to operate some of its Hamilton finishing lines profitably. The company has said it plans to concentrate more of its operations at Lake Erie Works in Nanticoke, Ontario. It argues that the changes reflect difficult market conditions rather than a decision to abandon Canadian steel production. Some affected workers could have opportunities to fill available positions at the Nanticoke facility, although the extent of those opportunities remains unclear. Stelco has also called on Ottawa to take stronger measures to protect Canadian steelmakers. In its letter, the company urged the government to impose further restrictions on imports of cold-rolled and coated steel products, limit import substitution and end tariff remissions for products that Canadian manufacturers can supply. Joly has rejected the argument that changing market conditions automatically release the company from its obligations. She has emphasized that the employment commitments formed part of the conditions under which the federal government approved the acquisition and remain legally binding. Prime Minister Mark Carney has also criticised the planned layoffs, accusing Cleveland-Cliffs of betraying Canadian workers. The government says it has offered financial assistance intended to help preserve jobs, while the company maintains that the measures offered did not address the underlying problems affecting demand and production. The United Steelworkers union, which represents workers at Stelco’s Hamilton facility, has expressed concern over the layoffs. Union representatives say workers had been assured that employment levels would be maintained for five years following the takeover. The union has also questioned whether the employment commitments were adequately communicated to workers during the acquisition process. The dispute could lead to a legal battle over the interpretation and enforcement of the Investment Canada Act undertakings. The precise terms of the agreement have not been made public, and whether the planned layoffs constitute a breach will depend on the wording of the commitments and the circumstances surrounding the job reductions. The outcome could have implications beyond Stelco, particularly for future foreign takeovers of Canadian companies. Ottawa’s response will be closely watched by businesses and unions seeking clarity on how employment guarantees attached to major acquisitions are enforced.
For now, Stelco says it intends to defend its position and proceed with the planned changes, while the federal government maintains that the company must honour its commitments. With hundreds of jobs potentially affected, the dispute has become a major test of Ottawa’s ability to enforce employment protections amid escalating Canada-U.S. trade tensions.