Ottawa Warns Stelco Owner Over Layoffs Tied to Takeover Deal
Industry Minister Mélanie Joly has warned Cleveland-Cliffs it could face fines or be forced to sell its Canadian assets if it goes ahead with layoffs at Stelco. The Globe and Mail
Stelco announced on Sept. 28 that it would lay off up to 500 workers in Hamilton and Nanticoke, Ontario, and idle some production at its Hamilton plant. Reuters
The company blames the trade war with the United States. It says it cannot compete in galvanized steel, which is steel coated to resist rust, and calls the layoffs temporary until Canada and the United States reach a trade deal. The Globe and Mail
The fight is about conditions Ottawa set when it approved Cleveland-Cliffs' $3.4-billion purchase of Stelco in 2024. Under the Investment Canada Act, the federal law that reviews foreign takeovers of Canadian firms, the company agreed to keep at least the same number of unionized workers in Canada for five years. They work like conditions attached to a permit. It also agreed to keep the vast majority of non-union workers.
Joly says the planned layoffs break those commitments. On Oct. 5, she gave Cleveland-Cliffs five business days to present a plan to meet its employment guarantees under the Act or face possible legal action.
That deadline has now passed. Stelco told Ottawa in a letter sent Friday that it does not consider itself in violation and will proceed with the layoffs.
Ottawa rejects that position. Joly says the government is prepared to test the guarantees through the enforcement process in the Act.
Under Section 40, the enforcement part of the Act, Joly said a court could impose financial penalties, order the company to honour its commitments, or order it to sell its Canadian assets. The remedies are not mutually exclusive. A court could order compliance and a penalty, or order a sale where compliance is no longer practical.
Cleveland-Cliffs' chief executive says he is prepared to fight Canada over the dispute. CBC
The company's 2024 Annual Report disclosed that the Stelco deal included funding commitments to employee life and health trusts. That filing does not alter the job undertakings, but it forms part of the post-purchase obligations Cleveland-Cliffs assumed in Canada.
The broader context here is enforcement credibility. Job undertakings are negotiated as conditions for approving a foreign takeover as a net benefit to Canada. For lawyers and investors, the question is whether those promises hold when a company points to cross-border tariffs and poor market conditions.
Looking at what this means for Ottawa, a Section 40 application would move the file from ministerial talks to court-supervised compliance. That path offers binding orders and the power to force a sale. It also brings litigation risk and delay, while the planned layoffs remain the central labour issue in two Ontario steel communities.
