U.S.-based steel producer Cleveland-Cliffs Inc. may face legal consequences from the Canadian government following its announcement of significant layoffs at its Stelco operations in Ontario. The company’s decision to reduce its workforce by up to 500 employees at the Hamilton steel plant and the Lake Erie Works facility in Nanticoke has raised concerns about potential breaches of job commitments linked to the 2024 acquisition of Stelco Holdings Inc.
In 2024, Cleveland-Cliffs completed a $3.4-billion purchase of Stelco, a deal approved by the Canadian federal government under specific conditions. Among these were legally binding promises from Cleveland-Cliffs to preserve employment levels for at least five years, maintaining a minimum number of unionized and most non-unionized workers at Stelco’s Canadian sites.
On Monday, Cleveland-Cliffs justified the layoffs, citing economic pressures stemming from the ongoing trade dispute between Canada and the United States, which it said threatened the company’s viability. While the company stated that some displaced workers would be offered positions at the Lake Erie Works plant, union representatives highlight that these openings are insufficient to compensate for the total reductions. Ron Wells, president of United Steelworkers Local 1005, noted only 46 vacancies are available at Nanticoke, and he urged the federal government to enforce the terms of the acquisition agreement, emphasizing the importance of the Investment Canada Act. This legislation requires foreign investments in Canada to provide tangible benefits to the domestic economy, including job preservation.
The federal government, through Industry Minister Mélanie Joly’s office, acknowledged the situation but stopped short of confirming any imminent legal action. Gabrielle Landry, deputy director of media relations, stated that the government remains committed to protecting Canadian industry, defending jobs, and securing supply chains by employing all available measures. The ministry did not specify whether Cleveland-Cliffs is formally considered in breach of its commitments or detail potential next steps.
Legal experts caution that without access to the precise contractual language governing the acquisition, determining whether Cleveland-Cliffs is violating its obligations is challenging. Subrata Bhattacharjee, national chair of the competition and foreign investment review group at Borden Ladner Gervais LLP, said a thorough review of the agreement is necessary before drawing conclusions. He suggested that ongoing discussions between the government and Cleveland-Cliffs about the company’s commitments are likely.
Cleveland-Cliffs has not provided comments regarding the potential dispute or the layoffs. The unfolding situation underscores the complexities of enforcing employment guarantees tied to foreign acquisitions, particularly amid challenging economic and trade environments.