Canada Weighs Legal Action Against Cleveland-Cliffs Over Stelco Layoffs Amid Strong Earnings
The Canadian government is considering legal action against Cleveland-Cliffs after the U.S. steelmaker laid off hundreds of workers at its Hamilton, Ontario plant while reporting US$612 million in third-quarter earnings. Ottawa argues the layoffs breach a binding 2024 acquisition agreement, while Stelco contends the cuts are temporary and compliant.
Cleveland-Cliffs, the U.S.-based owner of Canadian steelmaker Stelco, reported net earnings of US$612 million in the third quarter, up from $286 million in the previous quarter. At the same time, Stelco is laying off hundreds of workers at its steel plant in Hamilton, Ontario, citing pressure from U.S. tariffs.
U.S. President Donald Trump imposed a 50 per cent duty on various Canadian steel products, which Stelco claims severely impacted its sales. The company reported that exports of cold-rolled and coated steel to the United States have plunged 58 per cent from pre-trade-war levels. In response, Stelco announced it would concentrate production at its Lake Erie Works plant in Haldimand, Ontario, and halt production in Hamilton.
The federal government approved Cleveland-Cliffs' acquisition of Stelco in 2024 under the Investment Canada Act. That approval included an agreement requiring the maintenance of unionized and non-unionized employee numbers. Industry Minister Mélanie Joly stated that the government has hired lawyers to advise on next steps regarding Stelco's alleged breach of the acquisition agreement.
Joly sent a letter to Stelco’s president on Oct. 5 demanding the company outline how it plans to abide by its commitments to preserve jobs. Stelco President Paul Simon responded on Oct. 9, stating the federal government's accusations are false and arguing that the undertakings do not stipulate a commitment to avoid layoffs.
Legal expert Christopher Achkar suggests Stelco may argue based on a technicality that laid-off workers remain technically employees, maintaining headcount compliance. Stelco describes the cuts as indefinite layoffs, whereas the union treats them as temporary under collective agreement terms, with benefits lasting 35 weeks for a temporary layoff.
The conflict is further complicated by the fact that Cleveland-Cliffs CEO Lourenco Goncalves publicly supported the very tariffs Stelco now cites as justification for the workforce reductions.
Minister Joly stated on Oct. 14 that possible outcomes of court proceedings include financial penalties, forcing abidance by commitments, or forced divestiture of Canadian assets.