Stelco Layoffs Begin as Ottawa and Cleveland-Cliffs Head Toward Court

Stelco's Hamilton steel mill fell quiet over the Thanksgiving weekend, and the fight over who is responsible now turns on a single document: a letter in which the company tells Ottawa that its layoffs break no promise at all.

Stelco Layoffs Begin as Ottawa and Cleveland-Cliffs Head Toward Court

Hamilton, Ontario - Hundreds of steelworkers at Stelco's Hamilton Works are out of a job after the first wave of layoffs took effect over the Canadian Thanksgiving weekend, and the company's American owner and the federal government are now squared off over promises made two years ago.

The Letter That Says Ottawa Is Wrong

Stelco president and general counsel Paul Simon wrote to Industry Minister Melanie Joly on Friday, and the steelmaker did not soften the message. In the response letter obtained by The Globe and Mail, Simon rejected the government's central claim outright: "Your representation that Stelco's planned layoffs cause it to breach its undertakings is false."

His argument rests on the wording of the promises themselves. "The undertakings do not stipulate a commitment to avoid layoffs, nor do they include a requirement that employment levels be above a certain amount on each day of the five years of the undertakings," Simon wrote. He added that the spirit of the Investment Canada Act gives the government wide latitude to permit layoffs in unforeseen circumstances, and that the 50 per cent American tariff on Canadian steel was an event outside the company's control. "Throughout the history of the Investment Canada Act and its predecessor foreign investment acts, it has consistently been understood that changes in circumstances may necessitate the non-enforcement or renegotiation of undertakings," he wrote.

What Cleveland-Cliffs Promised in 2024

Cleveland-Cliffs agreed to buy Stelco in a deal announced on 15 July 2024, offering CAD 70.00 per Stelco share - CAD 60.00 in cash plus 0.454 of a Cliffs share - in a transaction the company valued at roughly CAD 3.4 billion, or about USD 2.5 billion. The acquisition brought another 1,800 United Steelworkers members into Cliffs' workforce.

When Ottawa approved the takeover in October 2024 under the Investment Canada Act, it attached legally binding undertakings spanning five years. The conditions require Cliffs to maintain at least the same number of unionized employees in Canada as existed when the deal was announced, along with the vast majority of non-unionized staff. Joly has described the commitment as maintaining more than 1,500 jobs. Cliffs also pledged at the time to keep Stelco's headquarters in Hamilton, invest at least CAD 60 million over three years, and increase charitable support by CAD 2 million a year. Mathis Denis, Joly's director of communications, said the commitments "do not cease to apply because of changing business strategy or market conditions."

How the Layoffs Unfolded

Stelco announced on 28 September that it would cut up to 500 workers across its Hamilton and Nanticoke operations, idling the Hamilton Works finishing lines that produce cold-rolled and coated steel. The company said it could no longer compete profitably in the galvanized steel market. Notices went out the following week, and by the weekend roughly 90 employees had already been laid off, with about 80 more expected at the end of this week.

Ron Wells, president of United Steelworkers Local 1005, which represents the Hamilton workers, expects 300 to 350 cuts there over three weeks, with more at Stelco's Lake Erie Works in Nanticoke, covered by a different local. One worker, Jordan Williams, told CBC Hamilton he received his notice on Wednesday, effective Sunday. Because of Ontario's Employment Standards Act, a temporary layoff shorter than 35 weeks needs no advance notice, so some workers got their notice and their last shift in the same week. Laid-off employees keep their medical benefits for now, and only 46 openings are available at Lake Erie Works.

A CEO Ready to Go to Court

Cleveland-Cliffs chief executive Lourenco Goncalves told CBC's Rosemary Barton Live on Sunday that he is prepared to defend the layoffs in court, arguing the 2024 agreement does not oblige him to hold a fixed headcount for the full five-year term. He calls the cuts temporary and says the jobs will come back once Canada and the United States strike a trade deal. Asked whether he would sell Stelco, Goncalves answered simply: "For a good offer, yes."

He also endorses the very tariffs his company cites as the cause of the cuts - the American steel duties imposed under Section 232. Cliffs has said it will immediately call laid-off workers back if Ottawa can reach what it calls a "Fortress North America" trade pact with Washington. In an earlier CBC interview, Goncalves framed his purchase of Stelco around market access: "I would not have acquired the Stelco if I knew that Canada and the United States would become what they became - enemies in trade."

Joly's Answer: Force Majeure Won't Wash

Joly opened this round on 5 October, sending Simon a letter that gave the company five business days to produce a plan for complying with its employment guarantees or face possible legal action. Two days later, she went further, telling reporters that a chief executive who publicly backs the tariffs cannot then describe the resulting layoffs as an act of God.

"He's in favour of these U.S. tariffs against steel," she said. "They cannot say that this is now an act of God or force majeure." Her warning was blunt: "They need to comply. If not, we will use the full force of the law." Joly has also said the federal government put "a lot of support on the table" to prevent the job losses, and that she offered it to the company's leadership personally. After receiving Stelco's letter, her office said the government expects the company to honour its commitments and that "all options are on the table" while lawyers review the response.

What Ottawa Can Actually Do

The enforcement ladder is real, but its strength depends on wording that has never been made public. Business lawyer Nassira El Hadri, founder of Hadri Law in Toronto, said that if the company has failed to meet its 2024 commitments, the industry minister could first issue a formal demand requiring it to fix or justify the non-compliance. If that fails, Ottawa could go to superior court, where a judge could order compliance, impose penalties, or even order the sale of the business.

The complication is the act's flexibility clause: where an investor's inability to fulfil a commitment is "clearly the result of factors beyond the control of the investor," it will not be held accountable. "The key word, in my opinion here, is 'clearly,'" El Hadri said. She noted the agreements themselves are confidential. "We only have a summary of those undertakings," she said. "We don't know exactly what it was committed to." Prime Minister Mark Carney has said the government intends to "use all powers that we have and pursue them to the fullest extent of the law."

The Last Time Ottawa Sued Stelco

There is one clear precedent, and it involves the same mill. In 2007, U.S. Steel bought Stelco for about USD 1 billion and renamed it U.S. Steel Canada, promising under the Investment Canada Act to maintain Canadian employment for three years and raise production in Canada by at least 10 per cent. When the 2008 financial crisis hit, the company shut most of its Canadian operations and laid off more than 1,500 workers. Canada's attorney general sued in July 2009.

The case ended in a late-2011 out-of-court settlement: U.S. Steel agreed to keep operating in Hamilton and Lake Erie and to direct USD 50 million toward modernizing the plants by 2015, under new agreements that set no minimum workforce numbers. U.S. Steel Canada sought creditor protection in 2014, and a New York private equity firm bought the business in 2016, reviving the Stelco name and relisting it on the Toronto Stock Exchange a year later. El Hadri said that 2009 lawsuit remains, as far as public records show, the only time Ottawa has taken legal action over such commitments.

A City Counting the Cost

In Hamilton, the arithmetic runs well past the plant gates. Wells estimates that for every laid-off steelworker, as many as five other jobs could be on the line - in maintenance, contracting, supply and services that depend on the mill running. Bernard Tompkins, a boilermaker running for Hamilton council in Ward 2, put it plainly: "It's not just the direct employees - it also affects other building trades, contractors, suppliers, technicians and companies whose work depends on maintaining and supporting those operations."

Ottawa and Ontario announced CAD 203,000 toward retraining 75 steel and manufacturing workers, delivered through Learning Connections Hamilton. Displaced workers can also reach the United Steelworkers Action Centre on Barton Street East. Hamilton Mayor Andrea Horwath said her "Head of Lake Ontario" tariff-response plan will hold property tax increases below inflation and allow emergency tax and fee deferrals. "I can't control Trump's actions, but I can control how we respond," she said.

The Tariff at the Centre of It

Everything here bends back to one number: the 50 per cent American tariff on Canadian steel exports, imposed in 2025 under Section 232 of the U.S. Trade Expansion Act. Stelco called the layoffs "unfortunate but necessary" to ensure its survival, saying the tariff has sharply shrunk the market for its cold-rolled and galvanized products.

Carney said the workers had been "betrayed by the company," pointing out that Stelco's ultimate owner applauded the very tariffs now being blamed for the cuts. Cliffs, for its part, argues Ottawa has not done enough to stop foreign dumping of galvanized steel into Canada, and it wants further restrictions on imports of cold-rolled and coated products, limits on import substitution, and an end to remissions for steel that Canadian producers can supply. Ottawa has already imposed tariff-rate quotas on dumped foreign steel and mandated Canadian steel in publicly funded projects, and it previously extended loan assistance to Algoma Steel as that company reoriented its business.

What Comes Next

Ottawa has not said which enforcement step it will take, or when. The government's lawyers are still working through Stelco's letter, and the company has signalled it is in no hurry to retreat: Simon wrote that if anything, the government's own letter misrepresented the talks between the two sides, and he said Ottawa had itself raised the idea of revising the undertakings.

Drew Fagan, a professor at the University of Toronto's Munk School of Global Affairs and Public Policy, framed the standoff as bigger than one mill. "There's a nature of force majeure about this," he said of the tariff argument, though he suspects the parent company is caught up in the broader politicization of cross-border trade. "After 40 years of the depoliticization of the border, we are now in the depths of a repoliticization of the border," he said. For the workers who spent the holiday weekend absorbing the news, the question is simpler, and harder: whether a promise written into a government approval two years ago can put steel back on the line.

By Jessica Ali, Staff Writer

This article was produced with AI-assisted research and editorial support. Sources: CBC News, The Globe and Mail, The Canadian Press (iPolitics), Global News, Newsweek, and the Government of Canada (Innovation, Science and Economic Development Canada).