Stelco just had its strongest quarter since its takeover, but layoffs are proceeding. The feds say it’s a breach, but the takeover terms and employment standards obligations are different, says a lawyer
Stelco has just had what its owner calls its best quarter since Cleveland-Cliffs bought it, and the layoffs at its Ontario plants are going ahead regardless.
On Monday’s third-quarter earnings call, Cliffs CEO Lourenco Goncalves said Stelco’s results were its strongest since the 2024 acquisition. He attributed the layoffs to a domestic market swamped with imported steel. Industry Minister Mélanie Joly responded by posting on X that Cliffs must “keep jobs in Canada or face the prospect of having to sell” its Canadian assets.
Whether the layoffs breach the takeover terms is far from settled, partly because of how the promise was worded.
When Ottawa approved the $3.4 billion takeover in 2024, the commitment appeared straightforward: for five years, Cleveland-Cliffs would keep at least as many unionized employees, and the vast majority of non-union staff, as Stelco had on the day the deal was announced. That’s how the federal government summarized it at the time.
Two years later, with up to 500 workers in Hamilton and Nanticoke, Ont., being laid off, much of the dispute turns on that one sentence — and the full text has never been made public.
Two readings of the same commitment
Joly says the layoffs breach the undertakings Cliffs gave under the Investment Canada Act (ICA). In an Oct. 5, 2026, letter, she gave the company five business days to comply, writing that the conditions don’t fall away when strategy or markets shift.
Stelco’s answer arrived on Oct. 9, 2026, from Paul Simon, its president and general counsel. He told the minister her claim was false because the undertakings “do not stipulate a commitment to avoid layoffs,” and argued that nothing requires “employment levels be above a certain amount on each day” of the five-year term.
If the employment test is a snapshot taken once a year, or an average over five years, a dip in headcount now might never show up as a breach. If it applies continuously, the layoffs look much harder to defend. Which version is right depends entirely on wording the public hasn’t seen.
Nadia Zaman, senior associate at Rudner Law in Toronto, says the starting point has to be the actual text. “A snapshot, an average, and an ongoing minimum are different obligations,” says Zaman. “The fact that a commitment lasts several years does not, by itself, establish that headcount can be averaged over that period. Without reviewing the actual undertaking, I would not favour either interpretation.”
Goncalves told CBC's Rosemary Barton Live he was prepared to fight Ottawa in court rather than reverse the cuts. He has also said he would not have bought Stelco had he known Canada and the U.S. would become “enemies in trade.”
The contract nobody outside can read
The undertakings themselves are confidential. Ottawa publishes a short summary; the binding text stays private. “We don’t know exactly what it was committed to,” Toronto business lawyer Nassira El Hadri, founder of Hadri Law, told The Canadian Press last month. She added that how successful any enforcement would be turns on the exact wording.
Undertakings under the ICA are routinely negotiated in private. A 2014 private member's bill that would have forced publication of the undertakings U.S. Steel gave when it bought Stelco in 2007 never became law.
Zaman said the opacity creates a real problem for those most affected. “For workers, a key concern is accountability,” she says. “Without access to the actual wording, they may struggle to understand which jobs are protected, how compliance is measured and what the commitments mean for them.”
Zaman also draws a distinction many workers may not appreciate: “There’s an important distinction between a commitment the government can enforce and a remedy an individual employee can pursue,” she says. “Workers should not assume that an employment undertaking automatically gives them a personal guarantee of continued employment.”
Ron Wells, president of United Steelworkers Local 1005, has said the union was never shown the agreement. Even so, “Cleveland-Cliffs knew exactly what they were agreeing to when they bought the place,” he told the press.
The ‘beyond our control’ defence
A court would also have to consider federal guidelines that say an investor won’t be held accountable where failure to comply is clearly caused by factors outside its control, according to a 2026 guide by law firm Davies Ward Phillips and Vineberg. Stelco is relying on that provision, with Simon’s letter pointing to a 58 per cent fall in exports of cold-rolled and coated steel to the U.S. from pre-trade-war levels and some experts predicting that the trade war will get worse before it gets better.
Joly has countered that Goncalves publicly backed U.S. steel tariffs, so the company can’t now treat them as an unforeseeable shock. “They cannot say that this is now an act of God or force majeure,” she said.
A company’s public statements can affect the credibility of its position, but don’t automatically defeat it, according to Zaman. “Supporting a policy is not the same as controlling it,” she says. “The central question is whether the tariffs clearly caused an inability to meet the commitments, rather than simply making compliance more expensive or less commercially attractive.”
The ICA provision, notes Zaman, is administrative guidance rather than a contractual force majeure clause, so Canadian case law on self-induced commercial difficulties provides an analogy rather than a definitive answer. No Canadian court has ruled on how far that guideline extends.
What happened last time
After U.S. Steel bought Stelco in 2007, Ottawa went to Federal Court in 2009 seeking compliance. The matter settled in December 2011 without a ruling – U.S. Steel committed to keeping its Hamilton and Lake Erie plants operating and investing at least $50 million in them. Less than two years later, steelmaking in Hamilton ended.
Zaman believes the episode illustrates a broader pattern. “The U.S. Steel experience shows that enforcement proceedings can lead to negotiated commitments rather than a final ruling on compliance,” she says. “The real test of any settlement is whether it delivers meaningful, enforceable protection, not simply another announcement of commitments.”
For now, Joly says “everything is on the table.” Under section 40 of the ICA, a court could order Cliffs to comply, impose financial penalties, or force it to sell its Canadian assets.
What this means for workers, and for HR
The undertakings are a deal between the investor and the federal government; a worker can’t sue to enforce them. Day-to-day protections come from elsewhere – the collective agreement and Ontario’s Employment Standards Act, which limits how long a temporary layoff can run before it becomes a termination. Recall rights in a collective agreement can change that picture, which is why unions read the fine print on duration so closely. For non-union staff, whether a layoff is lawful at all can hinge on how the temporary layoff clause in their contract is drafted.
Zaman flags a point that catches many organizations off guard. “ICA commitments and employees’ individual rights are separate obligations,” she says. “Paying termination entitlements does not necessarily satisfy a headcount commitment, and meeting an ICA undertaking does not remove obligations under employment standards legislation, employment agreements, or applicable common law.”
For organizations going through a foreign acquisition under ICA review, Zaman suggests acting before the employment numbers are locked in would be prudent. “HR leaders should involve legal counsel early, including employment counsel alongside the corporate and investment-review team,” she says. “The goal is to ensure the company can comply with its obligations and understand how it can maximize its flexibility and minimize its liability, before workforce commitments are finalized.”
After closing, those commitments should become part of the review process for temporary layoffs, terminations, outsourcing, and transfers. “The process risk is a disconnect between the public promise, the legal wording of the undertakings, and management’s decisions in practice,” says Zaman. “Clear responsibilities and ongoing monitoring help protect both employers and employees.”
Canada shed 68,000 jobs in September 2026. Until the undertakings are published or tested before a judge, the laid-off workers have no clear answer on whether the promise made in 2024 covers them.
