Cleveland-Cliffs Inc. may be exposed to litigation from the Canadian government over alleged breaches of employment obligations tied to its acquisition of Stelco Holdings Inc., following the announcement of workforce reductions across its Canadian operations, though a legal specialist noted that the terms of the underlying agreement would ultimately determine any outcome. The Ohio-based firm disclosed plans to acquire Stelco in a deal valued at $3.4 billion during 2024. Regulatory approval for the deal was granted, subject to a set of enforceable conditions placed on Cliffs. Among the commitments was Cliffs pledging to preserve, for a period of five years, no fewer than the existing number of union workers and the overwhelming proportion of non-union staff. The company disclosed plans to reduce its workforce by as many as 500 positions across Stelco's Hamilton facility and the Lake Erie Works site in Nanticoke, Ont. The firm described the workforce reductions as a measure needed to maintain its financial viability amid ongoing trade tensions with the United States. A portion of those displaced by the redundancies may be offered positions at Lake Erie Works, though the available roles are expected to fall short of replacing the total number of jobs lost. Ron Wells, president of United Steelworkers Local 1005, noted that only 46 positions are available at Nanticoke and stated that he is urging the federal government to hold Cliffs accountable to its commitment to sustain employment levels, expressing hope that authorities would enforce the Investment Canada Act. Under that legislation, large-scale foreign investments in Canada are required to deliver tangible benefits to the local economy. The office of Industry Minister Mélanie Joly received a query regarding whether the government views Cliffs as having breached its commitments and whether legal proceedings against the steelmaker are under consideration; Gabrielle Landry, deputy director of media relations for Ms. Joly's office, stated in an email that Stelco and Cleveland-Cliffs had made commitments to steelworkers in Canada and that the government would draw on all available tools to defend domestic industry, protect employment, and secure supply chains, while Cliffs did not provide a response to a request for comment. Subrata Bhattacharjee, who leads the competition and foreign investment review practice at Borden Ladner Gervais LLP, noted that without access to the specific terms of the legal arrangement between the firm and the federal government, any determination about whether Cliffs has breached its obligations would be premature, adding that the details of the agreement would need to be reviewed before any firm conclusion could be drawn. Mr. Bhattacharjee noted that Cleveland Cliffs would likely seek to attribute the tariff situation to factors beyond its control, potentially requesting either a revised arrangement or release from the existing undertaking, while also observing that the current environment made it plausible the government would pursue an alternative form of assurance through renegotiation or mediation — a process for which precedent already exists involving the same Canadian steelmaker. When U.S. Steel took over Stelco in 2007, the company pledged to meet certain obligations under the Investment Canada Act relating to employment levels and output targets. Following the 2008 financial downturn, U.S. Steel reduced its workforce at Canadian operations. The federal government subsequently filed a lawsuit against the corporation over alleged violations of its contractual obligations. In 2011, U.S. Steel entered into an agreement outlining obligations related to production targets and capital investment in Canada. The Canadian steel industry has faced the impact of 50-per-cent tariffs introduced by U.S. President Donald Trump. Both levels of government have introduced a range of measures aimed at supporting the sector, among them hundreds of millions of dollars in financial assistance, restrictions on the importation of foreign steel at below-market prices, and requirements that domestically funded infrastructure projects source Canadian steel where feasible. Ms. Landry noted that the federal government had extended financial assistance to Stelco to sustain its operations and workforce during the trade dispute, an offer the company chose not to accept, adding that the government had communicated its readiness to provide such support over a period of time, and that the company's choice to proceed with layoffs while setting aside those proposals was a source of considerable disappointment.
