Stelco penalties including fines, forced sale possible over layoffs: Joly - Global News

Industry Minister Mélanie Joly said Stelco could face financial penalties or even a forced sale of their assets in Canada if they proceed with layoffs of up to 500 workers.

Speaking to reporters after an event in Ottawa on Wednesday, Joly said the federal government is continuing to work with the company on a solution, but “everything is on the table,” including legal action.

“We expect Stelco to follow the undertakings that they’ve committed to, to the Government of Canada, and right now, a business decision or even a change in market conditions cannot be used to not follow the commitment. So we’re reviewing the Stelco letter,” Joly said.

“A few possible outcomes of a court process can lead to financial penalties towards a company, forcing them to abide by the commitment, and also a forced divestiture, so forcing them sell their Canadian assets. Everything is on the table.”

“I’m always open to sit down with the company and find a solution, but we’re looking at everything that is possible to keep jobs in Canada.”

Stelco’s letter to Joly, obtained by Global News, was dated Oct. 9 in response to one sent by Joly on Oct. 5, in which she gave the company an ultimatum and five days to respond.

Joly’s letter to the company expressed “extreme disappointment” and claimed the layoffs constitute a direct breach of the company’s commitments under the Investment Canada Act.

Stelco maintained in its response that it hasn’t done anything wrong and claims the accusations from the federal government are “false.”

The Ontario-based steel manufacturer announced last month that pressure from U.S. tariffs forced it to concentrate steel production at its Lake Erie Works plant in Haldimand, and halt production at its plant in Hamilton. Although the company said some of those workers would be offered positions at the Haldimand facility, hundreds are still expected to be out of work.

U.S. President Donald Trump levied tariffs on steel products from Canada of up to 50 per cent under its Section 232 duties about a year-and-a-half ago, with other products like aluminum and autos also facing tariffs.

Joly claimed in her letter to Stelco on Oct. 5 that the market dynamics surrounding Trump’s tariff policies do not excuse Stelco from its commitments under the Investment Canada Act, and that the federal government would be using the “full force of the law” if those jobs are not preserved.

Joly told reporters last week that the chief executive of U.S.-based Cleveland-Cliffs, which acquired Stelco in 2024, has supported steel tariffs and therefore cannot characterize the company’s plan to lay off up to 500 workers due to tariffs and market pressures as beyond its control.

“He’s in favor of these U.S. tariffs against steel,” she said, referring to Cleveland-Cliffs CEO Lourenco Goncalves’ public support of American steel tariffs.

“They cannot say that this is now an act of God or force majeure.”

The government says Cleveland-Cliffs made a series of commitments when it acquired the Ontario steelmaker, including preserving jobs and the Stelco name, maintaining and expanding its Canadian operations, generating cost savings, broadening its customer base and supporting unionized steel jobs.

In a release from 2024, Cleveland-Cliffs announced the agreed acquisition of Stelco and said they would “maintain significant employment levels in Canada and Canadian representation on the management team.”

Business lawyer Nassira El Hadri said the government appears to have moved past asking Cleveland-Cliffs to justify the layoffs, and is also asking for a plan outlining how it will comply with all of its undertakings.

“They are not asking for an explanation,” said El Hadri, founder of Hadri Law in Toronto. “They’re saying, ‘You have to give us a plan on how you are going to comply.’”

“These undertakings are not goodwill gestures,” El Hadri said. “They are binding.”

If the company responds by simply reiterating that the layoffs are necessary because of U.S. tariffs, she said the dispute could end up in court.

Stelco’s letter in response to Joly from Oct. 9 was authored by Stelco’s president, Paul Simon.

According to the seven-page letter, exports of cold-rolled and coated steel to the United States have plunged 58 per cent from pre-trade-war levels as foreign imports continue to undercut Canadian-made steel.

Simon also claimed in the letter that the company was open and transparent with the federal government for several months about its struggles.

“Our early September meetings with several senior government officials, including representatives from your office, led Stelco to believe that the government understood the market realities confronting Stelco’s Hamilton Works finishing lines,” the letter said.

“Stelco submitted its annual report confirming its compliance with the employment undertakings in November 2025. That report highlighted that Stelco was facing significant challenges due to the unforeseen consequences stemming from unprecedented U.S. tariffs and Canada’s failure to advance an effective ‘Fortress North America’ trade regime.”

“Your representation that Stelco’s planned layoffs cause it to breach its undertakings is false as the undertakings do not stipulate a commitment to avoid layoffs.”

In the letter, Simon described an industry upended by U.S. tariffs, weakening demand and continued foreign steel imports.

“Stelco cannot continue to produce cold-rolled and coated steel products without incurring significant losses that are not sustainable,” Simon said in the letter. “As such, we will continue with the idling of Hamilton Works.”

Over the weekend, Joly issued a statement in a social media post acknowledging she had received the letter from Stelco, and maintained the federal government’s stance.

“The Government of Canada continues to expect Stelco to meet its legally binding commitments to employees. These commitments were agreed upon as undertakings under the Investment Canada Act and do not cease to apply because of changing business strategy or market conditions,” said Joly in the statement.

“As our legal team reviews the Stelco letter, all options are on the table.”