Stelco Holdings has only a few days to provide a plan that could prevent hundreds of Ontario steel workers from facing layoffs that have already begun – or it may find itself in legal trouble with the Canadian government.
Time is running out on what legal experts say will be a significant test of how foreign investors are held accountable as Prime Minister Mark Carney aims to attract more investment to Canada amidst ongoing trade tensions with the United States.
So, how serious is this threat? And can it actually help save jobs? Here’s what we learned from the last time the federal government took action against the U. S. steelmaker.
20 Years Since Ottawa’s Legal Battle with Former Stelco Owner
In 2007, U. S. Steel from Pennsylvania announced its intention to buy Stelco, then listed publicly, for about $1 billion US, and subsequently renamed it U. S. Steel Canada.
According to the Investment Canada Act, major foreign investments must benefit the Canadian economy. Therefore, foreign buyers are required to provide legally binding written promises – known as undertakings – to demonstrate that their deal results in a “net benefit to Canada.”
Back then, U. S. Steel made several commitments, including a promise to maintain Canadian employment levels for three years and boost steel production in Canada by at least 10 percent.
However, when the financial crisis hit in 2008 and demand plummeted globally, U. S. Steel shut down most of Stelco’s operations in Canada and laid off over 1,500 workers.
WATCH | Union reports layoffs have started:
Layoffs begin at Hamilton Stelco plant according to union
Layoffs are occurring at the Stelco facility in Hamilton, Ont., expected to unfold over three weeks as stated by Ron Wells, president of United Steelworkers Local 1005. Stelco employee Jordan Williams mentioned he got his layoff notice right after his shift ended on Wednesday.
In July 2009, Canada’s attorney general launched a lawsuit against U. S. Steel.
“As far as public records indicate, this is the only occasion Ottawa has taken legal action over such commitments,” noted Toronto-based business lawyer Nassira El Hadri while speaking with .
According to court filing summaries gathered by a lawyer from Torys LLP based in Toronto, Stelco contended that these commitments only needed compliance at the end of their three-year period rather than before then.
Stelco also argued that following Industry Canada guidelines meant its investors shouldn’t be held responsible for events outside their control like the unfolding financial crisis.
WATCH | A worker shares feelings on receiving layoff notice:
Uncertainty about layoffs feels like ‘a roller-coaster’ for Stelco employees
Steelworker Jordan Williams expressed his frustration after getting a layoff notification from Stelco. Cleveland-Cliffs – an Ohio-based firm now owning Stelco – began sending out individual layoff notices as it plans to let go up to 500 employees and halt production at its Hamilton site.
Previous Legal Conflict Resulted in Agreement for Continued Production
The lawsuit was formally dropped by Canada’s attorney general in late 2011 after reaching an out-of-court settlement before any judicial decision could occur.
U. S. Steel agreed to keep operating in Hamilton and Lake Erie while committing $50 million towards new capital investments by 2015 aimed at modernizing its operations. They entered into new agreements with Ottawa but those didn’t stipulate minimum workforce numbers.
However, earlier in 2014, U. S. Steel Canada sought creditor protection while its American parent company cut ties with its Canadian division.
By 2016, a private equity firm located in New York purchased the steelmaker which led to reviving the Stelco name when they returned it back onto the Toronto Stock Exchange one year later.
This dispute resulted in revisions being made to the Investment Canada Act during both 2009 and 2012 aimed at facilitating settlement talks while enhancing enforcement measures. The government later increased daily penalties for non-compliance up to $25,000 and tightened scrutiny within sensitive sectors.
Current Developments Regarding Stelco
Fast forward to 2024 when Ottawa approved Cleveland-Cliffs’ $3.4 billion cash-and-stock acquisition of Stelco.
The conditions included an assurance that they would maintain at least as many unionized workers within Canada over five years along with most non-unionized staff according to a statement released by the government during that period.
Last week brought news from Stelco about plans idling certain production lines in Hamilton which could lead up to 500 layoffs across their workforce; according to union reports these layoffs have already commenced.
WATCH | Layoffs commence despite threats from Ottawa:
Stelco has begun laying off steelworkers at its Hamilton plant even though demands from government were clear: share plans for saving jobs within five days or face possible legal consequences.
Cleveland-Cliffs CEO Lourenco Goncalves explained these cuts were necessary due primarily due trade conflicts between Canada and America claiming that “underlying conditions” influenced their ability sell steel across borders.
This past Monday Industry Minister Mélanie Joly addressed a letter directed toward Paul Simon president of Stelco giving them five business days deadline submit job preservation strategies otherwise face potential litigation.
On Tuesday Joly criticized Goncalves’s public endorsement of American tariffs applied on steel products stating,
“He’s backing these tariffs imposed by America,” she remarked adding “they cannot claim this situation constitutes force majeure.”
