As Stelco reports soaring earnings, how solid is their layoff legal case?

U.S.-based Cleveland-Cliffs said on Monday that it saw its strongest quarterly financial results since the year before acquiring Stelco in 2024.

This comes as Stelco continues to lay off hundreds of workers at its steel plant in Hamilton, Ont., while citing pressure from U.S. tariffs, a decision the federal government says breaches its binding agreement to maintain jobs.

Cleveland-Cliffs said it saw net earnings of US$612 million in the third quarter, up from $286 million in the previous quarter.

Cleveland-Cliffs CEO Lourenco Goncalves in the report said, “Third quarter was our strongest quarter in three years,” and added that the figure was higher than the $575 million guidance they provided three months earlier.

On Tuesday, Industry Minister Mélanie Joly spoke outside the House of Commons.

“We took good note of the earnings call that happened yesterday where the CEO of Stelco again mentioned that he was in favour of American tariffs against steelworkers in Canada and therefore we’ve hired the best lawyers to advise us on what to do next,” said Joly.

“I’ll have more to say in the coming days, but we’re following this very closely. We’ve been working also with the union as they’re providing important proof for a legal case.”

Several legal experts say that, based on publicly available information, the federal government could have a strong case.

“If they [Ottawa] have the ability to sue, they should get on with it and at least do something about it so the workers aren’t living in financial emotional paralysis,” says employment lawyer and senior partner Howard Levitt of Levitt LLP.

“The federal government’s case, from everything we’ve heard, is rock solid and they should be seeking injunctive relief against the layoffs entirely and recalling the workers.”

Stelco announced last month that pressure from U.S. tariffs forced it to concentrate steel production at its Lake Erie Works plant in Haldimand, Ont., 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’s tariffs include a 50 per cent duty on various Canadian steel products, and Stelco claims that has severely impacted its sales.

Here’s how the two arguments stack up, according to legal experts.

When Cleveland-Cliffs acquired Stelco in 2024, the federal government approved the deal under the Investment Canada Act. The full legally binding agreement has not been made public, although a summary of its terms was released in 2024.

According to the summary, the agreement with Cleveland-Cliffs includes a commitment “To continue to employ at least the same number of unionized employees and the vast majority of non-unionized employees as were employed when the transaction was announced.”

The federal government’s stance is that by using tariffs to justify laying off workers, Stelco and Cleveland-Cliffs breached the agreement.

“From what they [the Feds] have said publicly, from what everyone has said publicly they have a very good case […] if that’s the agreement that was made,” says Levitt.

“But again, it’s based on what we’ve heard and I’m surprised the federal government has not released the actual documents. But I’m also surprised, if the owner of Stelco has a real good defence, that they haven’t released the actual documents.”

Joly sent Stelco’s president a letter on Oct. 5 demanding the company outline how it plans to abide by its commitments, including preserving jobs.

In addition, Joly said last week that Goncalves has been a vocal supporter of U.S. tariffs on steel, and therefore the company cannot use tariffs as an excuse for layoffs.

“He’s in favor of these U.S. tariffs against steel,” she said to reporters on Oct. 7.

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

Employment lawyer Christopher Achkar, managing partner at Achkar Law, says that in this context, Stelco using tariffs as an excuse for layoffs amounts to trying to “have your cake and eat it too.”

“You can’t say that you are in favor of something, and then when it actually happens, say, ‘oh, it is out of my hands,’ — you are the one who was in favor of that,” he says.

“I think Stelco’s positions from a practical standpoint are quite weak.”

Further, Achkar says that Stelco would likely have a tough time arguing that tariffs forced it to lay off workers, when it also refused financial assistance from the federal government to mitigate those risks.

Stelco’s president, Paul Simon, responded to Joly’s letter on Oct. 9.

The seven-page response detailed the company’s stance, and said the federal government’s accusations are “false.”

“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,” the letter said.

“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.”

The company is describing the cuts as indefinite layoffs, while the union is treating them as temporary under its collective agreement, which Levitt says is a key detail.

“You can lay off some without paying them anything, as long as you maintain benefits for 35 weeks, if it’s a temporary layoff. But Stelco announced this is an ‘indefinite’ layoff — in my mind, that’s a termination, not a layoff.”

The letter also says its 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.

Achkar says the wording in the letter suggests Stelco may seek to argue its case based on a technicality.

“Their argument is going to be that they are still technically employees and the headcount is still technically the same,” he says.

Achkar also explains that the Investment Canada Act stipulates to avoid terminating workers, while these tariff-related layoffs are considered by the company to be temporary measures until market conditions improve.

“Stelco is saying that a layoff doesn’t mean that they’re no longer an employee, and if our undertaking says that we are going to maintain the same headcount, the question is, is it staying the same with a temporary layoff?”

“Someone who’s temporarily laid off for 13 weeks, for example, is not getting paid at all for that period. So the spirit of the [Investment Canada] Act would be to have them fully employed and actually receiving wages, but the technicality about it is that they potentially could be viewed as still employees while being laid off.”

Ultimately, Achkar expects the case will not go to the Supreme Court because Stelco’s case may not be strong enough to justify it. Instead, he believes the case will likely wind up being a negotiated settlement.

“They are in breach, whether they can justify the breach may fall on a technicality. My estimation of it is it would probably be a weak one and will not succeed,” he says.

After she confirmed receipt of the letter from Stelco over the Thanksgiving long weekend, Joly was asked by reporters on Oct. 14 if she still believes the case will go to court.

“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 to sell their Canadian assets. Everything is on the table.”

She added: “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.”