OTTAWA – Industry Minister Tony Clement is warning U.S. Steel that Ottawa may take legal action against the company over its temporary lay-off of Canadian workers.

In a letter to the company today, Clement said U.S. Steel must live up to the commitments on production and other business dealings the firm made when it was allowed by the federal government to take over Stelco Inc. in 2007.

"I am concerned by the actions of U.S. Steel in cutting operations in Canada and by the impact this will have on its workers," Clement said in the letter, which is the first step in the enforcement process under the Investment Canada Act that governs foreign acquisitions of Canadian corporations.

"While I recognize that these are challenging economic times, we expect the company to live up to its commitments."

In March, U.S. Steel said it was temporarily shutting down most of its production at two large former Stelco operations in Ontario – in Hamilton and Nanticoke – which has left the future of 1,500 employees up in the air.

Speaking with reporters, Clement threatened that the government could go as far as trying to nullify U.S. Steel's takeover or ask a court of levy fines on the American corporation.

"We have a number of options that are available to us, including unwinding the deal, seeking court penalties of $10,000 per day and seeking a court ruling that would force a rectification of the situation to the deal that was signed," he said.

"What I'm signalling to you is I take these agreements seriously. When you have signed a deal with the Canadian government to invest in Canada, we expect you to honour the deal."

The company is expected to respond today.