Federal public servants are facing legal threats to repay overpayments from the problematic Phoenix pay system rollout nearly a decade ago, as reported by Radio-Canada. Private debt collection agencies have been authorized by the government to seek repayment from recipients, including individuals who have since left the government and were unaware of the overpayments, according to Canada’s largest federal public sector union.
The Public Service Alliance of Canada (PSAC) revealed that some individuals are experiencing withholding of tax refunds, credits, and federal benefits, along with the addition of interest to their balances. The union is urging the government to cease pursuing overpayments that exceed a six-year limitation period.
PSAC’s national president, Sharon DeSousa, wrote to Finance Minister François-Philippe Champagne, expressing concern over the hardships faced by members and former members due to payroll failures. She emphasized that further harm through unlawful recovery actions contradicts federal legislation and established limitation periods.
Treasury Board President Shafqat Ali acknowledged being recently informed about the issue and pledged to address it in collaboration with union leaders and team members.
The troubled Phoenix payroll system, launched in 2016, has caused payment discrepancies for hundreds of thousands of federal employees, resulting in nearly $4 billion in associated costs. The government is now transitioning to a new payroll program due to the system’s persistent challenges.
Despite the passage of almost a decade, the government is actively pursuing repayment of mistakenly issued payments to public servants. Recent correspondence from Public Services and Procurement Canada (PSPC) highlighted efforts to collect outstanding amounts from past years.
Private collection agencies have been engaged by PSPC to recover debts, with the agency clarifying that debts remain with the Crown while collection agencies are utilized in cases of non-response.
PSAC criticized the involvement of private debt collectors, citing harassment and intimidation of former public service workers over debts they are not legally obligated to repay. The union urged President Ali to intervene, emphasizing the unacceptability of such actions.
PSPC attributed the delayed recovery efforts to the initial focus on resolving system issues during the Phoenix rollout, rather than immediate pursuit of overpayments. Efforts have since intensified to recover excess payments from current and former employees.
PSPC disclosed that over 481,652 employees received overpayments totaling $3.56 billion since Phoenix’s inception, with $3.07 billion already recovered. Approximately 115,118 employees still owe $495 million, prompting responsible fund management through repayment initiatives.
While recognizing the stress overpayment recovery may cause, PSPC highlighted support measures in place for individuals facing financial challenges, including flexible repayment options.
PSAC highlighted discrepancies in debt collection timelines, asserting that certain overpayments now exceed the six-year statutory limitation for collection. DeSousa emphasized the need for compliance with the Crown Liability and Proceedings Act, indicating that after the expiration of the six-year period, collection is impermissible without new agreements or acknowledgments.
The Canada Revenue Agency’s guidelines state that a six-year limitation period for payroll debt collection begins after sending a notice of assessment or reassessment. PSAC emphasized the importance of adhering to legal limitations in debt recovery actions.