Federal public servants are facing legal threats for repayment of overpayments made during the problematic implementation of the Phoenix pay system almost a decade ago, as reported by Radio-Canada. Private debt collection agencies have been authorized by the government to pursue repayment from these individuals, some of whom have since left government service without being informed of the overpayments, according to Canada’s largest federal public sector union.
The Public Service Alliance of Canada (PSAC) highlighted instances where tax refunds, credits, and federal benefits are being withheld, with interest accruing on outstanding balances. PSAC is urging the government to cease efforts to recover overpayments beyond a six-year limitation period, stressing the undue burden placed on current and former public servants who have already suffered due to the payroll system failures.
Sharon DeSousa, the national president of PSAC, expressed concern in a letter to Finance Minister François-Philippe Champagne, citing the contradiction between current recovery actions and federal laws. Treasury Board President Shafqat Ali acknowledged being recently informed of the issue, pledging to investigate and collaborate with union representatives to address the situation.
The troubled Phoenix payroll system, introduced in 2016, has caused widespread problems for federal employees, resulting in numerous cases of overpayment, underpayment, and non-payment. The costs associated with the system’s rollout have escalated to nearly $4 billion, prompting the government to transition towards a new payroll program.
Despite nearly a decade passing, the government continues efforts to recoup erroneously disbursed funds to public servants. Public Services and Procurement Canada (PSPC) corresponded with individuals regarding overpayments from as far back as 2015, warning of potential tax implications and debt transfer to departmental finance if repayment or response is not received.
PSPC has engaged private collection agencies to pursue outstanding debts, a move criticized by PSAC for subjecting former public servants to undue pressure and threats to their credit ratings for debts not legally enforceable. PSPC explained the delay in pursuing repayments was due to prioritizing system fixes during the initial pay issues rather than immediate recovery efforts.
Approximately 481,652 employees received overpayments totaling $3.56 billion since the Phoenix launch, with $3.07 billion already recovered from 366,534 individuals. This leaves 115,118 employees owing $495 million. PSPC emphasized the importance of responsible fund management and highlighted support measures for individuals experiencing financial hardship during the repayment process.
While the Canada Revenue Agency outlines a six-year limitation period for collecting payroll debts, PSAC points out that some overpayments now exceed this statutory timeframe for collection. PSAC cited the Crown Liability and Proceedings Act, emphasizing that without a new agreement or acknowledgment, collection beyond the six-year period is impermissible.
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