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Federal public servants are being threatened with legal action if they don’t repay money they were overpaid during the error-plagued rollout of the Phoenix pay system nearly a decade ago, Radio-Canada has learned.
The government has authorized private debt collection companies to pursue repayment from those recipients, some of whom left government years ago and were never informed of the overpayments, according to Canada’s largest federal public sector union.
In some instances, tax refunds, tax credits and federal benefits are being withheld and interest is being added to balances, according the Public Service Alliance of Canada (PSAC), which is calling on the government to stop pursuing overpayments that fall outside a six-year limitation period.
“PSAC members and former members have already endured years of hardship due to the government’s payroll failures through missed paycheques, financial stress, and uncertainty,” the union’s national president Sharon DeSousa wrote to Finance Minister François-Philippe Champagne.
“They should not be subjected to further harm through unlawful recovery actions that contradict federal legislation and established limitation periods,” she wrote in the letter dated Tuesday and seen by CBC.
President of the Treasury Board Shafqat Ali said he had only just been made aware of the issue.
“It came to my attention yesterday,” he told Radio-Canada on Thursday. “We’ll be looking into it, and we’ll be working together with union leaders and team members to address this.”
Costly, error-prone pay system
Since launching in 2016, the Phoenix payroll system has caused issues for hundreds of thousands of federal employees, many of whom were overpaid, underpaid or not paid at all.
Costs associated with rolling out the troubled system have since ballooned to nearly $4 billion, while the government is now moving toward an entirely new payroll program.
Nearly a decade on, the government is still seeking to recoup money it mistakenly paid to public servants.
CBC reviewed one letter Public Services and Procurement Canada (PSPC) sent last month relating to an overpayment from the 2015 calendar year.
PSPC wrote that unless the amount was repaid or a response received, “the amount of the overpayment will be reported to your tax authority … as income for the 2015 tax year and your debt will be transferred to Departmental Finance.”
PSPC has also contracted private collection agencies to pursue debts. In an email seen by CBC, the agency wrote that while the debt itself remains with the Crown, “we contract collection agencies to recover debts on the Crown’s behalf in cases where we do not receive responses.”
PSAC deplored the referral of overpayments to private debt collectors. “Former public service workers are being harassed and intimidated, with threats to their credit scores for debts they are not legally required to pay,” the union wrote to Ali.
“This is unacceptable,” continued the letter, dated Tuesday and seen by CBC.
PSPC said the long delay in seeking repayment resulted from the agency initially focusing on fixing the system when pay issues first emerged during Phoenix’s rollout, rather than immediately pursuing overpayments.
“Since October 2021, we have intensified efforts to recover overpayments from employees and former employees who received excess payments,” a spokesperson told CBC in an emailed statement.
More than 15,000 owe $495M
PSPC said approximately 481,652 employees had received an overpayment since Phoenix launched, totalling $3.56 billion. It has now recovered $3.07 billion from 366,534 employees, leaving 15,118 employees owing $495 million.
“Recovering overpayments is part of responsible management of public funds, as failing to do so would result in a significant loss to the government,” the spokesperson wrote.
“We recognize that recovering overpayments can be stressful for those affected, and several measures are in place to support individuals experiencing financial hardship, including flexible repayment options.”
The Canada Revenue Agency says on its website that a six-year limitation period for collecting payroll debt starts the day after a notice of assessment or reassessment is sent.
But PSAC says some of the overpayments now fall outside a six-year statutory limitation period for collection.
“The Crown Liability and Proceedings Act is clear: once the six-year limitation period expires, recovery is no longer permitted without a new agreement or acknowledgement from the individual,” DeSousa wrote in her letter to Champagne.
“If a department required more than six years simply to notify a former employee of an overpayment, it was clearly never treated as a priority. In these cases, the law says the right to collect has expired.”
