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The government has authorized private debt collection companies to demand payment from those recipients, some of whom left the government years ago and were never informed of the overpayments, according to Canada’s largest bank. federal public sector union.
“PSAC members and former members have already endured years of hardship due to government payroll failures due to unpaid checks, financial stress and uncertainty,” the union’s national president, Sharon DeSousa, wrote to Finance Minister François-Philippe Champagne.
“They should not suffer further harm through illegal recovery actions that contradict federal legislation and established statutes of limitations,” he wrote in the letter dated Tuesday and seen by CBC.
Treasury Board Chairman Shafqat Ali said he had just learned of the problem.
“I found out about this yesterday,” he told Radio-Canada on Thursday. “We will investigate it and work together with union leaders and team members to address it.”
Expensive and error-prone payment system
Since its launch in 2016, Phoenix’s payroll system has caused problems for hundreds of thousands of federal employees, many of whom were overpaid, underpaid, or not paid at all.
Since then, the costs associated with implementing the problematic system have skyrocketed to almost 4 billion dollars, while the government now moves towards an entirely new payroll program.
Almost a decade later, the government is still trying to recover the money it mistakenly paid to public servants.
CBC reviewed a letter from Public Services and Procurement Canada (PSPC) sent last month regarding an overpayment for the 2015 calendar year.
PSPC wrote that unless the amount is refunded or a response is received, “the amount of the overpayment will be reported to your tax authority… as income for fiscal year 2015 and your debt will be transferred to Departmental Finance.”
PSPC has also hired private collection agencies to process debts. In an email seen by CBC, the agency wrote that while the debt itself remains with the Crown, “we hire collection agencies to recover debts on behalf of the Crown in cases where we do not receive answers.”
The PSAC deplored the referral of overpayments to private debt collectors. “Former public service workers are being harassed and intimidated, with threats to their credit ratings for debts they are not legally required to pay,” the union wrote to Ali.
“This is unacceptable,” continues the letter, dated Tuesday and seen by CBC.
PSPC said the long delay in requesting reimbursement was because the agency initially focused on fixing the system when pay issues arose during the launch of Phoenix, rather than immediately pursuing overpayments.
“Since October 2021, we have intensified efforts to recover overpayments from employees and former employees who were overpaid,” a spokesperson told CBC in an emailed statement.
More than 15,000 owe $495 million
PSPC said approximately 481,652 employees had been overpaid since the launch of Phoenix, totaling $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 failure to do so would result in a significant loss for the government,” the spokesperson wrote.
“We recognize that recovering overpayments can be stressful for those affected, and there are a number of measures to help people experiencing financial difficulties, including flexible payment options.”
The Canada Revenue Agency says on its website that a six-year limitation period for collecting payroll debt begins the day after a notice of assessment or reassessment is sent.
But PSAC says some of the overpayments now fall outside the six-year legal statute of limitations period for collection.
“The Crown Procedures and Liability Act is clear: once the six-year statute of limitations expires, recovery is no longer permitted without a new agreement or acknowledgment of the individual,” DeSousa wrote in his letter to Champagne.
“If a department required more than six years simply to notify a former employee about an overpayment, it was clearly never treated as a priority. In these cases, the law says the right to collect has expired.”
