Phoenix Fiasco Three Years Later: Where Are We Now?

March 05, 2019

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Q&A with Greg Phillips

CAPE President Greg Phillips discusses the Phoenix pay system, three years into its implementation. He offers an overview of what CAPE has learned and shares the actions the association has taken since Phoenix was launched in 2016.

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Hello Greg. Thank you for taking the time to speak with us today. Before we dive into recent updates about the Phoenix pay system, could you walk us through why this payment system was adopted in the first place?

To put it briefly, the Phoenix payment system was meant to replace a 40-year-old pay system the government at the time deemed to be costly and ineffective. In hindsight, it is clear that the process to adopt and implement Phoenix was rushed and severely botched with numerous federal employees reporting a range of issues including underpayments, over-payments, and non-payments within weeks of the system implementation.

 
How has CAPE approached the Phoenix debacle since members started reporting problems in 2016?

As soon as members started reporting problems to CAPE—and there were many—we promptly implemented a number of measures. The notion of crisis was real, and we quickly hired additional full-time labour relations officers who were dedicated to assisting members deal with Phoenix payment issues.

We also worked closely with other bargaining agents, and the National Joint Council, and we were involved in labour management consultations as well as committee meetings in all departments to address, correct and improve how our members were being paid.

Since the beginning, we have had to monitor Phoenix pay issues extremely closely and exert pressure on departmental officials to advance the resolution of their pay files at the Pay Centre. This work hasn’t stopped.


What means can be used, and have been used, to pressure the federal government to rectify the Phoenix fiasco?

According tothe Financial Administration Act, it is the responsibility of the Employer to pay its employees correctly in a timely manner. Therefore, CAPE can pursue a range of means to address payment-related issues, such as filing policy grievances, unfair labour complaints and bring mandamus applications in federal court.

We filed four Phoenix policy grievances with the Treasury Board Secretariat for our Economics and Social Science Services ( EC) and Translation (TR) members in October 2017 on the basis of “general pay errors” and other collective agreement violations that could affect all those covered by the collective agreement.  In addition, CAPE will be seeking damages for the mental anguish Phoenix caused to our members.

As well, CAPE filed an Unfair Labour Complaint to the Federal Public Service Labour Relations Board (FPSLREB), which  alleges that an employer engaged in an activity that involved prohibited conduct under the Federal Public Sector Labour  Relations Act.

Further, we brought a mandamus application in federal court.  This is a declaration obtained by the court indicating the Employer violated the conditions under the Financial Administrations Act (FAA). To expedite the process, CAPE’s legal counsel served notice to the FPSLREB to schedule a hearing date as soon as possible to hear CAPE’s unfair labour practice complaint under section 190 of the Federal Public Sector Labour Relations Act.

 
What range of issues were reported? What were the most severe ones CAPE processed?

Over the past three years, our members have reported a wide range of Phoenix pay-related issues. We had members who were not paid at all, some who received incomplete pay, and those who were overpaid. Other cases included mistakes in the Acting Overtime Pay calculations, and even non-payment of acting overtime. Some members reported not receiving their Employment Insurance (EI) or top-up provisions, which is an allowance in addition to EI benefits. Others experienced delays in pay reinstatement after they returned from a leave of absence.

Some of the most severe pay issues involved significant overpayment and lengthy delays in obtaining full pay, especially in 2016. In addition, there were serious delays in processing Disability Insurance (DI) benefits because the Pay Centre was not processing forms and providing information to the DI insurance provider in a timely manner.

Cases of overpayment have caused some members to lose subsidized childcare in Québec because they received money that they will need to reimburse but that makes them ineligible for the subsidies.

There were very complicated pay errors involving members’ T4 forms as well, with significant tax implications for them. In addition, if employees moved from one department to another—which is quite common—the pay reconciliation process would become longer and more complicated, sometimes taking years.

The numbers that we are now getting from the Employer seem to indicate incremental progress with the pay system, but the fact is that the Employer does not have a lot of credibility when it comes to Phoenix. Who wants to work for an Employer who can almost guarantee that you will not get paid properly? I’m sure this is having an effect on recruitment. One of the reasons that there isn’t a tidal wave of public service employees leaving the public service is that they fear the final reconciliation of their pay situation —meaning if they leave, our members are worried that they will be forfeiting the significant amounts of money the government owes them. Additionally, members are telling us that they are delaying retirement in the hope that Phoenix gets resolved. They are putting off the next stage of their life, a time when they should be relaxing and enjoying the fruits of their many years of hard and dedicated work for the Employer.

Another indicator of the breadth and depth of the problem is how Phoenix and the Employer’s actions regarding pay have affected the application of collective agreements. Members are forced to consider making regrettable decisions to avoid encountering problems with Phoenix.  For example, we found that many members are delaying leaves of absence, promotions, deployments, acting assignments, acting pay and other entitlements to avoid Phoenix pay issues. They don’t ask for overtime pay; they just do the work in the hopes of getting something far down the line. We have heard that managers have little black books to record what they owe employees. An entire informal, secret and error-prone system has arisen because of Phoenix where the rules, protections and rights in collective agreements are circumvented to avoid doing something that results in having your pay suspended—maybe for months. Avoiding the collective agreement has become a survival technique.  

Could you tell us about the Next Generation Human Resources (HR) and Pay Team initiative created by the government? What is it and how is CAPE involved?  

The Next Generation Human Resources and Pay team (NextGen) was established at the Treasury Board of Canada Secretariat to explore a future HR and pay solutions to replace Phoenix. It has been running a number of consultations with all kinds of stakeholders, including private companies and unions, such as CAPE, so that the final solution is innovative, effective and makes the most sense.

Unfortunately, it is not common for the government to involve external stakeholders in conversations about initiatives that can impact federal employees. We appreciate the consultative approach adopted by the government to look for an alternative to Phoenix. When they have not consulted, it does not end well— as we have all seen far too often in the past. Frankly, the proof is in the pudding. The data in the Phoenix system is obviously not reliable, so I am very concerned about how the NextGen system will treat these problematic data. To be perfectly blunt, I am not convinced that we are anywhere near a solution.

 
The federal government also implemented new tax rules to help federal employees who were overpaid by Phoenix that would “require (members) to repay only the amounts deposited into their bank accounts in a prior tax year.”  Is this a victory for federal employees?

Oh, yes. This is a major victory for public service employees, and it comes from constant pressure from their unions. Currently, a salary overpayment for a previous year for which a tax slip has been produced is considered to be a gross overpayment.  This means the overpayment amount includes income tax, EI and Canada Pension Plan (CPP) that would be refunded to the employee by Canada Revenue Agency (CRA) once they reassess their tax returns. In short, the overpayment will be calculated on the net income not the gross income.

I’m sure our members are asking themselves what this means for them! If you have been overpaid in a previous year and the overpayment is not yet recorded in Phoenix, your overpayment may qualify under the new legislation. If your situation qualifies under the proposed legislation, the income tax, EI and CPP will be adjusted on your previous year’s salary once it is recorded in the Phoenix pay system.

In short, Public Service and Procurement Canada (PSPC) will not run the overpayment calculation process and amended tax slips for overpayment amount reported for 2016, 2017 and 2018 until the legislative changes have been implemented in Phoenix.

Accordingly, your compensation advisor will not be able to advise you of the amount of your overpayment until the legislative changes are implemented and PSPC runs the overpayment process in Phoenix.

A manager’s toolkit has been developed by PSPC to help managers to respond to questions from employees on their 2018 tax slips. Members should talk to their managers about it if they have questions

 
Will the present collective bargaining sessions include protections for members affected by the Phoenix pay errors?

The CAPE negotiating teams have developed proposals for the current round of bargaining to provide members with rights with respect to pay administration; however, these proposals must remain confidential at the current time. We hope the Employer will understand that these proposals are just one way (among many) to reassure our members and demonstrate their commitment to a higher level of accountability with respect to paying their employees their owed salaries.

What are your thoughts on Phoenix going forward?

Until a new pay and HR system is implemented, we will have to deal with problems caused by Phoenix. And while there are band-aid solutions applied left and right, Phoenix is too flawed to be fixed. It’s clear—and both the unions and the Employer agree—that Phoenix needs to be replaced entirely.

On a more positive side, since December 2017, when the pilot Pay Pod program began, the overall backlog for the three departments under the pilot was reduced by 30 per cent. In June 2018, Pay Pods were introduced in 13 departments, and over the next 12 months the Pay Pod approach will be expanded to the remaining departments and agencies.  But there is still significant work to be done by these Pay Pods.

The Phoenix fiasco has clearly demonstrated that the Employer needs specialized and focused teams of federal government employees dedicated to working on pay files. It is the best way to manage the complex federal public service pay system. Ironically, it is what we had before the Employer introduced the Phoenix pay system.  The former pay system wasn’t perfect, but it was much better than what we had up until the Pay Pods were introduced. By implementing the Pay Pod process throughout the government, it is obvious that the Employer has come to the same conclusion.

 
What can members do if they’re experiencing Phoenix related issues?

There is a detailed step-by-step process in departments to assist members with pay issues, which offers ways to address the various types of pay problems including log-in or access issues, problems entering overtime, and others.

The information you provide on your pay issue will be prioritized based on the type of financial impact reported, whether you missed a payment, a portion of your pay, you are missing on-leave pay, you are being overpaid or you’re experiencing financial hardship.

At this time, we regret to report that the Employer continues to fail to fulfill its obligation to implement the EC retro pay for the EC Collective Agreement that was signed in 2017, as well as other numerous Phoenix files that remain unresolved. This failure has caused prejudice and damages to our members. 

As always, I strongly encourage our members to contact CAPE when they have unresolved pay issues. We have a highly dedicated team of labour relations officers who will assist them by liaising with compensation officials through the informal channels and mechanisms that are available. CAPE is working diligently with members to look for ways to resolve their Phoenix pay issues. And while we realize some of those problems are harder and sometimes even impossible to solve, our professionals will always explore all avenues.

 
What are the lessons learned from the Phoenix pay system debacle?

There are numerous lessons learned from the Phoenix pay fiasco for the Employer and the bargaining agents

As summarized in the Auditor General’s report 2018, the Phoenix pay system is an incomprehensible failure on all fronts.  The failures of Phoenix caused serious financial, stress, which impacted the health of many of CAPE’s members. The pay problems they experienced are unacceptable and are in violation of the EC and TR collective agreement and the Financial Administration Act.

The Phoenix pay system should have never been adopted. It is a commercial off-the-shelf pay system that required extensive customizations that were extremely risky and unsuitable for the Government of Canada. Before being implemented in Canada, the Phoenix system had failed miserably in Australia and in government operations of social programs in various states in the USA. This information was in the public domain at the time the Government of Canada decided to approve the pay system. It was a rush decision that led to unnecessary suffering for many people. This suffering is not limited to our members but extends to their families and friends as well.

The Phoenix pay fiasco could have been averted. At the heart of the lessons learned is the urgent need to fix the public service culture as highlighted by the Auditor General. It is well documented in the Goss Gilroy report that people inside the government who knew the Phoenix project had serious problems, but they were afraid to speak the truth to those in power because they worried about retaliation. Warnings about Phoenix didn’t make it up to the highest levels of bureaucracy or to the politicians in charge. The launching of Phoenix without adequate testing and backup was reckless and the impacts of failure have been significant.

The ramifications of the Phoenix debacle are widespread.  It has taken an enormous toll on the lives and mental health of federal employees, as well as on their families and friends.

This will be remembered as one of the worst public employee crises of our time. 

 
DO YOU NEED HELP? CONTACT US:  

If you are currently affected by the Phoenix pay system failures and require consultation, please refer to Labour Relations Assignment List to find the labour relations officer assigned to your department or region.