PSAC: Government rushing Phoenix damages payment for federal workers without tax ruling

THE PSAC on Thursday slammed the federal Liberal government for “shamelessly” choosing “the fifth anniversary of the Phoenix pay system disaster to short-change thousands of Public Service Alliance of Canada members on their compensation for years of pay problems.”  

The PSAC said that even though it is in the process of working with Canada Revenue Agency (CRA) to review the taxability of Phoenix damages, the federal government has confirmed that it intends to ignore these efforts and issue the up to $2,500 for its members on March 3 – with taxes deducted. Treasury board provided no explanation for their actions. 

“The government still has time to do the right thing,” said PSAC National President Chris Aylward.  “General damages should not be taxed, so we’re calling on key ministers to immediately intervene to fix this before payments are issued.” 

The PSAC said that “the $2,500 settlement, even if taxed, is still greater than the five days of leave initially offered to PSAC members, but it represents a violation of the language we negotiated into the agreement.” The PSAC maintains that general damages paid to all employees for ‘stress, aggravation, pain and suffering’ and for the late implementation of collective agreements are non-taxable, as CRA has acknowledged other specific damages in the settlement should be treated. 

“It’s a slap in the face to the tens of thousands of PSAC members who suffered years of pay problems, and then worked non-stop during this pandemic to deliver aid and benefits to millions of Canadians in crisis,” said Aylward. 

The PSAC said it will pursue every legal route to secure the full compensation that its members are entitled to. This includes tax challenges that would retroactively see its members reimbursed should the payments be issued as planned on March 3, but its goal remains to avoid any time-consuming and complex tax disputes for our members. 

“Phoenix short-changed PSAC members for years – the last thing they deserve is for the government to short-change them again,” said Aylward. 

PSAC said it will continue to work to resolve this problem and updates will follow in the coming days.