In a system for encoding/decoding phase modulated data, each data word (520) includes 8 data bits, a parity bit, and ends with two coding bits. A transmitted BPSK signal is demodulated into a recovered signal that is decoded using a rotating reference frame that tracks the signal phase. The signal is compared against the reference frame and the signal phase characteristics are recorded for determining a bit position of a large phase shift most likely to cause a data inversion. A single bit error detected (2310) with the parity bit is corrected (2520) by inverting the bit having the smallest measured amplitude in the recovered signal of the data word. An inversion detected (2550) by the two coding bits is corrected (2720, 2725) by inverting each successive bit starting from the position with the large phase shift. Parity is rechecked (2730), and any single bit error is corrected (2735).