REASONS FOR JUDGMENT
Visser J.
[1]
In 2013, Kevin Russell was an undergraduate
student at Mount Allison University (the “University”) in Sackville, New
Brunswick, and was enrolled in the Bachelor of Science (Honours) program in
Chemistry. In order to complete his Honours degree, Mr. Russell was
required to undertake research and write a thesis. To that end, he asked Maria
Victoria Meli, PhD (“Dr.
Meli”), an assistant professor in the
Department of Chemistry and Biochemistry at the University, if she would
supervise his Honours research. At her suggestion, he also sought “employment”
in the summer of 2013 with the University to undertake research in her lab. In
that respect, he applied for, and obtained, an Undergraduate Student Research
Award (a “USRA”) from the University, which was funded in part by the Natural
Sciences and Engineering Research Council of Canada (“NSERC”)
and covered the period from May 6, 2013 to August 23, 2013
(the “Period”). Mr. Russell subsequently applied for Employment Insurance
benefits with Service Canada, which requested a corresponding ruling on the
insurability and pensionability of the Appellant’s employment with the
University during the Period pursuant to the Employment Insurance Act
(the “EIA”) and the Canada Pension Plan
(the “CPP”), respectively. Following the May 29, 2014 determination
(the “First Ruling”) of the Minister of National Revenue (the “Minister”) that the employment was insurable and pensionable, the University
appealed to the Minister. In a decision dated October 22, 2014 (the “Second Ruling”), the Minister overturned the First Ruling and ruled that the
employment was not insurable or pensionable for the purposes of the EIA
and the CPP. The Appellant has appealed the Minister’s Second Ruling to
this Court. The appeals were heard together on common evidence. The University
was an Intervenor in these appeals.
ISSUES
[2]
The sole issue in this appeal is whether the
Appellant was employed in “insurable
employment” and “pensionable employment” with the
University during the Period for the purposes of paragraph 5(1)(a) of
the EIA and paragraph 6(1)(a) of the CPP, respectively.
[3]
In the EIA appeal, the Minister relied on
numerous assumptions of fact, which were set out in paragraph 8 of the
Minster’s Reply to the Notice of Appeal (the “EI Reply”), in determining that
the Appellant’s employment was not insurable. These assumptions of fact are
reproduced in Schedule A, attached hereto.
While many of these assumptions of fact are not in issue and were supported by
the evidence presented at the hearing of this matter, Mr. Russell
disagrees with a number of these assumptions of fact, and it is thus necessary
to carefully review the evidence presented in these appeals.
[4]
The University is located in Sackville,
New Brunswick, and in 2013 offered five undergraduate degree programs and
the services of a research office.
[5]
Mr. Russell testified and submitted
evidence in the hearing of these appeals. I found him to be a credible witness.
He did not call any other witnesses.
[6]
At the time of the hearing of these appeals,
Mr. Russell resided in Miramichi, New Brunswick and was unemployed.
As noted above, in 2013 Mr. Russell was an undergraduate student at the
University and was enrolled in the Honours Bachelor of Science program in
Chemistry. He completed his third year in the spring of 2013, and was entering
his fourth and final year in the fall of 2013. He graduated in the spring of
2014. He had worked full time in the summer of each of 2010, 2011, and 2012,
and stated that he was able to obtain employment insurance benefits during the
parts of the year when he was not working full time and was attending
University.
[7]
Mr. Russell “worked” on the following three
distinct occasions at the University in 2013 and 2014:
(a) he
worked in Dr. Meli’s research lab during the Period, was paid $6,250 under
the NSERC USRA and was issued a T4A in respect thereof by the University;
(b) he worked
as a teaching assistant from September 2013 to December 2013, was paid $308.88
and was issued a T4 in respect thereof by the University; and
(c) following
his graduation in the spring of 2014, he worked as a paid research assistant
for several months for Dr. Meli and was issued a T4 in respect thereof by
the University.
[8]
Of these three time periods, only the first
(being the Period) is in issue in these appeals. All three parties to these
appeals agree that Mr. Russell was an employee of the University during
the other two time periods. While the third time period was not in issue in
these appeals, it is important to note that the work Mr. Russell undertook
during that time period was a continuation of the research he undertook during
the Period and was for the purpose of working towards a joint publication of
the results of his research with Dr. Meli.
[9]
The Intervenor called two witnesses in these
appeals, namely Mr. David Bruce, the Director of the Office of
Research Services at the University, and Dr. Meli. I found both of them to
be credible witnesses.
[10]
The Respondent did not call any witnesses or
present any evidence, and relied substantially on the witnesses and evidence
submitted by the Intervenor in these appeals.
LAW AND ANALYSIS
[11]
All three parties to these appeals are
substantially in agreement as to the law that applies in these appeals. Mr. Russell,
however, disagrees with the Respondent and the Intervenor both as to the
applicable facts and as to the application of the appropriate legal test to the
facts in these appeals.
[12]
Paragraph 5(1)(a) of the EIA
defines “insurable employment” as follows:
5 (1) Subject to subsection (2), insurable
employment is
(a) employment in
Canada by one or more employers, under any express or implied contract of
service or apprenticeship, written or oral, whether the earnings of the
employed person are received from the employer or some other person and whether
the earnings are calculated by time or by the piece, or partly by time and
partly by the piece, or otherwise;
[13]
Subsection 6(1) of the CPP defines “pensionable employment” for the purposes of the CPP as follows:
6 (1) Pensionable employment is
(a) employment in
Canada that is not excepted employment;
(b) employment in
Canada under Her Majesty in right of Canada that is not excepted employment; or
(c) employment
included in pensionable employment by a regulation made under section 7.
[14]
In addition, subsection 2(1) of the CPP
defines “employment” for the purposes of the CPP as follows:
employment means the state of being employed under an express or implied
contract of service or apprenticeship, and includes the tenure of an office;
[15]
This case is not one of employee versus
independent contractor. Rather, it is one of employee versus financial
assistance provided to a student.
In this respect, I note that there have been numerous cases that have
considered the status of amounts paid by universities to students in respect of
research activities. Most of these cases relate to amounts paid to postdoctoral
fellows, doctoral students and masters students. In Rizak v Minister of
National Revenue,
Justice Graham reviewed the law applicable to these types of cases. In
that case, Mr. Rizak was a doctoral student and during the time in issue
was a graduate research assistant, was paid an annual stipend of $21,000, and
was not considered an employee by the University of British Columbia (“UBC”).
Mr. Rizak also worked for UBC in the same lab in time periods both before
and after the period in issue, and the parties agreed that he was an employee during
those other time periods. In reviewing the case law as it then stood and
determining that Mr. Rizak was an employee of UBC during the time period
under appeal, Justice Graham noted the following at paragraphs 25 and 26:
25 In Caropreso v. R., 2012 TCC 212
(T.C.C. [Informal Procedure]), Justice Woods was also asked to consider whether
a postdoctoral fellow was an employee. She acknowledged that the case law on
the issue was divided. She then set out what she believed was the appropriate
test that should be applied in determining whether a taxpayer has received
funding as a student or been compensated as an employee. At paragraph 20 she
stated:
The root of the difficulty is that
payments to postdoctoral research fellows often have dual elements. The
payments further the education of research fellows and they also provide
compensation for work performed. If the payments are received by virtue of
employment, this takes precedence. However, in making this determination, it
is relevant to consider the dominant characteristic of the payments, whether it
is compensation for work or student assistance.
[emphasis added]
26 I agree with Justice Woods'
conclusions. In my view, the test that she uses is equally applicable to
doctoral students and I adopt it for the purposes of this Appeal.
[16]
While Mr. Russell was an undergraduate
student during the Period, and not a doctoral student as Mr. Rizak was, it
is my view that the dominant characteristic test set out by Justice Graham
in Rizak should also be applied to undergraduate students and is
applicable for the purposes of these appeals. I am also of the view that the
same test applies to both the CPP and the EIA matters under
appeal.
[17]
I note that all three parties argued that this
test, as set out by Justice Graham in Rizak, should apply in this
case. They disagree, however, as to the outcome of the application of that test
to the facts of these appeals. Mr. Russell argues that his case is
essentially the same as the Rizak case, and that the same outcome should
apply. The Respondent and the Intervenor argue that the Rizak case
should be distinguished, as the facts in these appeals are different. It is
therefore necessary to consider the specific facts of these appeals in light of
the dominant characteristic test set out in Rizak.
[18]
In applying the Rizak dominant
characteristic test to this case, it is helpful to review the following summary
of the applicable case law set out by Justice Graham at paragraphs 28 to
32 of Rizak:
28 Graduate students are in a very different
situation than postdoctoral fellows. Graduate students have not yet obtained
their degrees. Their primary reason for being at a university is to obtain
their degrees. For those graduate students who choose to work as graduate
research assistants, their work is geared, at least in part, towards that end.
Therefore, it is important to review how the Court has dealt with cases
involving graduate students.
29 In Hammell v. Minister of National
Revenue, [1994] T.C.J. No. 921 (T.C.C.), a masters student was interested
in researching fish epidemiology. The university did not have a professor who
specialized in fish epidemiology but it did have a professor who specialized in
fish pathology and one who specialized in epidemiology (though not of fish).
Those professors agreed to jointly supervise the student's research. The
research was not connected to any research that the professors were doing. The
student applied to the university for an annual stipend of $20,000. He was
granted the stipend based on the fact that what he was hoping to achieve in his
studies in general meshed with the university's goals. Not all masters students
received stipends. While the student did a lot of work in the department's
laboratories to assist with other people's studies, that work was done on a
voluntary basis. He was not required to do the work. He did it purely to gain
experience in his field and to advance his prospects of ultimately being asked
to join the faculty at the university. The Court held that the student was not
engaged in insurable employment.
30 A similar result occurred in Hospital
for Sick Children v. Minister of National Revenue, [1993] T.C.J. No. 388
(T.C.C.), a case involving a masters student. At paragraph 65 of that decision,
Justice Christie stated:
The
evidence shows that it was accepted by Dr. Riordan and the [student] that
the former was not vested with any real authority to specify the work to be
done by her. This was decided by arriving at a consensus. He said that there
was no instruction or direction involved. It is an academic process whereby
some agreement is reached on the subject of the research. The [student] specifically
stated that Dr. Riordan could not obligate her with reference to areas in
which to do research. Changes that occurred in the focus of the [student]'s
research came about at her instigation. Nor did Dr. Riordan have control
over the manner in which the [student] conducted her research. When asked if he
could tell her what techniques to use, she replied, no he could only make
suggestions in that regard. His evidence is to the same effect. In contrast he
said with reference to the technicians that he designed the experiments and he
analyzed the results. . . .
31 That decision was followed in Nabet c.
Ministre du Revenu national, [1999] T.C.J. No. 79 (T.C.C.), a case
involving a doctoral student, where Justice Lamarre Proulx found the student
not to be an employee. She stated at paragraph 13:
The case
at bar is similar to The Hospital for Sick Children case, supra,
and it is my view that that decision properly sets out the law regarding the
legal status of a student paid out of research funds: there is no insurable
employment if the student is paid for research done as part of a work program
the student has drawn up himself or herself; although a professor may have
helped the student establish the work program, that program remains the
student's program and serves the student's purposes; the student controls the
use of his or her time; the professor is there to give advice; the work is done
for the student's benefit; no services are provided to an employer.
32 A different conclusion was reached in Charron
v. Minister of National Revenue, [1994] T.C.J. No. 47 (T.C.C.). In that
case Justice Archambault found that a masters student was an employee. Like
Mr. Rizak, the appellant in Charron began work before her period of
studies began. At paragraph 10, Justice Archambault stated:
. . . The
evidence established that the appellant provided her services to the payer and
that, in providing her services, she received instructions on the work to be
done and the way in which it was to be done. She was not free to choose which
experiments to do: it was Dr. Moss who decided on the procedure to be
followed. . . .
[19]
Based on the test as set out in Rizak, it
is necessary to determine whether the dominant characteristic of the amount
received by Mr. Russell for the “work” he undertook in Dr. Meli’s
research lab during the Period was compensation for work or student assistance.
This will allow the Court to answer the question of whether the agreement
between the University and Mr. Russell was a contract of employment or an
agreement of financial assistance regarding continuing studies. In undertaking
this analysis, it is my view that it is also instructive to consider the legal
form used by the parties. For example, an arrangement that in substance is the
same from a business or economic perspective may legally be formed in different
manners.
[20]
Further to his testimony and that of
Dr. Meli, Mr. Russell argued that:
(a) it
was his intention to obtain insurable and pensionable employment for the summer
of 2013, and that is what he understood he had obtained at the University;
(b) his work
in Dr. Meli’s lab during the Period was the same as, or very similar to,
that of other students who were treated as employees by the University;
(c) during
the Period, there were four Honours students working in Dr. Meli’s lab,
two of whom were funded by Dr. Meli’s research grant and two of whom were
funded by NSERC USRA grants;
(d) the two
Honours students who were funded by Dr. Meli’s grant were treated as
employees by the University, and the other two were treated as award
recipients, even though there was no material difference between the work
undertaken by the four of them;
(e) the
research project he worked on was one he selected from a number of topics
suggested by Dr. Meli and was related to research Dr. Meli was
undertaking, and his research was undertaken under her supervision and
instruction;
(f) the work he undertook in 2014 for Dr. Meli, for which he was
considered to be an employee, was a continuation of the work he undertook in
2013 during the Period and was for the purpose of tying up loose ends and to
prepare it for publication;
(g) he
was told that he could be paid as an employee or under an NSERC USRA, and
that the NSERC USRA was just another avenue to be paid;
(h) he applied
for an NSERC USRA as encouraged by Dr. Meli to save her lab funding;
(i) during the Period, he submitted progress reports, met deadlines,
discussed research methods and results with Dr. Meli, and generally worked
from 8:30 a.m. to 4:30 p.m. each weekday (totalling 35 hours per
week);
(j) if he was absent from work, he had to let Dr. Meli know and
make arrangements to make up lost time; and
(k) he was not
advised by the University that the NSERC USRA was not insurable employment
for EI purposes.
[21]
As previously noted, while the Respondent and
the University agree that the test set out by Justice Graham in Rizak
applies in this case, they argue that this case should be distinguished from Rizak
based on the facts. In particular, they argue that the dominant characteristic
of the payments made to Mr. Russell by the University during the Period
was that of financial assistance provided to an Honours student, and that this
case is more similar to Bekhor v Minister of National Revenue, where the
relationship was found to be that of an advanced student and professor, and not
an employee and employer. For the reasons that follow, I agree.
[22]
In this case, based on all of the evidence, it
is my view that there was a dual element to the work undertaken by
Mr. Russell in Dr. Meli’s lab during the Period. His work related to and
furthered the Honours thesis he was required to complete in his fourth year at
the University. However, with the assistance of Dr. Meli, he had chosen a
research project that was congruent with Dr. Meli’s general research
program, and there was therefore a hope on the part of Dr. Meli that his
research would also eventually benefit her ongoing research. Dr. Meli,
however, testified that the short term purpose of Mr. Russell’s research
during the Period was to further his Honours thesis, which he submitted in the
spring of 2014. Based on all of the evidence, it is my view that the dominant
characteristic of the payments to Mr. Russell is that of financial
assistance to an Honours student working on his thesis, and that any benefit to
Dr. Meli or the University was secondary.
[23]
In terms of the legal form of the relationship
between the parties, it is also clear that Mr. Russell applied for, and
was granted, an NSERC USRA which was funded in part by NSERC and in part
by the University.
The process of applying for and obtaining an NSERC USRA at the University,
and the resulting legal relationship, are very different than in the case of an
employee. The University must administer the NSERC USRA in accordance with
the criteria set out by NSERC, and pays recipient students such as Mr. Russell
through its accounts payable department, not through its payroll department, as
it does not consider award recipients to be employees.
[24]
Based on the foregoing, it is my view that there
was not a contract of service between Mr. Russell and the University (or
Dr. Meli) in respect of the payments made during the Period under appeal.
Rather, Mr. Russell applied for and obtained financial assistance for his
thesis research in the form of an NSERC USRA.
[25]
In the Rizak case, I note that Mr. Rizak’s
work for Dr. Wang was governed by the terms of Dr. Wang’s grant, he
was paid a stipend by the University from Dr. Wang’s grant, and the amount
of the stipend was determined and varied by Dr. Wang. In contrast, Mr. Russell
applied for, and was awarded, an NSERC USRA in his own name based on his
own research proposal. It is my view that this case is distinguishable from the
Rizak case.
[26]
While the income tax treatment of the
NSERC USRA was not in issue in these appeals, I note that student awards
may be exempt from income tax pursuant to paragraph 56(1)(n) and
subsection 56(3) of the Income Tax Act,
provided that an amount received “in respect of, in the course of or by virtue of an office or
employment” is taxable as employment income. In
this case, the University issued a T4A to Mr. Russell, which included both
the amount of the NSERC USRA and his scholarships. In this respect, I note
that Mr. Russell testified that he did not report his NSERC USRA
earnings (reflected on the T4A issued to him by the University) as employment
income in his 2013 income tax return filed with the Minister and did not pay
any income tax thereon. Thus, it is my view that both the University and
Mr. Russell reported the NSERC USRA payments for income tax purposes
on the basis that they were not employment income, but were student awards. This
is consistent with my determination herein.
CONCLUSION
[27]
Based on all of the foregoing, it is my view
that there was no contract of service between the University and Mr. Russell
during the Period, and that therefore he was not employed by the University
during the Period in either “insurable
employment” or “pensionable employment”. Accordingly, the decisions of the Minister under appeal herein are confirmed
and the appeals are dismissed, without costs.
Signed at Ottawa, Canada, this 2nd day of June 2016.
“Henry A. Visser”
Schedule A
Excerpt from
Respondent’s Reply in File 2015-150(EI) – Assumptions of Fact
Assumptions
8. In
determining that the Appellant was not engaged in insurable employment with the
Payer for the Period, the Minister relied on the following assumptions of fact:
The Payer
(a)
the Payer was a
university that operated under the authority of the Mount Allison University
Act, 1993, of the Legislative Assembly of the Province of New Brunswick;
(b)
the Payer offered five
undergraduate degree programs, and the services of a research office;
(c)
the Payer’s university
campus was located at Sackville, New Brunswick;
The Appellant
(d)
the Appellant was
enrolled as an undergraduate student with the Payer in their Bachelor of
Science program with an Honours, major in chemistry;
(e)
the Appellant contacted
Dr. Vicki Meli (“Dr.
Meli”) to request supervision for his Honours thesis, in the fall
of 2012;
(f)
the Payer held an
information session for students interested in applying for the Summer Student
Research Awards which included the Undergraduate Student Research Awards
("USRA") funded by the Natural Sciences and Engineering Research
Council of Canada ("NSERC"), in January 2013;
(g)
the NSERC's goals for
the USRA were:
i. to stimulate student interest in research
in the natural sciences and engineering;
ii. to encourage students to undertake graduate
studies and pursue a research career in these fields; and
iii. to provide financial support , through the
academic setting of host universities, for students to gain research work
experience that complemented their studies;
(h)
(the work funded by the
USRA could be used as part of course work or an Honours thesis in an
undergraduate program;
(i)
a student who was
awarded an USRA was required to do their work under the supervision of a
faculty member who held an active NSERC research grant;
(j)
an USRA had a value of
$4,500 for a tenure of 16-weeks on a full-time basis;
(k)
host universities were
required to supplement the USRA by at least 25% of its value using other
sources, such as university funds, NSERC grants, or any other research funds;
(l)
the NSERC would not
reimburse a host university for any period during which a student worked
part-time, or took vacation leave, during the tenure of 16-weeks;
(m)
the NSERC allocated an
annual quota of USRAs to each eligible host university;
(n)
the NSERC delegated the
USRA application process, and the selection process to these host universities;
(o)
the host universities
selected students for the awards based on their assessments of the students’
academic records and research aptitudes within the objectives of the USRA and
the guidelines provided by the NSERC;
(p)
a student could apply
for a USRA at a university other than the one at which they were enrolled as a
student;
(q)
a student who was
awarded a USRA at a university other than the one which they were enrolled
could apply to the NSERC for a travel allowance in addition to their USRA;
(r)
the Appellant applied
to the Payer for a NSERC USRA Summer Undergraduate Award in January 2013;
(s)
the Appellant's
application included:
i.
the Appellant's written
Proposal for his research project in nanotechnology;
ii.
the Appellant's written
Statement of Preparation ;
iii.
Dr. Meli's
Certification Letter; and
iv. Dr. Meli's Reference Letter;
(t)
the Appellant chose the
subject of his research project largely on his own;
(u)
the Appellant prepared
his Proposal largely on his own;
(v)
the Appellant was
offered a NSERC USRA for the tenable period from May 6, 2013 to August 23, 2013
by letter dated February 15, 2013;
(w)
the Appellant accepted
the USRA by email on March 5, 2013;
(x)
the Appellant was
required to submit a report of the research accomplished, to the Dean's Office,
by September 13, 2013, which would be provided to the funders of the award;
(y)
the Appellant had
finished the 3rd year of his four-year undergraduate program when he began his
USRA funded research;
(z)
the Appellant worked
the hours of his choice;
(aa)
the Appellant met the
general stipulations of the USRA to be devote himself to his project for a
maximum of 35 hours a week;
(bb)
the Appellant chose his
own methods to conduct research ;
(cc)
he Appellant chose the
timing of his work;
(dd)
the Appellant could
pursue his own ideas or experiments;
(ee)
Dr. Meli provided the
Appellant with mentorship and guidance ;
(ff)
the Appellant performed
his work at laboratories located on the Payer's campus;
(gg)
the Payer owned and
maintained all the tools, equipment, and materials in the laboratories;
(hh)
the Appellant had
access to, and use of, the laboratories, tools, equipment, and materials as an
enrolled student;
(ii)
the research from the
Appellant's work was his property;
(jj)
the Appellant used the
research from his work to complete his Honours thesis for his undergraduate
program;
(kk)
the Appellant completed
his Honours thesis in the academic year 2013/2014;
(ll)
the Appellant graduated
from his undergraduate program in May 2014;
(mm)
the Appellant's award
was for $1,562.50 per tenable month, for a total of $6,250.00 for the Period,
which was inclusive of the $4,500 from NSERC;
(nn)
the Appellant and Dr.
Meli signed a pay advice, by the 10th of each month, to attest to the
benefactors who contributed funds for the Appellant's award, that:
i.
the Appellant worked on
the project each month;
ii.
the Appellant did his
work responsibly;
iii.
the Appellant worked
under Dr. Meli's supervision and consulted with her regularly; and
iv.
the Appellant did not
have other conflicting activities that diminished or restricted the Appellant
from his work on the project;
(oo)
the Payer paid the
Appellant $1,562.50 for each of May, June, July, and August of 2013, after
receipt of a duly signed pay advice;
(pp)
the Payer did not take
any deductions from their award payments to the Appellant;
(qq)
the Payer provided the
Appellant with a T4A slip for the 2013 year, which reported the amount of
$10,250.00, which was the total of:
i.
$6,250.00 paid under
the NSERC USRA Summer Undergraduate Award; and
ii.
$4,000.00 for an
entrance scholarship received by the Appellant, from the Payer, which was paid
to him at $2,000 per semester for a total of $16,000 over 4 years;
(rr)
the Payer paid the
Appellant $308.88 for his services as a teaching assistant from September 2013
to December 2013;
(ss)
the Payer provided the
Appellant with a T4 slip for the 2013 year in the amount of $308.88 with a
deduction of $5.82 for Employment Insurance premiums;
(tt)
the Appellant was not
in receipt of a NSERC USRA in 2014;
(uu)
the Appellant's intent
was that he was the Payer's employee; and
(vv)
the Payer's intent was
that there was an academic relationship and not an employment relationship in
regards to the Appellant's USRA funded research during the Period.
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