Citation: 2012 TCC 13
Date: 20120109
Docket: 2010-2905(EI)
BETWEEN:
LE CONSEIL ATLANTIQUE DU CANADA –
THE ATLANTIC COUNCIL OF CANADA,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
AND BETWEEN: Docket: 2010-2933(CPP)
LE CONSEIL ATLANTIQUE DU CANADA –
THE ATLANTIC COUNCIL OF CANADA,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
AMENDED REASONS FOR JUDGMENT
D'Auray J.
[1]
The appellant is a
charitable organisation, its objects and purposes are :
to advance education and other purposes beneficial to the community
in connection with Canada’s
external affairs and Canadian participation in the Atlantic Institute and the
Atlantic Treaty Association.
[2]
The goal of the
Atlantic Institute (AI) is to facilitate the exchange of ideas on
military, economic, political and cultural issues on both side of the Atlantic.
The Atlantic Treaty Association (ATA) seeks to foster a better
understanding of NATO issues.
[3]
Ms. Luisa Sargsyan
joined the appellant in July 2007 under the Security and Defence Forum
Internship Program (SDF Internship Program). She left the appellant in
October 2008.
[4]
The questions that I
have to decide on these appeals is whether Ms. Sargsyan was employed in
insurable employment with the appellant within the meaning of paragraph 5(1)(a)
of the Employment Insurance Act (EIA) and in pensionable
employment within the meaning of paragraph 6(1)(a) of the Canada
Pension Plan (CPP) during the period from January 1, 2008 to
September 30, 2008.
[5]
By agreement of the
parties, the appeals under the EIA and the CPP were heard on common evidence.
Facts
[6]
Two witnesses testified
on these appeals namely, Ms. Julie Lindhout and
Ms. Luisa Sargsyan. Their testimony differed on several important
points, making it necessary for me to review the facts in detail.
[7]
Ms. Lindhout is the
president of the appellant and testified on its behalf.
[8]
She stated that the
appellant is a non-governmental organization, registered as a charitable
organization. It was incorporated on March 7, 1966.
[9]
She explained that the
appellant is a small organization, relying on part-time and contract staff as
well as volunteers. At the time of the hearing, there were five volunteers and
interns. The budget of the appellant varies from year to year; it is usually
around $125,000.
[10]
The appellant’s
activities include issuing newsletters on issues relating to Canada’s external affairs, national defence, security and
NATO; organizing round tables on issues of interest to the appellant; and in
2007 hosting the 53rd General Assembly of the ATA. In partnership
with other organizations, the appellant also gives seminars on NATO issues to
students both in and outside of Canada.
[11]
Ms. Lindhout explained
that Ms. Sargsyan joined the appellant as an intern under the SDF Internship
Program in July 2007. She stayed one year under the Program. Upon Ms.
Sargsyan’s request, her stay was subsequently extended for three months under a
Bank of Nova Scotia scholarship. She left the appellant in October 2008. All
the evidence given by the parties on these appeals related to the SDF
Internship Program There was no evidence that either the nature of the
relationship or the work changed under the Bank of Nova Scotia scholarship.
[12]
The SDF Internship
Program is intended to provide relevant work experience opportunities for
recent MA graduates with a background in security and defence. I have set out
below a description of the Program that was filed by the appellant, under
Exhibit A-1, Tab 2.
DND Policy Group Defence and Academic Programs
The security and Defence Forum (SDF)
SDF Internship Program
Objective: The SDF Internship Program is intended to promote relevant work
experience opportunities for recent MA graduates with a background in security
and defence, which will complement their studies. The internship provides for a
year-long placement in a research or related position in a Canadian
organization, excluding universities and government. Placements in Canadian
government offices outside Canada (e.g., embassies, NATO, international organizations) may also be
considered.
Relevant Fields: Internships related
to current and future Canadian security and defence issues and their political,
international, historical, social, military, industrial and economic dimensions
are encouraged. Applicants must clearly explain in their proposal the
relationship between their work plans and Canadian security and defence issues.
Work in the pure or applied sciences is ineligible.
Application must demonstrate relevance to contemporary Canadian
security and defence issues. These include, but are not limited to:
·
Failed or failing states
·
Terrorism
·
Weapons of Mass Destruction
·
Regional flashpoints
·
Canadian Forces Transformation, including
integrated and unified approaches to operations
·
The Defence of Canada
·
Canada-United States defence relations
·
The Canadian Forces’ international role
·
The integrated Defence, Diplomacy and
Development (“3D”) approach to conflict and post-conflict situations
·
Defence procurement and management
·
National Defence’s support to other government
departments and agencies
·
The Selection Committee will not consider
incomplete applications, handwritten applications/ references or applications
that do not adhere to length and font requirements. It is the candidate’s
responsibility to ensure that the application is complete.
Value: Internships are valued at up
to $35,000 for twelve months, pro-rated for shorter periods of time. Participating
organisations are encouraged to supplement this amount with additional funds.
Number: Up to four internships are
available. The Department of National Defence reserves the right to change the
final number and value of internship awarded depending upon the level of
response and the quality of applications for this program and others within the
Security and Defence Forum.
Duration: Maximum of 12 months. The
award may not be renewed.
Tenability: Internships are tenable
with a range of security and defence related institutions. More than one
application may be made. Students must obtain proof of agreement from their
respective supporting organizations before submitting an application to the
Association of Universities and Colleges of Canada (AUCC). Universities and government
departments or agencies in Canada are excluded. A list of potential organizations and organizations
who have hosted internships in the past is available at Annex A.
Conditions: All applicants must be
Canadian citizen or permanent residents at the time of application and hold a
Master’s degree before taking up the award. On completion of the
internship, one copy of the thesis, or a reasonably detailed account of the
research undertaken, must be submitted to the Directorate of Public Policy,
Department of National Defence, no later than 1 October 2001. Publications,
papers, theses or unpublished conference presentations submitted must include
an executive summary of at least one paragraph but no greater than two pages.
Acceptance of Security and Defence Forum funding implies permission to
circulate candidate’s work within the Department of National Defence.
Successful applicants will agree to the use of their names and/or images for
inclusion in Security and Defence Forum promotional material.
Adjudication: Following the receipt
of the complete application package by the AUCC, a sub-committee of the
Security and Defence Forum’s independent Selection Committee will evaluate all
applications on the basis of academic merit. The selection Committee of the
Security and Defence Forum will then consider based on academic merit,
contribution to the Security and Defence Forum, and overall merit and relevance
to Canadian security and defence, as indicated in the “Fields of Study”
section. Decisions are final and are not open to appeal.
Application Deadline: February 1,
2006. Due to the need to allow sufficient time for processing and reviewing
applications, applications will not be sent out after January 23, 2006.
Application Forms
Or contact:
Canadian Awards Program
Association of Universities and Colleges of Canada
350 Albert Street, Suite 600
Ottawa, Ontario
K1R 1B1
Telephone: (613) 563-1236
Facsimile: (613) 563-9745
E-Mail: awards@aucc.ca
Internet: www.aucc.ca/dnd.html
[My
emphasis]
[13]
Ms. Lindhout explained
that from 2006 to 2010, the SDF Internship Program was administered by the
Association of Universities and Colleges of Canada (AUCC). Before 2006,
it was administered directly by the Department of National Defence (DND)
and in 2010, the DND resumed administration of the Program.
[14]
In order to qualify for
an internship under the SDF Internship Program, an applicant has to find an
organization that is willing to act as a host. In December 2006, Ms. Sargsyan
called Ms. Lindhout to see if the appellant would be ready to act as host for
her under the Program. Ms. Lindhout testified that Ms. Sargsyan appeared quite
interested in having the appellant serve as her host organization, indicating
that she wished to learn how a non-governmental organization worked.
[15]
On January 10, 2007,
Ms. Lindhout, on behalf of the appellant, wrote a letter to the AUCC, stating
that the appellant would be pleased to accept Ms. Sargsyan as an intern
under the SDF Internship Program. The letter is marked as Exhibit A-1, Tab 5.
[16]
On May 29, 2007, Ms.
Sargsyan was informed by the AUCC that she had been selected as recipient for
the scholarship awarded by the DND under the SDF Internship Program for the
2007-2008 academic year. On June 11, 2007, Ms. Sargsyan signed the award
acceptance form. I am reproducing the letter sent by the AUCC to Ms. Sargsyan
and the award acceptance form signed by Ms. Sargsyan.
Association of Universities Association des
universités
and Colleges of Canada et
collèges du Canada
May 29, 2007 AUCC ID.: xxxxxxxxxxxx
Ms. Luisa Sargsyan
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxx
CANADA
Dear Ms. Luisa Sargsyan,
Subject : Department of National Defence – The Security and
Defence Forum (SDF) Internship : INTERNSHIP
Congratulations! I am pleased to inform you that you have been
selected as a recipient for the above-noted scholarship for the 2007-2008
academic year. The details of your scholarship are as follows:
Maximum Tenure of Award: 1 year,
non-renewable.
Conditions of your award:
On completion of the internship, one copy of a thesis or reasonably
detailed account of any research undertaken and of your year’s experience must
be submitted to the AUCC who will in turn forward it to DND no later than
October 1, 2008.
Proposed Institution: Atlantic Council of
Canada.
Payment information:
Payment type Payment Period Amount Currency
Payable to
General Sept-Dec $17,500 (CDN) Institution
General Jan-Apr $17,500 (CDN) Institution
Report/Thesis Sep-Apr $ 0 (CDN) **NO PAYMENT
Please note the following:
These funds are disbursed in two instalments, first in September and
the second in January. Note: Your second instalment in January will be
conditional upon receipt (to AUCC) of a report of your accomplishments during
your first semester/work year and a workplan for the next semester. If you
withdraw from your program, you must repay the scholarship.
As scholarship funds are considered taxable income, you will receive
a T4A each year.
Your payment(s) will be processed upon receipt of a signed copy of the
Award Acceptance Form attached and the required documentation noted above.
I wish you all the best with your studies this year.
Sincerely,
(s) G Kerr
Ginette Kerr
Program Officer
Higher Education Scholarships
600-350 Albert Ottawa ON
Canada K1R 1B1
Phone/ Tél. : (613) 563-1236 Fax/Téléc. : (613) 563-9745
www.aucc.ca
[My emphasis]
*********************************
Association of Universities Association des
universités
and Colleges of Canada et collèges
du Canada
AWARD ACCEPTANCE FORM
May 29, 2007
AUCC ID.: xxxxxxxxxxx
Ms. Luisa Sargsyan
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxx
CANADA
SCHOLARSHIP
PROGRAM : Department of National Defence – The Security and Defence Forum
(SDF) Internship : INTERNSHIP
PROPOSED
INSTITUTION: Atlantic Council of Canada
Please
indicate below your student number (if known), your Social Insurance Number
(required for income tax purposes), and the institution you will be attending
if it is different from the one noted above. This form must be signed and
returned to the Association of Universities and Colleges of Canada at the
address below no later than July 27, 2007.
Student Number
N/A
Social
Insurance Number XXXXXXXXXXX
Institution Atlantic
Council of Canada
(ACC)
I, Luisa Sargsyan / /decline
(circle one) the above noted scholarship.
(print your name)
My proof of registration: _____ is attached ___ will be
forwarded at a later date
Signature Luisa
Sargsyan Date June
11, 2007
600-350 Albert Ottawa ON Canada K1R 1B1
Phone/ Tél.: (613) 563-1236 Fax/Téléc.: (613) 563-9745
www.aucc.ca
[17]
Ms. Sargsyan commenced
her internship with the appellant in July 2007 instead of August. Ms. Lindhout
testified that Ms. Sargsyan had asked to start early; she told Ms. Lindhout
that she was unhappy with her job in Montreal. Ms. Lindhout
agreed that she could start in July.
[18]
The scholarship of
$35,000 was given by the AUCC to the appellant in two instalments of $17,500.
[19]
The appellant did not
follow the payment schedule set out in the letter sent to Ms. Sargsyan by the
AUCC, namely one instalment of $17,500 to be paid in September and a second
instalment of $17,500 to be paid in January. Instead, the appellant paid Ms.
Sargsyan monthly instalments of $2,900 except for the final monthly instalment,
which was $3,200. Ms. Lindhout testified that the appellant adopted this
payment schedule because in the past, interns had indicated a preference for
monthly payments and the DND had paid interns in this manner when it
administrated the SDF Internship Program.
[20]
In order for Ms.
Sargsyan to receive the second instalment of $17,500 via the appellant, the SDF
Internship Program required that she submits a report of her accomplishments
during her first semester/work year and a work plan for the next semester.
Another condition of the Program required Ms. Sargsyan to submit, at the
completion of the internship, a thesis or a reasonably detailed account of any
research undertaken during her internship. Both the interim report and the
final report had to be submitted to the AUCC. The AUCC was to forward the final
report to the DND by no later than October 1, 2008. There was no requirement
that either report be submitted to the appellant.
[21]
Ms. Lindhout testified
that she never saw the initial work plan, the mid-year work plan or the final
report prepared by Ms. Sargsyan under the SDF Internship Program. They were all
sent directly by Ms. Sargsyan to the AUCC.
[22]
Ms. Lindhout testified
that she told Ms. Sargsyan that no deductions would be taken at source from the
monthly instalments and that Ms. Sargsyan stated that she was fine with this.
[23]
Ms. Lindhout stated
that Ms. Sargsyan did not have fixed hours of work. She said, however, that Ms.
Sargsyan was usually at the office between 9.00 am and 5.00 pm. There were no
attendance records and no one at the appellant kept track of her time. She used
an office computer; however when she was away from the office the computer was
used by other interns. There were more interns and volunteers than the
appellant had computers.
[24]
Ms. Lindhout testified
that Ms. Sargsyan, as an intern for the appellant, was given different tasks
that were consistent with the objectives of the SDF Internship Program, namely:
-
she was the
editor-in-chief of the appellant’s corporate newsletter, and wrote some
articles with respect to defence matters for the newsletter: see Exhibit A‑1,
Tab 11. All the interns had the opportunity to write in the newsletter;
-
she prepared minutes at
some of the round tables on issues of security and defence. Interns were not
required to attend these round tables but Ms. Sargsyan chose to do so. The
understanding was that if interns attended they had to prepare a report;
-
she prepared the
minutes for the Executive Committee meeting over a six month period. According
to Ms. Lindhout, her attendance at the Executive Committee was a way for her to
learn about the governance of a non-governmental organization;
-
she participated in the
appellant’s graduate essay contest on Afghanistan, although
Ms. Lindhout stated that Ms. Sargsyan’s role was limited to putting the notice
for the competition on the appellant’s web site;
-
she did some
administrative work such as answering the phone, but this was very rare
occurring only when the administrative assistant was absent.
[25]
Ms. Lindhout stated
that Ms. Sargsyan’s major project as an intern was to put in place a newsletter
that would bring attention to events taking place in different parts of the
world. The newsletter would provide objective analyses of current events in the
Middle East, Africa and throughout the Euro-Atlantic world on
a variety of topics related to politics, economics, security and NATO. The
newsletter was named “In Focus Transatlantic” (In Focus). The newsletter
was Ms. Sargsyan’s idea and Ms. Lindhout approved its publication under the
name of the appellant.
[26]
Ms. Lindhout stated
that she thought that the In Focus newsletter was a good project for Ms.
Sargsyan since the topics dealt in the In Focus newsletter were in line with
the SDF Internship Program. Ms. Sargsyan produced 10 or 11 editions of In
Focus. The In Focus letter was distributed to DND.
[27]
Ms. Lindhout also stated
that although the In Focus newsletter was a very good idea, it was the
type of newsletter the appellant would not normally publish as it did not have
sufficient resources.
[28]
When asked why In Focus
continued being produced after Ms. Sargsyan left, Ms. Lindhout answered
that the interns who joined the appellant after Ms. Sargsyan showed an
interest in continuing to publish it. Ms. Lindhout stated that she would not
hesitate to stop publishing In Focus if interns lost interest in working on it.
[29]
Ms. Lindhout also
testified that, Ms. Sargsyan attended some conferences under the SDF Internship
Program, namely:
-
the 53rd
General Assembly of the ATA, hosted by the appellant, from October 31 to
November 2nd, 2007 in Ottawa. According to Ms. Lindhout, Ms.
Sargsyan’s work for that conference consisted of researching background
material for participants, and assisting with the delegation list and the
registration of delegates. She also attended the conference. Most of Ms.
Sargsyan expenses for the conference were paid by the DND, with the appellant
covering the cost of some meals;
-
the Department of
National Defence Security and Defence Forum in Ottawa
on March 4, 2008. Ms. Lindhout testified that Ms. Sargsyan was invited by the
DND which paid all her expenses;
-
a conference on April
30, 2008 in Toronto, where international, peace and security
issues were discussed. Ms. Sargsyan prepared a report for publication. The
conference was organised by the appellant;
-
the Young Atlanticist
Summit in Bucharest organised by the ATA. The ATA funded most
of Ms. Sargsyan’s expenses for the Summit with the
appellant paying a small part.
[30]
In cross-examination,
Ms. Lindhout stated that she did not tell Ms. Sargsyan what to write or even
what type of direction to take in her writing. Ms. Lindhout testified that she
reviewed Ms. Sargsyan’s work. This was particularly so when Ms. Sargsyan was
writing on behalf of the appellant as the appellant’s Board of Directors
expected her to do so. She stated that she provided her comments to Ms. Sargsyan
in an academic style of supervision. She added that Ms. Sargsyan was under the
SDF Internship Program in order to learn and get some practical experience.
[31]
Ms. Lindhout stated
that Ms. Sargsyan set her own deadlines for publishing In Focus as well as
the appellant’s newsletter. Ms. Lindhout’s only concern was that deadlines
chosen be met for publication purposes.
[32]
Ms. Lindhout stated
that Ms. Sargsyan was away from the office for approximately eight and one half
weeks :
one week to visit her sister in New Jersey; one week off before the Summit in
Bucharest; one week in Italy; three and one-half weeks to join her fiancee in
California at Christmas (the appellant’s office was closed for two of these
weeks). Ms. Lindhout’s stated that she would have not authorized as much time
away from the office if Ms. Sargsyan had been an employee of the appellant.
[33]
Knowing that the SDF
Internship Program was only for a year, on January 21, 2008, Ms. Sargsyan
wrote to Ms. Lindhout and Ms. Lindhout’s colleague, Mr. McKenna, stating
that she had a strong interest in applying for the Junior Fellowship Program
with the new Canadian International Council (CIC). She asked if they
could review a research proposal she had prepared for the CIC and if they would
provide her with letters of recommendation.
[34]
Ms. Lindhout provided
comments on the research proposal and provided her with a letter of
recommendation supporting her application with the CIC.
[35]
Near the end of the SDF
Internship Program in August 2008, Ms. Sargsyan had not yet found a place to
work. According to Ms. Lindhout, Ms. Sargsyan was in great despair, she had not
found a job and she had not been chosen for the CIC Junior Fellowship Program.
Ms. Sargsyan asked Ms. Lindhout if she could stay on with the appellant in
order to give her a chance to develop more possibilities to find another job.
[36]
The appellant had no
funds to keep Ms. Sargsyan once the SDF Internship Program ended. In order to
accommodate Ms. Sargsyan, Ms. Lindhout looked into obtaining the Bank of Nova
Scotia scholarship of $10,000 for her. The scholarship had not yet been
awarded. Ms. Lindhout went to the appellant’s Board of Directors and asked that
the scholarship be given to Ms. Sargsyan. The Board accepted Ms. Lindhout’s
request and Ms. Sargsyan was able to stay with the appellant for three
additional months.
[37]
After leaving the
appellant at the beginning of October 2008, Ms. Sargsyan took a position with
the Ministry of College and Universities of Ontario on a research contract,
which ended in March 2009.
[38]
Ms. Lindhout testified
that Ms. Sargsyan called her (it would have been around March 27, 2009) and
asked if the appellant could prepare a record of employment (ROE)
indicating that she had 12 insurable hours. Ms. Lindhout signed such a ROE on
March 27, 2009: see Exhibit A-1, Tab-13. Ms. Sargsyan did not tell
Ms. Lindhout why she wanted the ROE to indicate 12 hours.
[39]
On April 2, 2009, Ms.
Sargsyan wrote an e-mail to Ms. Lindhout asking her to amend the ROE to
indicate her total insurable hours (1855) and total insurable earnings ($
20,800) with the appellant: see Exhibit A-1, Tab 14.
[40]
At that point, Ms.
Lindhout realized that if she were to provide Ms. Sargsyan with an amended
ROE as requested by Ms. Sargsyan, she would have to advise the appellant’s
Board of Directors, as it would go against the past practices of the appellant.
[41]
She therefore sent a
revised ROE indicating 1,855 hours, representing 15 months at 35 hours per
week, as the total insurable hours and 0 as the total insurable earnings with a
note indicating that :
[…] Although she worked a regular 35 hours per week, no deductions
were made because her position was an internship funded as a scholarship by the
Department of National Defence for 12 months and by Scotia Bank for another 3
months. The money was provided to the Atlantic Council of Canada to be paid out
to Ms. Sargsyan on monthly basis.
[42]
The appellant prepared
a T4A in respect of Ms. Sargsyan indicating other income in the amount of
$26,000 for the 2008 taxation year and $17,400 for the 2007 taxation year: see
Exhibit A-1, Tab-9. On April 6, 2009, Ms. Sargsyan requested that the T4A be
amended by the appellant to indicate that the Box
38 income was from a scholarship: see Exhibit A-1, tab-17.
[43]
Ms. Sargsyan testified
on behalf of the respondent.
[44]
Ms. Sargsyan has a
Masters in International Security from the University of Denver. She stated that she applied under the SDF Internship
Program in 2007. In order to qualify for the SDF Internship Program, she had to
ensure that a host organisation was ready to accept her as an intern for twelve
months. The aim of the internship was to promote relevant work experience which
would complement her studies.
[45]
With respect to her
work during her internship with appellant, Ms. Sargsyan’s testimony was
largely similar to that of Ms. Lindhout. There were however slight differences
in her description of the tasks she performed and the time spent on those
tasks. Ms. Sargsyan also stated that all the work she did was in relation to
the appellant’s activities. By way of example she mentioned:
-
she did the project
costing and prepared the web message for a graduate essay contest on Afghanistan and chose the three best essays;
-
her work as editor-in-chief,
for the corporate and the In Focus newsletters;
-
her work on the 53rd
General Assembly of the ATA Conference;
-
her work on different
conferences;
-
administrative tasks
for the appellant.
[46]
With respect to the In
Focus newsletter, Ms. Sargsyan confirmed that it was her main project as an
intern for the appellant and that it was her idea to produce it. She testified
that she did not own the copyright for In Focus, it was owned by the appellant.
[47]
She stated that before
starting a project she needed Ms. Lindhout’s blessing and every thing she did had
to be run by Ms. Lindhout.
[48]
She testified Ms.
Lindhout was her supervisor. She stated that she was expected to be at work
from 9:00 am to 5:00 pm, that she had to work at the appellant’s office
premises, and that she had to ask the permission to be away from the office.
[49]
She agreed with Ms.
Lindhout’s testimony regarding the time she was away from the office but stated
that she had asked permission to be away. She stated that she had stayed a week
longer than expected in California at Christmas because she had had an ear
infection and she could not fly until she was better.
[50]
She stated that in
order to perform her work she used the desk, telephone, computer and faxes of
the appellant. She stated that she had her own laptop but she never used it for
her work with the appellant.
[51]
She stated that she did
not choose to be paid on a monthly basis. This method of payment was determined
by the appellant. She also stated that she did not have a GST number and did
not claim expenses in her returns for the 2007 and 2008 taxation years. She
stated that she did not know what a T4A was and that she never discussed the
issue of source deductions with Ms. Lindhout or anyone else from the appellant.
[52]
With respect to her
application for the CIC Junior Fellowship, she stated that she prepared her
application and research proposal on her own time and not on the SDF Internship
Program’s time.
[53]
In cross-examination,
she explained that she moved to Canada in 2006, and had worked in Montreal as an office manager for International Jewellery
before joining the appellant. She explained that she did not mention that
working experience in her curriculum vitae submitted to the appellant as she
customized her resume as needed.
[54]
She testified that she
worked as an employee for International Jewellery and that she was aware that
source deductions were made from her gross salary and that a T4 was issued by
International Jewellery in respect of her employment.
[55]
When questioned about
the contract that she had signed with the AUCC, which stated that she was
accepting a scholarship in the amount of $35,000 and that a T4A would be
issued, she answered that although it was a scholarship, she considered herself
to be an employee.
[56]
When questioned as to
why she had asked Ms. Lindhout to amend her T4A to include the word
“scholarship” in Box 38, she answered that her accountant had
told her to do so.
[57]
She stated that after
leaving the appellant, she worked for the Ministry of College and Universities
of Ontario. Her contract with the Ministry ended in March 2009. She then
applied to Services Canada for employment insurance benefits, but could not
receive any as she was short 11 insurable hours. She had accumulated 899
insurable hours but needed 910.
[58]
When asked whether it
was because she needed 11 additional hours to qualify for employment insurance
benefits that she had asked Ms. Lindhout in late March 2009 to prepare a
ROE indicating 12 hours of insurable earnings, she stated that she did not know
anything about employment insurance.
Position of the appellant
[59]
The appellant argues
that the intentions of the parties were clear. Ms. Sargsyan accepted the
offer made by the AUCC by signing the acceptance form on
June 11, 2007. The contract stated that Ms. Sargsyan would receive
$35,000 for the scholarship SDF Internship Program sponsored by the DND: see
Exhibit A-1, Tab-6. It also stated that she would receive a T4A each year.
[60]
One of the conditions
of the contract was that Ms. Sargsyan had to report her accomplishments to the
AUCC to receive her second instalment of $17,500. She also had to prepare a
detailed account of any research undertaken or a copy of a thesis at the end of
the internship.
[61]
The appellant stated
that such reports were not given to nor reviewed by it. The appellant did not
know what Ms. Sargsyan reported with respect to her experience. If she had been
an employee of the appellant, the appellant would have insisted on seeing the
reports prepared by Ms. Sargsyan before they were forwarded to the AUCC.
[62]
The appellant’s counsel
noted that the appellant did not keep any of the $35,000 scholarship moneys.
The entire amount was remitted to Ms. Sargsyan. In his view, the appellant
acted as host for the SDF Internship Program in order for Ms. Sargsyan to
obtain relevant work experience. He submits that it was a scholarship and that
accordingly that there was no contract of employment between the appellant and
Ms. Sargsyan.
[63]
The appellant pointed
out that most of Ms. Sargsyan conference expenses were paid for by either the
DND or by other organisations, with only a small portion being paid by the
appellant. In the view of the appellant this was another factor indicating that
she was not an employee.
[64]
With respect to
control, the appellant’s counsel argued that if Ms. Sargsyan had been an employee,
she would have not taken so much time away from the office and would not have
attended conferences that did not directly benefit the appellant.
[65]
On control, the
appellant’s counsel also argued that Ms. Sargsyan was given considerable
flexibility in choosing the type of the work she did. She initiated and put in
place the In Focus newsletter which was in line with the SDF Internship
Program.
[66]
Counsel submitted that
Ms. Sargsyan in her testimony had attempted to re‑characterize the
relationship between the appellant and herself. An example of this was when she
asked Ms. Lindhout to prepare a record of employment for 12 hours in order
for her to qualify for employment insurance.
[67]
Counsel stated that
because the evidence of Ms. Lindhout and Ms. Sargsyan was contradictory on
numerous points, the issue of credibility was determinative in these appeals.
[68]
In the alternative,
counsel argued that if I were to conclude that Ms. Sargsyan was an
employee, she would not be in ‘’insurable employment‘’ under the EIA but would
instead be in excepted employment pursuant to paragraph 5(2)(a) of the
EIA and would not be in pensionable employment pursuant to paragraph 6(2)(b)
of the CPP.
Position of the Respondent
[69]
The respondent argued
that Ms. Sargsyan was employed under a contract of service while working for
the appellant.
[70]
Counsel for the
respondent argued that there was no common understanding as to the intentions
of the parties. In any event, he argued that if I were to find that the
intention between the parties was not to form a contract of services, such
intention was not supported by the facts. In the respondent’s view, it is
irrelevant what the funding was called, whether internship, scholarship or
fellowship. What matters are the facts surrounding the relationship between the
appellant and Ms. Sargsyan.
[71]
The respondent submits
that the appellant exercised a high degree of control over Ms. Sargsyan. She
had to be at the office from 9:00 am to 5:00 pm. She was under the direct
supervision of Ms. Lindhout: see Exhibit R-1, Tab 1.
[72]
The work she performed
was for the benefit of the appellant: she worked on the essay contest,
contributed to the corporate and the In Focus newsletters, attended and worked
at conferences, and performed administration tasks.
[73]
She used the computer
and the office supplies of the appellant.
[74]
She did not pay her own
expenses and could not have made a profit from her endeavours.
[75]
The method of payment
was determined by the appellant. The appellant decided to pay Ms. Sargsyan on a
monthly basis, instead of in two instalments of $17,500 as prescribed by the
SDF Internship Program.
[76]
Ms. Sargsyan continued
to work for the appellant after her internship under the SDF Internship Program
ended.
[77]
With respect to the
test to determine whether a contract is one of services or one for services,
counsel referred the Court to Wiebe Door Services Ltd. v. M.N.R., [1986]
3 F.C. 553 and 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001
SCC 59. He also referred the Court to National Capital Outaouais Ski Team v.
Canada, 2008 FCA 132 and Mondo-Tech Inc. v. Canada, 2003 CAF 62, as
examples of cases dealing with similar government programs where an employer‑employee
relationship was found to exist.
Analysis
[78]
These appeals require
me to determine whether Ms. Sargsyan was an employee of the appellant. If I
find that she was, then it follows that she was employed in insurable
employment within the meaning of paragraph 5(1)(a) of the EIA and in
pensionable employment within the meaning of paragraph 6(1)(a) of the
CPP.
[79]
The law is not at issue
in these appeals. The test for determining the existence of an
employee-employer relationship has long been settled. In 671122 Ontario Ltd.
v. Sagaz Industries Canada, Justice Major for the Supreme Court of
Canada adopted the principles enunciated Justice MacGuigan in Wiebe Door,
by stating at paragraph 47:
47 Although
there is no universal test to determine whether a person is an
employee or an independent contractor, I agree with MacGuigan J.A. that a persuasive
approach to the issue is that taken by Cooke J. in Market Investigations,
supra. The central question is whether the person who has been engaged to
perform the services is performing them as a person in business on his own
account. In making this determination, the level of control the employer has
over the worker's activities will always be a factor. However, other factors to
consider include whether the worker provides his or her own equipment, whether
the worker hires his or her own helpers, the degree of financial risk taken by
the worker, the degree of responsibility for investment and management held by
the worker, and the worker's opportunity for profit in the performance
of his or her tasks.
[80]
The nature of the
relationship between the appellant and Ms. Sargsyan was the subject of detailed
and at times conflicting testimony from Ms. Sargsyan and Ms. Lindhout. Some of the conflicts in the
evidence are on vital points. In assessing the evidence of the witnesses, I am
mindful of the caution articulated by the British Columbia Court of Appeal in Faryna
v. Chorny, [1952] 2 D.L.R. 354 at page 359, that a Court must consider the
truth of the story of a witness in the context of the surrounding
circumstances. In the words of that Court:
In short, the real test of the truth
of the story of a witness in such a case must be its harmony with the
preponderance of the probabilities which a practical and informed person would
readily recognize as reasonable in that place and in those conditions.
[81]
In my view, Ms.
Lindhout’s was the more credible witness. She was a solid witness, her answers
both in examination-in-chief and on cross-examination were precise and to the
point. On the other hand, Ms. Sargsyan was at times evasive in cross-examination;
she did not respond directly to the questions that she was asked. More
importantly, I find that Ms. Lindhout’s testimony was more consistent with the
surrounding circumstances, including the written record.
[82]
The written record
supports Ms. Lindhout’s evidence. The aim of the SDF Internship Program was to
promote relevant work experience and to complement the studies of interns. The
scholarship under the SDF Internship Program was granted by the AUCC and not
the appellant. The appellant served as a host under the program.
[83]
The contract between
the AUCC and Ms. Sargsyan clearly refers to a scholarship arrangement and
indicates that a T4A will be sent to Ms. Sargsyan at the end of each taxation
year. Under the contract, Ms. Sargsyan had to report to the AUCC, and not
to the appellant, on her accomplishments with the appellant in order to receive
the $35,000 scholarship. The contract also contained a clause requiring Ms. Sargsyan
to repay the scholarship to the AUCC if she withdrew from the Program.
[84]
By signing the contract
on June 11, 2007, Ms. Sargsyan therefore knew that the $35,000 was being paid
to her as a scholarship. She also knew that the appellant was simply serving as
the host organization.
[85]
Despite this written
contract, Ms. Sargsyan maintained that she was an employee of the appellant.
[86]
Ms. Sargsyan testified
that she was directly supervised by Ms. Lindhout, and that she could not do
anything without Ms. Lindhout’s approval. She stated that she had to work at
the appellant’s office premises and that her hours of work were 9:00 am to
5:00 pm. She also said that she needed to advise Ms. Lindhout in order to take
time away from the office.
[87]
Mrs. Lindhout on the
other hand testified that she supervised Ms. Sargsyan in an academic style. She
reviewed the material prepared by Ms. Sargsyan that was to be published under
the appellant’s name. She added however, that she never told Ms. Sargsyan what
subjects to write on or how to write it. She was mainly interested in the end
product. Ms. Sargsyan set her own deadlines, which she met.
[88]
Ms. Lindhout further
stated that Ms. Sargsyan did not have to work at the appellant’s premises,
and that she did not monitor Ms. Sargsyan’s hours. No attendance records were
kept.
[89]
Ms. Sargsyan also
pointed out that all the work that she did was for the benefit of the
appellant: she assisted in preparing conferences, worked on both the corporate
and the In Focus newsletters. In her view, she did not derive any academic
benefit from her time with the appellant.
[90]
Ms. Lindhout’s testimony
differed from that of Ms. Sargsyan on this point. In her view, the SDF
Internship Program was for the benefit of Ms. Sargsyan. She stated that the
goal of the SDF internship Program was to give interns a practical learning
experience so that they could later apply for a policy position or for a PhD.
[91]
I am satisfied that Ms.
Lindhout’s characterization of the work and the supervision exercised is the
more accurate. While there is no doubt that the appellant did derive some
benefit from having Ms. Sargsyan working in the office, I find that the
principal goal of the scholarship was to assist Ms. Sargsyan in her
development. Recognizing that she was not an employee, the appellant afforded
Ms. Sargsyan a fair degree of independence and flexibility in what she did.
[92]
In addition, I do not
find Ms. Sargsyan’s testimony surrounding employment insurance and her
explanation for requesting an amended ROE to be credible. It appears that she
was trying to re-characterize her relationship with the appellant after the fact
in order to qualify for employment benefits.
[93]
Ms. Lindhout
testified that she told Ms. Sargsyan that the appellant would not make any
source deductions from the scholarship funds and Ms. Sargsyan indicated that
she was fine with that.
[94]
Ms. Sargsyan on the
other hand testified that she never spoke about the issue of source deductions
with anyone at the appellant and believed as a result that she was an employee.
She also claimed that she was not familiar with the Employment Insurance
system.
[95]
However, prior to
accepting the SDF Internship Program scholarship, Ms. Sargsyan had worked
for almost a year as an employee for International Jewellery, where her salary
was subject to source deductions. It is difficult to accept that she did not
notice that no source deductions were being made from her scholarship payments.
[96]
When questioned on why
she had asked Ms. Lindhout to amend her T4A to indicate that the $35,000 was
received by her as a scholarship, she answered that it was on the advice of her
accountant.
[97]
However, at almost the
same time she asked Ms. Lindhout to include reference to the scholarship on her
T4A, she also asked Ms. Lindhout to prepare a ROE showing 12 hours of insurable
earnings. When questioned on cross-examination why she had asked Ms. Lindhout
to prepare a ROE indicating 12 hours, she did not directly respond but
again claimed that she was not familiar with the employment insurance system.
However, it seems logical to conclude that she knew at that point that she
needed 11 hours to qualify for employment insurance benefits.
[98]
When Service Canada
later told Ms. Sargsyan that the period of employment shown on the ROE did not
match her insurable hours, Ms. Sargsyan asked the appellant for another ROE to
reflect her actual number of hours at the appellant. This was again consistent
with her effort to obtain employment insurance benefits and showed at least a
passing familiarity with the employment insurance system.
[99]
I therefore do not
believe that Ms. Sargsyan did not know what she was doing when she asked Ms.
Lindhout to prepare the first and the second ROE. She was trying to qualify for
benefits and to do so she had to re-characterize her relationship with the
appellant from that of an intern on a scholarship to that of an employee.
[100]
The respondent relied
on the case of Mondo-Tech International Inc. (Mondo-Tech) v. Canada,
2003 FCA 62 where an intern was found to be in an employee relationship.
However, the facts in that case are distinguishable.
[101]
In Mondo-Tech,
the company Mondo-Tech made a proposal to CIDA for a grant to carry out an
international youth internship project. Under the agreement between CIDA and
Mondo-Tech, the latter was responsible for the implementation and the
management of the project. Mondo-Tech was also responsible for finding an
organization to sponsor the project. Métalec was a client of Mondo-Tech. It was
in the business of manufacturing steel doors and was interested in selling its
products in South America. Métalec became the sponsor for the project. A
tripartite agreement was signed by Mondo-Tech, Métalec and the worker. The
agreement was for an international project management internship in Uruguay. The agreement provided that the worker would work in
Montreal and then in Uruguay
and conduct research and development by contacting different businesses and
visiting different sites to promote the products of Métalec. Métalec was
referred to as the sponsor and was responsible for providing the training and
office tools.
[102]
Mondo-Tech could
terminate the employment of the worker at any time, solely at its discretion.
The Federal Court of Appeal found that the worker was an employee of
Mondo-Tech.
[103]
In my view, the
decision in Mondo–Tech does not assist the respondent. In the present appeals:
-
it was Ms. Sargsyan who
applied for the scholarship, she was responsible for finding a host corporation.
On the other hand, Mondo‑Tech made a proposal to CIDA, and was
responsible for finding a host corporation;
-
the AUCC was
responsible for the administration and management of the SDF Internship
Program. Mondo–Tech was responsible for the administration and management of
the agreement;
-
the agreement was
between Ms. Sargsyan and the AUCC, the appellant was not party to it.
Mondo-Tech was party to two agreements, one with CIDA and another with the
worker and Métalec;
-
the written reports
prepared by Ms. Sargsyan during her internship had to be submitted to the AUCC
not to the appellant. In Mondo-Tech the reports prepared by the worker had to
be submitted to Mondo-Tech;
-
pursuant to the contract,
if Ms. Sargsyan were to withdraw from the SDF Internship Program, she had to
reimburse the AUCC not the appellant. In Mondo-Tech, if the worker left the
internship, the amounts he had received had to be refunded to Mondo‑Tech.
[104]
In some respect, Métalec
as the sponsor was in the same position of the appellant as a host.
[105]
In my view, it is more
instructive to read the decision of Justice Lamarre‑Proulx in Université
de Montreal v. Ministre du Revenu national, 2005 TCC 499 where she dealt
with the question of whether a worker who had received a scholarship was under
a contract of services. At paragraphs 28 and 31 of her reasons for judgment she
states:
28 […] On rare occasions, it is possible for a scholarship to be
considered a salary. There must be special circumstances involving a
relationship of subordination under an employment contract. In the case at bar,
no employment contract was signed. A candidate asked to participate in a master’s
program and his application was accepted. Admission to the master’s program
entails a scholarship. That scholarship is in the nature of financial
assistance to enhance research skill and the quality of research, and is not in
the nature of a salary under an employment contract.
31 The program, as both the Appellant’s witnesses and the Intervener
described it, is designed to provide an internship at a pharmaceutical company
for the purpose of obtaining practical experience as part of university
studies. The various obligations that were described are the obligations of
professors and students, not employers and employees.
[106]
The same is true in the
present appeal. Ms. Sargsyan applied under the SDF Internship Program. The
program was funded by the DND and administered by the AUCC. The acceptance form
and the contract in respect of the scholarship were between AUCC and Ms.
Sargsyan. The scholarship was awarded to Ms. Sargsyan so that she could gain
relevant work experience in order to assist her to find a policy position or to
pursue a PhD. The appellant simply served as a host organisation. Despite Ms.
Sargsyan testimony, I am of the view that in light of the documentary evidence
and the evidence presented at trial that there was no contract of services
between the appellant and the Ms. Sargsyan.
[107]
Viewing the facts
through the lens of the factors enunciated in Wiebe Door, does not
change my conclusion.
Control
[108] I have already dealt with the control
factor at paragraphs 86 to 91 of my reasons.
Tools
[109]
Ms. Sargsyan used the
computer and the office equipment provided by the appellant. When she was away
from the office, the computer was used by other interns and volunteers, as they
were more people than computers.
Degree of
financial risk taken
[110]
Ms. Sargsyan did not
take any financial risk. For that matter, the appellant did not incur any
expense in hosting an intern either. The appellant gave the entire scholarship
of $35,000 paid by the DND via the AUCC to Ms. Sargsyan. Most of Ms. Sargsyan’s
conference expenses during the SDF Internship Program were paid by other
organisations, with the appellant only covering a small part of these expenses.
Integration test
[111]
Ms. Sargsyan knew that
she was at the appellant for a set amount of time to gain practical experience
relating to her studies. The SDF Internship Program was principally designed to
benefit her, not the host organization.
[112]
Lord Wright remarked in
Montreal Locomotive,
that the four tests should be combined and integrated in order to seek out the
meaning of the whole transaction. Looking at the entire transaction, I conclude
that the amounts Ms. Sargsyan received were in the nature of a scholarship or
financial assistance and were not remuneration for services provided.
[113]
As I have stated
earlier I am of the view that when Ms. Sargsyan accepted the funding for the
scholarship, she knew that the relationship between the appellant and her was
not one of employee-employer.
[114]
In light of my
conclusion, I do not find it necessary to analyse the alternative argument of
the appellant that Ms. Sargsyan was in excepted employment pursuant to
paragraphs 5(2)(a) of the EIA and 6(2)(b) of the CPP.
[115]
The appeals are
allowed.
Signed at Ottawa, Canada, this 9th day of January 2012.
“Johanne D’Auray”
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