Date: 20001017
Docket: 2000-159-EI; 2000-160-CPP
BETWEEN:
DR. PATRICIA CHERNESKY AND DR. H. CHRISTIANSEN O/A NIPAWIN
HEALTH CENTRE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Rip, J.T.C.C.
[1]
The issue in these appeals from decisions by the Minister of
National Revenue ("Minister") under the Employment
Insurance Act ("EIA") and the Canada
Pension Plan ("CPP") is whether certain
physicians were engaged at various times in 1997 under a contract
of service or under a contract for service by the appellants who
are also physicians. If the physicians were engaged under a
contract of service by the appellants, the appellants are liable
for payments under the EIA and CPP in respect of
the physicians.
[2]
Drs. Chernesky and Christiansen carry on their profession as
medical doctors and operate a medical facility under the firm
name Nipawin Health Centre ("Centre") in Nipawin,
Saskatchewan. Nipawin has a population of 5,000 people; another
10,000 people live "around" the area. The Centre's
main clinic is Nipawin but it also had four other clinics, two on
reserves and two in smaller communities near Nipawin. The Centre
retains the services of physicians other than the appellants to
serve the needs of its clientele. The appellants and the
Centre's other physicians provide the services of general
practitioners, which includes diagnosing and treating patients
and performing surgery in the emergency room of the district
hospital. The physicians also visit nursing homes and make house
calls.
[3]
The physicians whose status is subject to these appeals are
Dr. Dino Smiljic, Dr. Sunel Sookdeo, Dr. Steven
Abramson, Dr. Stefanus De Nuysschen, Dr. Leandra Forman, and
Dr. Paul Forman. (These physicians are sometimes referred to in
these reasons individually as "Worker" and collectively
as "Workers").
[4]
Mr. Edwin Hobday, Administrative Director of the Saskatchewan
Medical Association ("SMA"), gave evidence on behalf of
the appellants. He described the SMA as a voluntary professional
association of physicians in Saskatchewan that represents the
physicians' interests. The SMA, besides offering educational
programs to its members and advocacy of quality health care, is
also the bargaining agent for physicians in negotiating fees with
the province of Saskatchewan.
[5]
There is a shortage of physicians in rural Saskatchewan as there
is in other rural and remote areas of Canada. The College of
Physicians and Surgeons of Saskatchewan ("College")
determines what type of licence a physician may be issued in
order to practice medicine in the province. The licence may be
permanent or temporary, for example. Temporary licences,
according to Mr. Hobday, may be granted to physicians who do
not yet have "Canadian qualifications recognized federally
and provincially". A temporary licence is issued to
physicians from foreign countries who wish to work in
Saskatchewan for an indefinite period. These physicians, referred
to as "locums" or "locum tenants", according
to Mr. Hobday, work on a temporary basis in a variety of
settings where there is a need for additional physicians. Locums
may work in all regions of the province, but do so primarily in
rural Saskatchewan.
[6]
The Workers were "locums".
[7]
Some locums have permanent licences to practice medicine in
Saskatchewan. The majority, however, have temporary licences.
Locums may "move around from community to community".
The scope of their practice is not limited; their ability to bill
is limited.
[8]
The Medical Care Insurance Branch ("MCIB"),
Saskatchewan Health, grants billing numbers only to fully
licensed physicians. Normally, a physician bills, and is paid by,
MCIB. In order to process a claim, a physician requires a billing
number. Locums do not have their own billing number. In Mr.
Hobday's words, they "borrow" or "use"
the billing number of a fully licensed physician. The locum is
given a sub-number so that her or his services may be identified.
The claim by a locum requires the licensed physician's
billing number and the locum's sub-number. Mr. Hobday
declared that the loan by a physician of a billing number to a
locum "has nothing to do with being liable for the
locum's work". The fully licensed physician may not even
know the locum, her or his ability or personality.
[9]
Locums, Mr. Hobday stated, have hospital privileges and have to
go through the "same hoops" as the regular licensed
physicians to obtain the privileges. The individual Health
Districts in Saskatchewan grant hospital privileges and if any
physician does not have hospital privileges, that physician
cannot use the health facilities in that district. Privileges are
discretionary and even fully licensed physicians may be denied
privileges. The same fee schedule applies to all physicians,
those who are fully licensed and locums.
[10] In
Saskatchewan, physicians charge on a fee for service basis, that
is, a schedule describes medical services and the fee a physician
may bill for each such service. Available to group practices,
such as the Centre, is a "population based" method of
billing. A clinic identifies a physician group and number of
patients attached to that group. The government will negotiate a
fee with the physician group that is based on a formula that
considers several factors, including age and sex of the patients
and historical billings by physicians in the group. How the
recipient of the fees distributes the fees among the physicians
in the group is not MCIB's concern. Only two clinics have
adopted population based billing, said Mr. Hobday. One of the
clinics is the Centre.
[11] The
Centre bills MCIB for services in the same manner as individual
physicians who bill fees for services. These billings were
described by Mr. Hobday as "shadow billing"; the
fee for service billing is not processed by MCIB.
Dr. Chernesky explained that since the Centre billings were
population based, the actual billings were "blended",
part population based and part fees for services, the
"shadow" billings that permit calculation of payments
to the Workers.
[12] Each
Worker retained two-thirds of the fees billed to MCIB for
services performed by the Worker; the other one-third is
retained by the appellants to cover costs of the Centre such as
support staff, nurses, and equipment.
[13]
Appellants' counsel reviewed with Mr. Hobday the
Minister’s assumptions in concluding the Workers were
employees of the Centre. The Minister assumed, among other
things, that the Workers were on call on a rotational basis for a
24-hour period and that the appellants "planned the
appointment schedule and on-call schedule with consultation
with the Workers". Mr. Hobday explained that
"on-call scheduling" is a requirement for all
physicians in Saskatchewan once they make a patient contact. The
physician is responsible to ensure that her or his patients may
obtain medical services 24 hours a day either from herself or
himself or from another physician. Physicians share this
responsibility among each other. Mr. Hobday also noted that
even clinics will rotate their doctors with doctors of other
clinics to fulfil this obligation. In other words,
Mr. Hobday explained, a physician has to make arrangements
to ensure that she or he is available to her or his patients at
all times and if she or he does not co-operate with other
physicians, then the physician is on her or his own 24 hours a
day, seven days a week.
[14] The
Minister also assumed that the work of the Workers "was
monitored in terms of ethical treatment of patients and their
record keeping and billing". Mr. Hobday stated that
physicians had a personal responsibility to deliver quality care
service. Monitoring the work of a locum was no different than
monitoring the work of a regular licensed physician. The College,
he said, sets the monitoring standards and has site inspections
to ensure maintenance of these standards.
[15] Dr.
Chernesky recruited the Workers from outside Canada because the
Centre has been short of physicians to serve its clientele. Local
medical school graduates, Dr. Chernesky stated, prefer working in
urban settings. The appellants provide prospective locums with a
letter of employment for purposes of obtaining a visa to work in
Canada. The appellants guarantee a prospective locum a minimum of
$8,000 a month for the first four months the physician works at
the Centre. She said that after four months the locums
"almost always" earn more. In several cases, the
appellants offer housing allowances to locums.
[16] Locums
build up their practice in basically the same way as regular
physicians. For example, when a locum is on-call and treats a
patient, that patient usually will request that the locum see her
or him on a "follow-up" visit.
[17] Centre
hours are flexible, Dr. Chernesky testified. The Centre is open
daily from 8:00 a.m. to 5:30 p.m. She described these hours as
"guidelines" in which most patients have access to the
physicians. Work schedules were prepared in consultation with all
the physicians at the Centre, including the Workers. Each
physician decided when she or he wanted to work. A Worker was not
required to visit satellite clinics; this was her or his personal
choice, Dr. Chernesky declared. If a physician, including a
locum, wanted time off, the physician would instruct the
Centre's receptionist not to book any patients at that time.
The physicians would handle amongst themselves any
"on-call" time off.
[18] There was
no written contract between the Workers and the Centre. The
Workers did not commit themselves to any definite term with the
Centre. Dr. Chernesky did hope "they'd stay for a
length of time". She recalled locums have worked for as
little as two weeks, although some stay for months and others may
stay for a year or more. In any event, locums come and go as they
wish.
[19] According
to Dr. Chernesky, the Workers controlled their level of income.
They could decide when to work and the number of hours they
wished to work. A Worker's income depended on this decision
as well as ensuring she or he maintained a good relationship with
patients. If a patient did not like a Worker's "bedside
manner" the Worker would lose the patient; a patient was
free to choose her or his physician. Also, at least one Worker
advertised his services.
[20] In her
examination-in-chief, Dr. Chernesky reviewed the status of the
Workers:
Dr. Sookdeo had no MCIB billing number in 1997 but obtained
his own number in 1998. In 1997 he was not fully licensed to
practice and used Dr. Christiansen's number;
Dr. Abramson and both Drs. Forman also used Dr.
Christiansen's number in 1997; and
Dr. Smiljic was fully licensed in 1997 and had his own MCIB
number. He was not a locum.
[21] Dr.
Chernesky explained that a billing to MCIB for services contains
the name of the patient, the service and the fee. The MCIB pays
the Centre.
[22] Before a
Worker started working at the Centre, Dr. Chernesky said, she
would give the new Worker "guidelines" with respect to
the number of hours a physician was expected to work at the
Centre, the equipment the physician should have available, and
related matters.
[23] Dr.
Chernesky stated that the Workers supplied their own stethoscope
and laboratory coat. They also required an automobile in their
work if they elected to travel to satellite clinics. The MCIB is
not billed for expenses of the Centre or for those of any
physicians, Dr. Chernesky declared. A Worker is also responsible
for her or his medical reference materials, professional
liability insurance, automobile expenses and other business
expenses. An individual physician's expenses, including those
of the Workers, are absorbed by the physician.
[24] For
travel to reserves, the physicians received $50 a trip; for
travel to the Centre's own clinics, the Workers and the other
physicians received nothing. The Centre billed MCIB for patients
on the reserve.
[25] When
Revenue Canada first started considering whether the appellants
were liable for payment of premiums under the EIA and
CPP, a questionnaire was sent to Dr. Chernesky. One of the
questions was whether the Centre expected the Workers to provide
services to them exclusively. Dr. Chernesky replied that it
is contemplated "that the Workers time commitment will be
such that other contracts are unlikely". However, she did
mention that some locums had worked in emergency rooms elsewhere
and that they were paid personally for this work.
[26] Dr.
Chernesky also replied that the Workers did not receive any
benefits. "We do not worry about source deductions, holiday
pay, overtime, benefits and labour standards issues." She
considered the Centre's employees to include the
receptionist, typist, lab technicians, nurses, clerical staff,
office manager and janitors, not the locums. She acknowledged
that on the advice of Revenue Canada, the Centre withheld 15 per
cent of the earnings of Workers who were non-residents of Canada:
Drs. P. and L. Forman, Sookdeo, Abramson and
De Nysschen.
[27] When a
locum leaves the Centre, Dr. Chernesky stated, the
locum's files are retained by the Centre. She considers the
files to be the property of the Centre. And when a physician
leaves the Centre, she or he does not receive any benefits such
as vacation or severance pay.
[28] Dr.
Chernesky conceded that the appellants could make a profit from
the Workers. If a Worker billed $18,000 in a month and retained
$12,000, the Centre may make some profit, after expenses, on the
$6,000 it gets but it "wouldn't make much". She
doubted whether the Centre ever made money from a locum.
[29] In the
respondent’s view the Workers were employees of the
appellants. The respondent’s counsel argued that since the
Workers were guaranteed income of $8,000 a month, the Workers did
not risk a loss if the gross billings fell below $12,000. This
may be so, but income was guaranteed only during the first four
months of the Workers’ pay at the Centre. And even during
those four months, the Worker could increase his monthly income
above $8,000, particularly during the latter months if the Worker
was prepared to devote the necessary time and energy.
[30]
Respondent’s counsel submitted that the facts in the
appeals at bar indicate that the four-in-one test (control,
ownership of tools, chance of profit and risk of loss and the
organization or integration test) elaborated by
MacGuigan J.A. of the Federal Court of Appeal in Wiebe
Door Services v. M.N.R.[1] supports the respondent’s position that
the Workers were the appellants’ employees. The Workers,
she stated, were integrated into a fully operational business
owned and operated by the appellants and the Workers merely
served the appellants. All Centre staff is paid for by the
appellants, all equipment at the Centre is owned by the
appellants and all administrative policies of the Centre are
determined and enforced by the appellants.
[31] Counsel
for the respondent argued that the facts in the appeals at bar
are similar to those in the appeal of Mirchandani et al. v.
M.N.R.,[2] a
decision of Beaubier T.C.J. In Mirchandani, contract
psychiatrists were hired to work at the clinics operated by their
local Health Districts in Saskatchewan. The psychiatrists
operated in a similar manner in terms of the work schedule,
performing their services at clinics, making hospital rounds and
providing on-call services; they were subject to a small
degree of control by their payor, as in the appeal at bar. The
payor provided all the tools, equipment and staff in the clinic
with the Health Districts providing the same in the hospitals.
The psychiatrists were required to provide their own vehicle and
malpractice insurance and were paid no benefits. The method of
remuneration differed from the facts at bar in that the
psychiatrists were paid on the basis of four-hour blocks of
time, the number of which varied significantly from psychiatrist
to psychiatrist, rather than a guaranteed minimum salary. Judge
Beaubier determined that the psychiatrists were employees:
Looked at objectively, by a patient or some other person in the
community, the psychiatrists, when working pursuant to their
sessional contracts, appeared to be employed as part of the
clinic business and their work was done as an integral part of
the clinic business. They were not performing services as persons
in business on their own account. Rather they were performing
them as integral staff of the clinics who were their Payors.
Therefore, the appeals are dismissed.[3]
[32] What I
have to consider is that notwithstanding that the business
carried on at the Centre is the business of the appellants
whether it can also be said that each of the Workers is herself
or himself also carrying on a business. For example, in
Alexander v. M.N.R.,[4] a physician, performed all of his duties at a
hospital except when filling in for associates during vacations
on a reciprocal basis. He did not have a separate medical
practice as was the nature of his specialty, which essentially
meant his patients were typically seen at the hospital. He was
paid by the hospital on a professional services basis less a five
per cent deduction for uncollected accounts. In addition, the
physician was head of the Department of Radiology at the hospital
and carried substantial administrative duties associated with
such a position. Jackett P. concluded that the physician was
operating under a contract for service and he could deduct
expenses of earning his income. He was carrying on his own
business. On the other hand, in Boardman v. The Queen,[5] a psychiatrist
agreed with the government of Alberta to provide psychiatric
services under purported contracts for service. However, the
Court found that the contractual relationship which existed was
that of an employee and an employer. The Court considered the
terms and conditions of the contract itself which contained
numerous provisions that were similar to those that other
employees of the government of Alberta enjoyed, including holiday
provisions, entitlement to sick leave days, restrictions and
ability to conduct a private practice, provisions for the
deduction of income tax at source, payments of sustenance and
travelling allowance and payment of fixed remuneration per
month.
[33] In the
case at bar, unlike Mirchandani, supra, one third of all
fees billed by the Workers was used by the clinic to pay expenses
of the clinic. The Workers are, in fact, helping to pay the
expenses of running the Centre. In Mirchandani the
psychiatrists were paid a fixed remuneration for a four-hour
block of time and were paid whether or not the patients
ultimately attended at a session. In the case at bar the
Workers’ pay was calculated on the basis of a fee for
service. If a patient did not show up at an appointment, I would
infer that the Worker did not get paid.
[34] The
respondent also referred to the appeal of Hauser v.
M.N.R.,[6]
where a hospital pathologist was found to be an employee. One of
the tests the Tax Review Board applied was the economic realty
test. The Board compared the economics of the appellants’
professional activities with those of a private practitioner
operating his own laboratory. The Board found that private
practitioners run the risk of financing equipment-supplying help
necessary to administer and operate the laboratory and have to
ensure they have sufficient clients to remain viable.
Dr. Hauser, on the other hand, used equipment and supplies
provided by a hospital, did not have to hire people to work under
him, but could actually get help from hospital staff. He did not
have to seek out clients. In his absence, he did not have to pay
for his replacement which was paid for by the hospital. The
respondent states these facts are identical to the appeals at
bar. I do not agree. As I have previously stated, the appellant
paid one-third of his gross fees to the Centre which, according
to the evidence, the Centre applied to pay salaries to staff, to
purchase equipment and, in general, to carry on the business of
the clinic. Also, the Workers have to seek out clients. I repeat:
they are only guaranteed income for the first four months they
work at the clinic. Once the four months are up, they must seek
out patients or they will not earn any income. The fact that if a
Worker wishes to take holidays she or he does not hire and pay a
replacement does not, in my view, affect the Worker's status.
Another physician at this Centre will cover their patient load
and get paid for her or his efforts. There is no evidence before
me that even if Dr. Chernesky or Dr. Christiansen, for
example, go on leave they pay for their replacement.
[35] In
Weibe Door, supra, MacGuigan J.A. wrote that one must not
consider only one element in a relationship to determine whether
the relationship is one of master and servant. One must consider
all four elements: ownership of tools, chance of profit and risk
of loss, control and integration. He cautions that one should not
focus on any one element but should consider all the elements
together to determine the exact relationship. In Hennick v.
Canada,[7]the
Federal Court of Appeal confirmed that one must search for the
total relationship between the parties.
[36] In the
appeals at bar it is the appellants' business that is being
carried on and the Workers are engaged to assist in the business.
Locums traditionally work on a temporary basis at any one place
and obviously do not have a long-term interest in the success of
a business.
[37] Control
is an elusive concept in the appeals at bar. There is no evidence
of any control by the appellants that suggest a master and
servant relationship, that is one of employer and employee. The
dress code or a set of administrative procedures are prevalent in
many professional situations and in and by themselves do not
necessarily suggest a high, or any, degree of control. It is
probably true that if a patient wished to lodge a complaint
against a Worker, she or he would do so with the appellants and
the appellants would in all probability discuss the matter with
the affected Worker. The Worker could then attempt to resolve the
problem or lose the patient. This is not a control situation. The
fact that a Worker may lose a patient suggests that the Worker
has a risk of loss of income.
[38] The
Workers risk loss, as mentioned, and have a chance of profit. The
monthly income of $8,000 is only guaranteed to the Workers for a
period of four months. After that, the Worker is on her or his
own.
[39] As far as
tools are concerned, it is quite clear that some tools are owned
by the Workers and other tools, including some of the heavier
equipment, are owned by the appellants and used by the Workers.
But, here too, the payment to the appellants by the Workers of
one-third of their fees includes the right to use this equipment.
However, this element is not particularly dominant in the
relationship between the appellants and the Workers.
[40] The
economic reality of the facts at bar is that the Workers carry on
business on their own account. They form relationships with
patients. The amount of income they make, once their initial
four-month period is completed, depends solely on the
particular physician. They help in the appellants' business
but their success (or failure) depends on themselves alone. They
are carrying on their own businesses in conjunction with the
business carried on by the appellants.
[41] The
Workers were engaged under a contract for service with the
appellants.
[42] The
Workers were therefore not engaged in insurable employment within
the meaning of subsection 5(1) of the EIA. Neither were
they engaged in pensionable service within the meaning of
paragraph 6(1)(a) of the CPP. The appeals are
allowed.
Signed at Ottawa, Canada, this 17th day of October 2000.
"Gerald J. Rip"
J.T.C.C.
Email this Content