Citation: 2013 TCC 273
Date: 20130923
Docket: 2011-3695(EI)
BETWEEN:
JOSHUA D. RIZAK,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
AMENDED REASONS FOR JUDGMENT
Graham J.
[1]
In 2008, Mr. Rizak
decided that he wanted to pursue a doctoral degree in neuroscience at the
University of British Columbia (“UBC”). Mr. Rizak is appealing a determination
by the Minister of National Revenue that the work he did at UBC as part of his
graduate studies from September 1, 2008 to May 10, 2010 was not insurable
employment at UBC within the meaning of subsection 5(1) of the Employment
Insurance Act.
Witnesses:
[2]
Mr. Rizak testified on
his own behalf. He has strongly held views on many aspects of academic life
both at UBC and in Canada in general. Those views appear to have arisen during
or after his time at UBC. I believe that, to an extent, those views have coloured
Mr. Rizak’s perception of events at UBC. As a result, while I generally found
Mr. Rizak to be a credible witness, I have taken his description of his
interaction with others at UBC with a grain of salt.
[3]
Dr. Jennifer Phelps
testified for the Respondent. Ms. Phelps is the assistant dean of graduate
studies at UBC. I found Dr. Phelps to be a credible witness. Although UBC has a
clear stake in the outcome of this appeal, Dr. Phelps did not appear to be
slanting her testimony with the goal of achieving a particular result. She
provided general evidence about graduate studies at UBC rather than specific
evidence about Mr. Rizak’s relationship with UBC.
Graduate Students:
[4]
The following general
description of graduate programs is based on the testimony of Mr. Rizak and Dr.
Phelps and appears to be generally applicable to students at UBC pursuing
doctoral degrees in the sciences.
[5]
The application process
for doctoral students is as follows. First the potential student submits an
application to the university. Then the student finds a professor who is
willing to accept the student as his or her mentor. The professor advises the
university that he or she is willing to take responsibility for the student and
the university then informs the student that he or she has been accepted into
the program. It is not possible to get admitted to UBC as a doctoral student
without the support of a professor.
[6]
In order to graduate, students
must produce and defend a doctoral dissertation or series of manuscripts which are
considered an original piece of scholarly work that contributes significant new
knowledge in their field. Graduate students must also attend classes. Mr. Rizak
testified that he personally spent approximately 7 hours a week in class or in
laboratory based classwork.
[7]
Much of what occurs at
the graduate level in sciences at universities is driven by grants from third
party funding agencies. Typically a professor will write a grant proposal to a
funding agency in which he or she will propose a general approach to pursue a
certain research problem. If the funding agency approves the grant it will give
money to the professor subject to certain conditions. The most important
condition is typically that the money be used for the specific research
purposes set out in the grant.
[8]
Dr. Phelps testified
that there are 3 types of funding available from UBC for graduate students. The
first is being a graduate research assistant. Graduate research assistants
generally design and conduct research for professors. This is the most common
source of funding for graduate students in the sciences. Mr. Rizak was a
graduate research assistant. The second form of funding is being a teaching
assistant. Teaching assistants teach courses to undergraduate students. This
occurs in the sciences but is more common in the humanities. The third form of
funding is scholarships. There are no specific responsibilities associated with
scholarships. I should note that Dr. Phelps’ description of the monies for
being a graduate research assistant or a teaching assistant as funding is in
keeping with her and UBC’s view that the monies provided are a form of
fellowship. Mr. Rizak would describe these monies as payment for work
performed. Dr. Phelps testified that most graduate students in the biological
sciences received funding from more than one of these types of funding.
[9]
While it is not
necessary for a graduate student in the sciences to work as a graduate research
assistant, it is certainly the norm. This is because most students use the
intellectual work or data from their graduate research activities as the basis
of their doctoral dissertation or manuscripts. A student who does not work as a
graduate research assistant would have to obtain their intellectual work or
data in another manner. This would be difficult as the professors and their
labs are focused on conducting the research that is required by their grants.
[10]
Graduate research
assistants in the biological sciences typically receive an annual stipend from
UBC of between $16,000 and $25,000. The money for the stipend for a given
graduate research assistant comes from the grant given to the professor whose
work the student is doing. Some departments have a set amount that is paid to
all graduate research assistants in their department. Sometimes the funding
agency funding a given grant sets a specific limit on the amount paid to
graduate research assistants working on that grant.
[11]
The term graduate
research assistant only applies to students pursuing doctoral degrees.
Postdoctoral students are not considered graduate research assistants.
Appellant’s History At UBC
[12]
Mr. Rizak submitted his
application to UBC in accordance with the usual process for applying to be a
graduate student. Sometime later he, along with a number of other potential
graduate students, was contacted by an associate professor named Dr. Jun-Feng
Wang. Dr. Wang was seeking a graduate student who was interested in assisting
him with his research. Mr. Rizak met with Dr. Wang. They discussed Dr.
Wang’s research and what a graduate student’s role would be. Dr. Wang had Mr.
Rizak meet with another professor in his department who was working on the same
research grant as Dr. Wang. Dr. Wang also encouraged Mr. Rizak to meet
with other professors at UBC in order to ensure that Mr. Rizak found an area of
research that most suited his interests. A few days after meeting with Mr.
Rizak, Dr. Wang advised Mr. Rizak that he would be pleased if Mr. Rizak
pursued his graduate studies in Dr. Wang’s lab. A week later, Mr. Rizak
sent Dr. Wang an email accepting Dr. Wang’s offer.
[13]
Graduate students
typically begin their work with professors when they begin their graduate
studies in September. Mr. Rizak needed money so he asked Dr. Wang whether
he could be hired to work as a research assistant in the lab over the summer. A
research assistant differs from a graduate research assistant because he or she
has not been accepted to the graduate studies program. Dr. Wang agreed to Mr.
Rizak’s request. Mr. Rizak worked in Dr. Wang’s lab from July 1 to August 31,
2008. Mr. Rizak was paid $12 per hour and worked a 7.5 hour day. He signed an
employment contract with UBC. The parties agree that Mr. Rizak was engaged in
insurable employment during this period.
[14]
Mr. Rizak’s graduate
studies commenced on September 1, 2008. Mr. Rizak testified that very little
changed in the lab when he became a student. He continued to perform the same
tasks that he had performed as a research assistant during the summer. The main
difference was that he was no longer paid an hourly wage. Instead, he received
an annual stipend of $21,000. Mr. Rizak cannot recall whether the stipend was
paid monthly or semi-monthly. Also, UBC no longer considered him to be an
employee.
[15]
Mr. Rizak described his
work for Dr. Wang as follows. Dr. Wang supplied the lab equipment and the
necessary chemicals. He told Mr. Rizak what experiments he wanted conducted.
The lab manager would then show Mr. Rizak how to do the experiments. When a
given experiment was completed, Mr. Rizak would discuss the results with Dr.
Wang. If there were problems with the experiment, Mr. Rizak would make
suggestions to Dr. Wang on how to improve the experiment and Dr. Wang would either
agree or suggest an alternative. All of Mr. Rizak’s work for Dr. Wang was
governed by the guidelines of Dr. Wang’s grant.
[16]
At the time that he
accepted Dr. Wang’s offer, Mr. Rizak’s understanding from UBC’s website was
that tuition fees would be waived for Ph.D students in neuroscience. In August
2008, Mr. Rizak learned that UBC would, in fact, no longer be waiving tuition
fees. Mr. Rizak was not in a financial position to cover his tuition. Mr. Rizak
approached Dr. Wang for help. Mr. Rizak eventually received funding from the
university in the form of a scholarship that covered his first term’s tuition
and, later, a second scholarship that covered part of his second term’s
tuition. Mr. Rizak also applied for a line of credit at his bank. Dr. Wang provided
Mr. Rizak with a letter confirming that as a graduate research assistant he
would be receiving $21,000 per year. I note that Dr. Wang’s letter refers to
the $21,000 as “an annual payment … which is paid through the University from
[his] grant”. He does not describe it as salary.
[17]
When Mr. Rizak’s
scholarships stopped, Dr. Wang increased Mr. Rizak’s stipend from $21,000 to $25,000.
[18]
Mr. Rizak testified
that when he had been in the graduate program for about a year, he had a novel
insight about the drug that he and Dr. Wang were researching. Mr. Rizak felt
that there was real merit to his insight and wanted to conduct research to
support his view. He was met with resistance both by Dr. Wang and others
on the faculty but was given an opportunity to spend 3 months trying to support
his position so long as he continued to do his regular research work at the
same time. When the 3 month period was over, Mr. Rizak presented his work to a
graduate committee but their decision was that he not be permitted to continue
this personal line of research further. While Mr. Rizak suggested a number of
possible explanations for the resistance, based on his description of events, I
suspect that it had a lot to do both with the fact that his insight fell
outside of the parameters of Dr. Wang’s grant and with the fact that the manner
in which Mr. Rizak pushed his idea lacked a certain sensitivity to the politics
of his department.
[19]
Eventually Mr. Rizak
became disillusioned with the entire doctoral degree process. His disillusionment,
combined with the fact that he had reached the end of his line of credit, caused
him to withdraw from the graduate studies program on May 10, 2010.
[20]
Although Mr. Rizak was
no longer a graduate student and thus no longer had to pay tuition, he still needed
money to live on and to pay his debts. He knew that Dr. Wang would not get a
new graduate research assistant until September so he offered to work for Dr.
Wang as a research assistant until that time. Dr. Wang accepted his offer. Mr.
Rizak continued to perform the same research that he had performed for Dr. Wang
while he was a student. He was still not permitted to perform research on his
own idea. For one reason or another, Mr. Rizak continued to be paid in the same
manner as if he were still a graduate research assistant rather than an
employee. However, the parties are in agreement that Mr. Rizak was an
employee of UBC during the period from May 11 to August 31, 2010 albeit for
different reasons: Mr. Rizak because he believes he was always an employee and
the Respondent because Mr. Rizak was no longer a student.
Law
[21]
There have been many
cases before the Court regarding funds received by students from universities
in relation to research activities.
[22]
Justice Lamarre
Proulx considered whether a postdoctoral fellow was an employee in her decision
in Bekhor v. MNR, 2005 TCC 443. The postdoctoral fellow in question was
expected to work on a specific research project. He received stipends for that
work. However, he also learned in the process. Justice Lamarre Proulx
concluded that the appellant was not an employee. At paragraph 39 she stated:
For
all these reasons, I conclude that the relationship of the Appellant with the
University of Alberta was one of advanced student and professor, not one of
employee and employer. The stipend received was in the nature of financial
assistance provided to a learning postdoctoral fellow, not remuneration for
services rendered by an employee to an employer.
[23]
In Chabaud v.
The Queen, 2011 TCC 438, Justice Archambault also considered whether a
postdoctoral fellow in a similar situation to the one in Bekhor was an
employee. He came to the opposite conclusion of Justice Lamarre Proulx.
At paragraph 71 he stated:
According
to Professor Moulin, the relationship between her and Mr. Chabaud was one
of student and professor. I do not share this opinion. A professor does not pay
a student when the student “studies”. In fact, the opposite is true: it is the
student who pays tuition fees!
Mr. Chabaud paid none. When a professor hires a student for summer work,
this student is in the same situation as all the other students who must earn
money to pay for their studies or to support themselves, although the work may
be more relevant for his or her future career. If the student receives a
salary, it must be included in his or her income tax return (which must be
filed if tax is payable). As a result, Mr. Chabaud would not be treated
any differently than the summer student mentioned in the operating budget whom
Professor Moulin was to hire for her research project at a salary of $5,252, or
than the master's student, who was to receive remuneration of $17,850
(Exhibit I-11). Therefore, a student can provide services under a contract
of employment. In such a situation, the student is an employee.
[24]
I am unable to find any
factual or legal basis upon which I can distinguish the decisions in Bekhor
and Chabaud from each other. With respect, I prefer Justice
Archambault’s reasoning over that of Justice Lamarre Proulx.
[25]
In Caropreso v.
The Queen, 2012 TCC 212, 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.
[27]
However, because Bekhor,
Chabaud and Caropreso all deal with postdoctoral fellows they are
not very helpful in analyzing the dominant characteristic of payments made to
graduate students. My understanding from the caselaw is that postdoctoral
fellows are individuals who already have a Ph.D who are participating in
research work at a university in part to obtain more specialized expertise.
They are not working towards a further degree. At paragraph 82 of Chabaud,
Justice Archambault compared postdoctoral fellows to individuals beginning work
in other professions:
In
my opinion, there is no relevant difference between the work Mr. Chabaud
did as a postdoctoral research fellow and that of an articling law student, a
medical resident, an accounting trainee or an apprentice. All must acquire more
experience before moving on to the next stage of their careers. Judicial notice
is taken of the fact that medical residents and articling law students must
work for a number of months under the supervision of an “attending staff
physician” or “articling principal” before being eligible for admission to
their respective professional bodies. During this period, they receive
remuneration for their work while acquiring more experience in their
field.
[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. MNR,
[1994] TCJ No. 921, 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. MNR, [1993] TCJ No. 388, 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 v. MNR, [1999] TCJ No 79, 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. MNR, [1994] TCJ No. 47. 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.
…
[33]
I note that both the
Minister at the appeals level and Mr. Rizak at trial focused attention on the 4
factor test that is normally used to distinguish between employees and
independent contractors: control, tools, chance of profit and risk of loss.
This test has also been applied in some of the above cases. I do not find this
test helpful. As Justice Lamarre Proulx stated at paragraph 26 of
Bekhor:
The
question at issue is not whether the agreement between the parties is a
contract of employment or a contract for services (employee versus independent
contractor status), but whether it is a contract of employment or an agreement
of financial assistance regarding continuing studies (employee versus student
or postgraduate student status).
[34]
I am not required to
determine whether Mr. Rizak was an employee or an independent contractor as
neither party took the position that Mr. Rizak was an independent contractor. I
simply have to determine whether the dominant characteristic of the payments
that Mr. Rizak received was compensation for the work he did or student
assistance. I do not find these 4 factors to be useful in reaching that
determination.
Analysis
[35]
It is clear to me from
the evidence that the dominant characteristic of the stipend paid to Mr. Rizak
was compensation for the work that he did for Dr. Wang and thus that he was an
employee.
[36]
This dominant
characteristic of the payment was evident throughout the entire relationship
between Mr. Rizak and UBC. Dr. Wang had a grant that funded him to do
particular research. He needed a graduate research assistant to help him with
that research. Therefore he approached a number of potential candidates. Dr. Wang
ultimately selected Mr. Rizak to be his research assistant. He told Mr. Rizak
that he would receive a stipend of $21,000 per year. There was a clear
correlation between the stipend and the work. Mr. Rizak did not receive the
money by virtue of being accepted as a doctoral student. He did not receive the
money as some form of no-strings-attached bursary or scholarship. He received
the money because he agreed to work in Dr. Wang’s lab. If he stopped working in
the lab, he would stop receiving the money. Not only did Mr. Rizak have to work
for Dr. Wang in order to receive the stipend, he also had to do the
specific work that Dr. Wang required of him. When he wanted to research a
related topic of interest to him he was permitted to do so for a short period,
on his own time but only so long as he continued to do the research for which
he was being paid.
[37]
Mr. Rizak’s situation
can be distinguished from the graduate students in Hammell, Hospital
for Sick Children and Nabet. The students in those cases developed
their own research ideas and pursued them under the mentorship and supervision
of their respective professors. By contrast, Mr. Rizak was simply paid to work
for Dr. Wang doing the work that Dr. Wang needed him to do. His situation was
far closer to that of the masters student in Charron.
[38]
I find the fact that
Mr. Rizak did the same work for Dr. Wang both before and after the period in
question and was considered to be an employee while doing so to be particularly
telling. Nothing about the nature of the work he was doing changed for Mr.
Rizak. Both while he was a student and while he was not he was simply paid for
the work he did.
[39]
I acknowledge that Mr.
Rizak learned invaluable laboratory and research skills and gained in-depth
knowledge about Dr. Wang’s area of research as a result of his work but this is
no different than the skills and knowledge that any employee would acquire in a
challenging new job. Had Mr. Rizak obtained part-time work with a
pharmaceutical company while he was studying at UBC he would have been in
essentially the same position. He would have received payment for doing the
work that the company needed him to do and he would have gained experience and
knowledge in the course of doing so.
[40]
There was insufficient
evidence at trial to allow me to determine whether Mr. Rizak’s relationship
with Dr. Wang was typical of doctoral students in the sciences at UBC or not. I
accept that if Mr. Rizak’s situation was common to all doctoral students in the
sciences at UBC, it may be difficult for such students to obtain the research
and data necessary to prepare their doctoral dissertations without working as
graduate research assistants. However, even if UBC has structured its doctoral
programs in such a way as to essentially require students to be employed by the
university, that would not, in my view, change the fact that they are
employees.
[41]
As set out above, I do
not consider it necessary to consider whether Mr. Rizak was an employee or
an independent contractor as neither party took the position that he was an
independent contractor. That said, there is no question in my mind that if I
had to decide whether Mr. Rizak was an employee or an independent contractor I
would find him to be an employee. Simply put, the tools, chance of profit and
risk of loss factors all point clearly in that direction as does, to a slightly
lesser extent, the control factor.
Income Tax
[42]
Mr. Rizak’s appeal
involves employment insurance, not income tax. However, I nonetheless feel I
should discuss the income tax impact of my decision.
[43]
Both UBC and Mr. Rizak
considered the stipend that he received to be a non-taxable payment. Generally
speaking, scholarship and fellowship payments received by graduate students are
not taxable under the Income Tax Act (“Act”). However, the Act is
careful to exclude amounts received in respect of, in the course of or by
virtue of employment from scholarship and fellowship payments. I have concluded
that the stipend Mr. Rizak received was employment income. This means that he
should have included this employment income in his income for income tax
purposes.
[44]
At trial, I asked Mr.
Rizak why he believed he could “have his cake and eat it too” by claiming not
to be an employee for income tax purposes while at the same time claiming to be
an employee for employment insurance purposes. Mr. Rizak was not able to
provide me with a satisfactory answer to this question. I do not think he fully
understood the potential consequences of succeeding in his appeal. It appeared
that Mr. Rizak had brought his appeal in large part because he believed that
graduate students were being treated unfairly and that his appeal would benefit
not only himself but also graduate students as a whole. Unfortunately, it is
possible that Mr. Rizak’s plan may actually have achieved the opposite result for
at least some students.
Decision
[45]
Based on all of the
foregoing, the appeal is allowed on the basis that Mr. Rizak was engaged
in insurable employment from September 1, 2008 to May 10, 2010.
This Amended Reasons for Judgment is issued
in substitution of the Reasons for Judgment dated September 3, 2013.
Signed at Ottawa, Canada,
this 23rd day of September 2013.
“David E. Graham”
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