Canada: What’s The Difference Between A Graduate Student And An Employee?

In Rizak v. M.N.R. (2013 TCC 273), the Tax Court of Canada considered this question and determined, on the facts, that a graduate student performing research at the University of British Columbia was an employee for the purposes of the Employment Insurance Act.

In Rizak, the taxpayer was a grad student in neuroscience at UBC. Before starting his studies, the taxpayer was hired as an employee by a professor who needed assistance with lab research. After his grad studies commenced, the taxpayer performed the same lab research but, instead, received an annual stipend rather than an hourly wage. After he withdrew from the grad program, the taxpayer was once again hired as an employee to perform the same lab research for several months.

Subsequently, the Minister of National Revenue determined the taxpayer's work while he was a grad student was not insurable employment for the purposes of subsection 5(1) of the Employment Insurance Act. The taxpayer appealed to the Tax Court.

The Tax Court considered a collection of cases on the classification of graduate students and post-doctoral fellows (see Bekhor v. M.N.R., 2005 TCC 443; Chabaud v. The Queen, 2011 TCC 438; Caropreso v. The Queen, 2012 TCC 212; Hammell v. M.N.R., [1994] T.C.J. No. 921; Hospital for Sick Children v. M.N.R., [1993] T.C.J. No. 388; Nabet v. M.N.R., [1999] T.C.J. No. 79; and Charron v. M.N.R., [1994] T.C.J. No. 47). The parties had also referred to the traditional four-in-one test from Wiebe Door Services Ltd. ([1986] 3 F.C. 553 (C.A.)) and Sagaz Industries Canada Inc. (2001 SCC 59) regarding the classification of a worker. In this case, however, the Tax Court stated,

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 [the Wiebe Door factors] to be useful in reaching that determination.

The Tax Court concluded that the dominant characteristic of the stipend paid to the taxpayer was compensation for work and, thus, he was an employee. There was a clear correlation between the stipend and the work performed by the taxpayer and he received the money because he agreed to work in the professor's lab. The taxpayer was required to do the specific work expected of him. Further, the taxpayer performed the same work as an employee both before and after his time as a grad student.

In obiter, the Tax Court also noted that, for the purposes of the Income Tax Act, the taxpayer had earned employment income rather that exempt (or partially exempt) scholarship income and the Court, therefore, suggested that the taxpayer had tried to "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.

For more information, visit our Canadian Tax Litigation blog at www.canadiantaxlitigation.com

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