Tax Court: Graduate Student Can be an Employee Under the EI Act

The Tax Court of Canada (TCC) recently considered whether a graduate student performing research at the University of British Columbia was an employee for the purposes of subsection 5(1) of the Employment Insurance Act.

The Court held that each case would have to be decided on its own facts, but decided the appellant in this particular case was in fact an employee.

Before Joshua Rizak was a graduate student in neuroscience at UBC, he was hired by a professor to assist with lab research. When his studies commenced, he performed the same duties, but received an annual stipend rather than an hourly wage. When he withdrew from the program he was again hired to perform the same research for several more months. The Minister of National Revenue determined that Mr. Rizak’s research work while a student at UBC was not insurable employment under the Employment Insurance Act.

Mr. Rizak represented himself on appeal to the TCC. 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 graduate research assistant comes from the grant given to the professor whose work the student is doing.

Decisions from the TCC considering similar issues have gone both ways because payments to postdoctoral researches often have dual elements; they are a form of education and a form of compensation. In this case, the Court stated that if payments are received by virtue of employment, that should take precedence, but that in making that determination the dominant characteristics of the payments must be considered.  

The Honourable Justice David E. Graham stated at paragraph 34 that he did not have to undertake the usual employee/independent contractor analysis:

“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.”

The Court concluded that the dominant characteristic of the stipend paid to Mr. Rizak was compensation for work, and therefore he was an employee. A large factor in this decision seems to be that Mr. Rizak performed the same work as an employee both before and after his time as a graduate student.

The Court also noted as an aside that Mr. Rizak “tried to have his cake and eat it too” by claiming not to be an employee for the purposes of the Income Tax Act, while simultaneously claiming to be an employee for the purposes of the Employment Insurance Act.

This decision helps to clarify this area of the law, although as mentioned, each determination will depend on the particular facts of the case and therefore absolute certainty is not possible.

Greer Jacks is updating jurisprudence in EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.

Source: Rizak v. MNR