http://decision.tcc-cci.gc.ca/site/tcc-cci/decisions/en/item/31290/index.do 
Rizak v. MNR[1] (September 3, 2013) is an appeal under the
Employment Insurance Act.[2] The appellant had received stipends as a graduate research assistant in while pursuing his doctorate in neuroscience at the University of British Columbia from September 1, 2008 to May 10, 2010. The Minister ruled that he was not engaged in insurable employment within the meaning of subsection 5(1) of the EIA. The appellant appealed the Minister’s decision to the Tax Court.
This case is one of a number over the years that explore the distinction between stipends, awards, scholarships, grants, etc., designed to enable students to pursue graduate work (or post-doctoral studies) and part-time jobs designed to supplement the income of students. Generally the former would be regarded as not amounting to insurable employment for EIA purposes and, depending on the facts, might be exempt from income tax. The latter would normally form insurable employment for EIA purposes and be subject to income tax. Nevertheless the line between the two types of receipts is often hard to determine.
In the case of Mr. Rizak the most telling fact is probably that he worked as a research assistant for the same professor both before and after he was a student at UBC:
[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.
The court adopted and applied the reasoning of an earlier decision:
[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.
As a result Mr. Rizak’s appeal was successful since the dominant characteristic of the payments was compensation for work done.
The court did point out that Mr. Rizak’s enthusiasm in pursuing his appeal might well have adverse income tax consequences:
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.
Comment: This is an area that badly needs clarification by CRA working in conjunction with major teaching institutions. Postgraduate education is both extremely expensive and a matter of national economic importance. There seems to be little consistency in how CRA applies these rules, whether for EIA or income tax purposes.
[1] 2013 TCC 273.
[2] S.C. 1996, c. 23 (“EIA”).