The Tax Court of Canada Rules That Post-Doctoral Fellows are Not Employees of the University in The University of New Brunswick v. The Minister of National Revenue

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The Tax Court of Canada Rules That Post-Doctoral Fellows are Not Employees of the University in The University of New Brunswick v. The Minister of National Revenue

In The University of New Brunswick v. The Minister of National Revenue, 2023 TCC 72, (U.N.B v. M.N.R) the University of New Brunswick (the “University”), appealed a decision of the Canada Revenue Agency (“CRA”), that classified a post-doctoral fellow (“post-doc fellow”) as an employee of the University. The CRA held that the post-doc fellow was an employee of the University. The University disputed this characterization and argued that post-doc fellows were not employees but rather students, who conducted research in order to further their education. The case concerned the period between March 2018 and August 2020. The Tax Court of Canada ruled that post-doc fellows were not employees of the University, therefore, the CRA has no claim to unremitted Canada Pension Plan (“CPP”) and Employment Insurance (“EI”) payments for the post-doc fellows.

In September 2020, post-doc fellows at the University unionized and are now deemed employees of the University with the ability to collectively bargain. The unionization of the post-doc fellows ensures that U.N.B v. M.N.R will be the last case of its kind.

Why does the CRA care about the characterization of post-doc fellows as employees?

The short answer – revenues. The CRA wanted the University to pay unremitted Canada Pension Plan (“CPP”) and Employment Insurance (“EI”) payments for the post-doc fellows from the period March 2018 through August 2020. The University would not have to remit these amounts to the CRA if the Tax Court affirmed the University’s position that the post-doc fellows were indeed students and not employees of the University. The CRA was also concerned about losing revenue in other places where post-doc fellows would be deemed students and the CRA’s tax base would contract.

Factors that the Tax Court of Canada deemed relevant in characterizing post-doc fellows as students.

The Tax Court held that it is not one factor on its own but a combination of factors that leads to the determination of whether or not someone is an employee. The case of post-doc fellows becomes increasingly complicated due to ambiguity in the terms of their contract. The Tax Court was of the opinion that characterization of the post-doc fellows’ compensation is the crucial determinant in the tax treatment of that renumerated amount.

The source of funds, the terms & language used in the post-doc fellow contract, and the control of the work product are all indicative of the nature of the working relationship between the post-doc fellow and the University. In making its determination, the Tax Court looked at the reasonable expectations of the party at the time of contract formation. The expectation of both the University and the post-doc fellow was that her renumeration was for financial assistance for the furtherance of her educational goals rather than income for services rendered to her university.

It is crucial to note that the post-doc fellow’s status in Canada was as a work permit holder and not as a student. However, the Tax Court did not rely on the work permit as sufficient evidence of her status due to the broad and vague language used in the work permit. It would not be an unfair analysis to state that post-doc fellows ‘study’ through their work permits in the same way that students-at-law ‘article’ on their work permits. The latter’s employers are not exempt from remitting CPP and EI on the articling student’s behalf, therefore, the only reasonable explanation of the Tax Court’s decision is the difference in control exercised over articling students as compared to post-doc fellows. Consult a Canadian tax lawyer in Toronto if you are unsure about whether to remit CPP or EI on behalf of your staff.


How does the CRA determine the dominant purpose of payment in an employment/contractor relationship for tax purposes?

The dominant purpose of payments can be determined by considering various factors which include but are not limited to the written agreement between the parties, the source of funding available for making payments, the control and ownership of the work product, the level of supervision & control exerted by the employer or payor, and the reasonable expectations of the parties. Additionally, factors such as the usage of tools, chance of profit/loss, and who benefits from the activities of the worker may all be relevant in making a holistic determination. However, the answer to this question is highly fact specific. Getting in touch with a top Canadian tax lawyer will greatly reduce your chances of getting in trouble with the CRA.

I am a post-doctoral fellow. Does the CRA consider payments made to me as financial assistance for education, or income for services rendered?

It depends on the nature of your contract. Payments made to post-doc fellows can be treated as financial assistance for education if the dominant purpose of the payments is to further the post-doc fellows academic studies and research skills. In U.N.B v. M.N.R, the court ruled in favour of treating the payments to the post-doc fellow as financial assistance for education as the evidence indicated that the University’s main objective was to enhance the post-doc fellow’s academic skills rather than benefit from her services. However, if employees similar to you are unionized or have a dissimilar work agreement to yours, you may be characterized as an employee of the University and your income will be subject to income tax deductions at source. Consulting a Canadian tax lawyer will allow you to make a more accurate determination of your tax obligation.

How can the classification of payments be impacted by unionization & collective bargaining agreements?

Unionization and collective bargaining agreements can impact the classification of payments for tax purposes. After the period under question in U.N.B v. M.N.R had elapsed, the University executed a collective bargaining agreement with a collective bargaining unit for post-doc fellow contracts. The agreement affirmed the CRA’s position i.e., all post-doc fellows were employees of the University.

This unionization and the subsequent collective bargaining agreement could influence the characterization of payments going forward. Unfortunately for the CRA, it could not convince the court of the presence of a collective bargaining agreement as sufficient proof that the post-doc fellow in question should be considered an employee in U.N.B v. M.N.R. Consult with an experienced Canadian tax litigation lawyer to ensure success in the Tax Court of Canada.


“This article provides information of a general nature only. It is only current at the posting date. It is not updated, and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions, you should consult a Canadian tax lawyer.”