Date: 20001017
Docket: 2000-159-EI; 2000-160-CPP
BETWEEN:
DR. PATRICIA CHERNESKY AND DR. H. CHRISTIANSEN O/A NIPAWIN HEALTH CENTRE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Rip, J.T.C.C.
[1] The issue in these appeals from decisions by the Minister of National Revenue ("Minister") under the Employment Insurance Act ("EIA") and the Canada Pension Plan ("CPP") is whether certain physicians were engaged at various times in 1997 under a contract of service or under a contract for service by the appellants who are also physicians. If the physicians were engaged under a contract of service by the appellants, the appellants are liable for payments under the EIA and CPP in respect of the physicians.
[2] Drs. Chernesky and Christiansen carry on their profession as medical doctors and operate a medical facility under the firm name Nipawin Health Centre ("Centre") in Nipawin, Saskatchewan. Nipawin has a population of 5,000 people; another 10,000 people live "around" the area. The Centre's main clinic is Nipawin but it also had four other clinics, two on reserves and two in smaller communities near Nipawin. The Centre retains the services of physicians other than the appellants to serve the needs of its clientele. The appellants and the Centre's other physicians provide the services of general practitioners, which includes diagnosing and treating patients and performing surgery in the emergency room of the district hospital. The physicians also visit nursing homes and make house calls.
[3] The physicians whose status is subject to these appeals are Dr. Dino Smiljic, Dr. Sunel Sookdeo, Dr. Steven Abramson, Dr. Stefanus De Nuysschen, Dr. Leandra Forman, and Dr. Paul Forman. (These physicians are sometimes referred to in these reasons individually as "Worker" and collectively as "Workers").
[4] Mr. Edwin Hobday, Administrative Director of the Saskatchewan Medical Association ("SMA"), gave evidence on behalf of the appellants. He described the SMA as a voluntary professional association of physicians in Saskatchewan that represents the physicians' interests. The SMA, besides offering educational programs to its members and advocacy of quality health care, is also the bargaining agent for physicians in negotiating fees with the province of Saskatchewan.
[5] There is a shortage of physicians in rural Saskatchewan as there is in other rural and remote areas of Canada. The College of Physicians and Surgeons of Saskatchewan ("College") determines what type of licence a physician may be issued in order to practice medicine in the province. The licence may be permanent or temporary, for example. Temporary licences, according to Mr. Hobday, may be granted to physicians who do not yet have "Canadian qualifications recognized federally and provincially". A temporary licence is issued to physicians from foreign countries who wish to work in Saskatchewan for an indefinite period. These physicians, referred to as "locums" or "locum tenants", according to Mr. Hobday, work on a temporary basis in a variety of settings where there is a need for additional physicians. Locums may work in all regions of the province, but do so primarily in rural Saskatchewan.
[6] The Workers were "locums".
[7] Some locums have permanent licences to practice medicine in Saskatchewan. The majority, however, have temporary licences. Locums may "move around from community to community". The scope of their practice is not limited; their ability to bill is limited.
[8] The Medical Care Insurance Branch ("MCIB"), Saskatchewan Health, grants billing numbers only to fully licensed physicians. Normally, a physician bills, and is paid by, MCIB. In order to process a claim, a physician requires a billing number. Locums do not have their own billing number. In Mr. Hobday's words, they "borrow" or "use" the billing number of a fully licensed physician. The locum is given a sub-number so that her or his services may be identified. The claim by a locum requires the licensed physician's billing number and the locum's sub-number. Mr. Hobday declared that the loan by a physician of a billing number to a locum "has nothing to do with being liable for the locum's work". The fully licensed physician may not even know the locum, her or his ability or personality.
[9] Locums, Mr. Hobday stated, have hospital privileges and have to go through the "same hoops" as the regular licensed physicians to obtain the privileges. The individual Health Districts in Saskatchewan grant hospital privileges and if any physician does not have hospital privileges, that physician cannot use the health facilities in that district. Privileges are discretionary and even fully licensed physicians may be denied privileges. The same fee schedule applies to all physicians, those who are fully licensed and locums.
[10] In Saskatchewan, physicians charge on a fee for service basis, that is, a schedule describes medical services and the fee a physician may bill for each such service. Available to group practices, such as the Centre, is a "population based" method of billing. A clinic identifies a physician group and number of patients attached to that group. The government will negotiate a fee with the physician group that is based on a formula that considers several factors, including age and sex of the patients and historical billings by physicians in the group. How the recipient of the fees distributes the fees among the physicians in the group is not MCIB's concern. Only two clinics have adopted population based billing, said Mr. Hobday. One of the clinics is the Centre.
[11] The Centre bills MCIB for services in the same manner as individual physicians who bill fees for services. These billings were described by Mr. Hobday as "shadow billing"; the fee for service billing is not processed by MCIB. Dr. Chernesky explained that since the Centre billings were population based, the actual billings were "blended", part population based and part fees for services, the "shadow" billings that permit calculation of payments to the Workers.
[12] Each Worker retained two-thirds of the fees billed to MCIB for services performed by the Worker; the other one-third is retained by the appellants to cover costs of the Centre such as support staff, nurses, and equipment.
[13] Appellants' counsel reviewed with Mr. Hobday the Minister’s assumptions in concluding the Workers were employees of the Centre. The Minister assumed, among other things, that the Workers were on call on a rotational basis for a 24-hour period and that the appellants "planned the appointment schedule and on-call schedule with consultation with the Workers". Mr. Hobday explained that "on-call scheduling" is a requirement for all physicians in Saskatchewan once they make a patient contact. The physician is responsible to ensure that her or his patients may obtain medical services 24 hours a day either from herself or himself or from another physician. Physicians share this responsibility among each other. Mr. Hobday also noted that even clinics will rotate their doctors with doctors of other clinics to fulfil this obligation. In other words, Mr. Hobday explained, a physician has to make arrangements to ensure that she or he is available to her or his patients at all times and if she or he does not co-operate with other physicians, then the physician is on her or his own 24 hours a day, seven days a week.
[14] The Minister also assumed that the work of the Workers "was monitored in terms of ethical treatment of patients and their record keeping and billing". Mr. Hobday stated that physicians had a personal responsibility to deliver quality care service. Monitoring the work of a locum was no different than monitoring the work of a regular licensed physician. The College, he said, sets the monitoring standards and has site inspections to ensure maintenance of these standards.
[15] Dr. Chernesky recruited the Workers from outside Canada because the Centre has been short of physicians to serve its clientele. Local medical school graduates, Dr. Chernesky stated, prefer working in urban settings. The appellants provide prospective locums with a letter of employment for purposes of obtaining a visa to work in Canada. The appellants guarantee a prospective locum a minimum of $8,000 a month for the first four months the physician works at the Centre. She said that after four months the locums "almost always" earn more. In several cases, the appellants offer housing allowances to locums.
[16] Locums build up their practice in basically the same way as regular physicians. For example, when a locum is on-call and treats a patient, that patient usually will request that the locum see her or him on a "follow-up" visit.
[17] Centre hours are flexible, Dr. Chernesky testified. The Centre is open daily from 8:00 a.m. to 5:30 p.m. She described these hours as "guidelines" in which most patients have access to the physicians. Work schedules were prepared in consultation with all the physicians at the Centre, including the Workers. Each physician decided when she or he wanted to work. A Worker was not required to visit satellite clinics; this was her or his personal choice, Dr. Chernesky declared. If a physician, including a locum, wanted time off, the physician would instruct the Centre's receptionist not to book any patients at that time. The physicians would handle amongst themselves any "on-call" time off.
[18] There was no written contract between the Workers and the Centre. The Workers did not commit themselves to any definite term with the Centre. Dr. Chernesky did hope "they'd stay for a length of time". She recalled locums have worked for as little as two weeks, although some stay for months and others may stay for a year or more. In any event, locums come and go as they wish.
[19] According to Dr. Chernesky, the Workers controlled their level of income. They could decide when to work and the number of hours they wished to work. A Worker's income depended on this decision as well as ensuring she or he maintained a good relationship with patients. If a patient did not like a Worker's "bedside manner" the Worker would lose the patient; a patient was free to choose her or his physician. Also, at least one Worker advertised his services.
[20] In her examination-in-chief, Dr. Chernesky reviewed the status of the Workers:
Dr. Sookdeo had no MCIB billing number in 1997 but obtained his own number in 1998. In 1997 he was not fully licensed to practice and used Dr. Christiansen's number;
Dr. Abramson and both Drs. Forman also used Dr. Christiansen's number in 1997; and
Dr. Smiljic was fully licensed in 1997 and had his own MCIB number. He was not a locum.
[21] Dr. Chernesky explained that a billing to MCIB for services contains the name of the patient, the service and the fee. The MCIB pays the Centre.
[22] Before a Worker started working at the Centre, Dr. Chernesky said, she would give the new Worker "guidelines" with respect to the number of hours a physician was expected to work at the Centre, the equipment the physician should have available, and related matters.
[23] Dr. Chernesky stated that the Workers supplied their own stethoscope and laboratory coat. They also required an automobile in their work if they elected to travel to satellite clinics. The MCIB is not billed for expenses of the Centre or for those of any physicians, Dr. Chernesky declared. A Worker is also responsible for her or his medical reference materials, professional liability insurance, automobile expenses and other business expenses. An individual physician's expenses, including those of the Workers, are absorbed by the physician.
[24] For travel to reserves, the physicians received $50 a trip; for travel to the Centre's own clinics, the Workers and the other physicians received nothing. The Centre billed MCIB for patients on the reserve.
[25] When Revenue Canada first started considering whether the appellants were liable for payment of premiums under the EIA and CPP, a questionnaire was sent to Dr. Chernesky. One of the questions was whether the Centre expected the Workers to provide services to them exclusively. Dr. Chernesky replied that it is contemplated "that the Workers time commitment will be such that other contracts are unlikely". However, she did mention that some locums had worked in emergency rooms elsewhere and that they were paid personally for this work.
[26] Dr. Chernesky also replied that the Workers did not receive any benefits. "We do not worry about source deductions, holiday pay, overtime, benefits and labour standards issues." She considered the Centre's employees to include the receptionist, typist, lab technicians, nurses, clerical staff, office manager and janitors, not the locums. She acknowledged that on the advice of Revenue Canada, the Centre withheld 15 per cent of the earnings of Workers who were non-residents of Canada: Drs. P. and L. Forman, Sookdeo, Abramson and De Nysschen.
[27] When a locum leaves the Centre, Dr. Chernesky stated, the locum's files are retained by the Centre. She considers the files to be the property of the Centre. And when a physician leaves the Centre, she or he does not receive any benefits such as vacation or severance pay.
[28] Dr. Chernesky conceded that the appellants could make a profit from the Workers. If a Worker billed $18,000 in a month and retained $12,000, the Centre may make some profit, after expenses, on the $6,000 it gets but it "wouldn't make much". She doubted whether the Centre ever made money from a locum.
[29] In the respondent’s view the Workers were employees of the appellants. The respondent’s counsel argued that since the Workers were guaranteed income of $8,000 a month, the Workers did not risk a loss if the gross billings fell below $12,000. This may be so, but income was guaranteed only during the first four months of the Workers’ pay at the Centre. And even during those four months, the Worker could increase his monthly income above $8,000, particularly during the latter months if the Worker was prepared to devote the necessary time and energy.
[30] Respondent’s counsel submitted that the facts in the appeals at bar indicate that the four-in-one test (control, ownership of tools, chance of profit and risk of loss and the organization or integration test) elaborated by MacGuigan J.A. of the Federal Court of Appeal in Wiebe Door Services v. M.N.R.[1] supports the respondent’s position that the Workers were the appellants’ employees. The Workers, she stated, were integrated into a fully operational business owned and operated by the appellants and the Workers merely served the appellants. All Centre staff is paid for by the appellants, all equipment at the Centre is owned by the appellants and all administrative policies of the Centre are determined and enforced by the appellants.
[31] Counsel for the respondent argued that the facts in the appeals at bar are similar to those in the appeal of Mirchandani et al. v. M.N.R.,[2] a decision of Beaubier T.C.J. In Mirchandani, contract psychiatrists were hired to work at the clinics operated by their local Health Districts in Saskatchewan. The psychiatrists operated in a similar manner in terms of the work schedule, performing their services at clinics, making hospital rounds and providing on-call services; they were subject to a small degree of control by their payor, as in the appeal at bar. The payor provided all the tools, equipment and staff in the clinic with the Health Districts providing the same in the hospitals. The psychiatrists were required to provide their own vehicle and malpractice insurance and were paid no benefits. The method of remuneration differed from the facts at bar in that the psychiatrists were paid on the basis of four-hour blocks of time, the number of which varied significantly from psychiatrist to psychiatrist, rather than a guaranteed minimum salary. Judge Beaubier determined that the psychiatrists were employees:
Looked at objectively, by a patient or some other person in the community, the psychiatrists, when working pursuant to their sessional contracts, appeared to be employed as part of the clinic business and their work was done as an integral part of the clinic business. They were not performing services as persons in business on their own account. Rather they were performing them as integral staff of the clinics who were their Payors. Therefore, the appeals are dismissed.[3]
[32] What I have to consider is that notwithstanding that the business carried on at the Centre is the business of the appellants whether it can also be said that each of the Workers is herself or himself also carrying on a business. For example, in Alexander v. M.N.R.,[4] a physician, performed all of his duties at a hospital except when filling in for associates during vacations on a reciprocal basis. He did not have a separate medical practice as was the nature of his specialty, which essentially meant his patients were typically seen at the hospital. He was paid by the hospital on a professional services basis less a five per cent deduction for uncollected accounts. In addition, the physician was head of the Department of Radiology at the hospital and carried substantial administrative duties associated with such a position. Jackett P. concluded that the physician was operating under a contract for service and he could deduct expenses of earning his income. He was carrying on his own business. On the other hand, in Boardman v. The Queen,[5] a psychiatrist agreed with the government of Alberta to provide psychiatric services under purported contracts for service. However, the Court found that the contractual relationship which existed was that of an employee and an employer. The Court considered the terms and conditions of the contract itself which contained numerous provisions that were similar to those that other employees of the government of Alberta enjoyed, including holiday provisions, entitlement to sick leave days, restrictions and ability to conduct a private practice, provisions for the deduction of income tax at source, payments of sustenance and travelling allowance and payment of fixed remuneration per month.
[33] In the case at bar, unlike Mirchandani, supra, one third of all fees billed by the Workers was used by the clinic to pay expenses of the clinic. The Workers are, in fact, helping to pay the expenses of running the Centre. In Mirchandani the psychiatrists were paid a fixed remuneration for a four-hour block of time and were paid whether or not the patients ultimately attended at a session. In the case at bar the Workers’ pay was calculated on the basis of a fee for service. If a patient did not show up at an appointment, I would infer that the Worker did not get paid.
[34] The respondent also referred to the appeal of Hauser v. M.N.R.,[6] where a hospital pathologist was found to be an employee. One of the tests the Tax Review Board applied was the economic realty test. The Board compared the economics of the appellants’ professional activities with those of a private practitioner operating his own laboratory. The Board found that private practitioners run the risk of financing equipment-supplying help necessary to administer and operate the laboratory and have to ensure they have sufficient clients to remain viable. Dr. Hauser, on the other hand, used equipment and supplies provided by a hospital, did not have to hire people to work under him, but could actually get help from hospital staff. He did not have to seek out clients. In his absence, he did not have to pay for his replacement which was paid for by the hospital. The respondent states these facts are identical to the appeals at bar. I do not agree. As I have previously stated, the appellant paid one-third of his gross fees to the Centre which, according to the evidence, the Centre applied to pay salaries to staff, to purchase equipment and, in general, to carry on the business of the clinic. Also, the Workers have to seek out clients. I repeat: they are only guaranteed income for the first four months they work at the clinic. Once the four months are up, they must seek out patients or they will not earn any income. The fact that if a Worker wishes to take holidays she or he does not hire and pay a replacement does not, in my view, affect the Worker's status. Another physician at this Centre will cover their patient load and get paid for her or his efforts. There is no evidence before me that even if Dr. Chernesky or Dr. Christiansen, for example, go on leave they pay for their replacement.
[35] In Weibe Door, supra, MacGuigan J.A. wrote that one must not consider only one element in a relationship to determine whether the relationship is one of master and servant. One must consider all four elements: ownership of tools, chance of profit and risk of loss, control and integration. He cautions that one should not focus on any one element but should consider all the elements together to determine the exact relationship. In Hennick v. Canada,[7]the Federal Court of Appeal confirmed that one must search for the total relationship between the parties.
[36] In the appeals at bar it is the appellants' business that is being carried on and the Workers are engaged to assist in the business. Locums traditionally work on a temporary basis at any one place and obviously do not have a long-term interest in the success of a business.
[37] Control is an elusive concept in the appeals at bar. There is no evidence of any control by the appellants that suggest a master and servant relationship, that is one of employer and employee. The dress code or a set of administrative procedures are prevalent in many professional situations and in and by themselves do not necessarily suggest a high, or any, degree of control. It is probably true that if a patient wished to lodge a complaint against a Worker, she or he would do so with the appellants and the appellants would in all probability discuss the matter with the affected Worker. The Worker could then attempt to resolve the problem or lose the patient. This is not a control situation. The fact that a Worker may lose a patient suggests that the Worker has a risk of loss of income.
[38] The Workers risk loss, as mentioned, and have a chance of profit. The monthly income of $8,000 is only guaranteed to the Workers for a period of four months. After that, the Worker is on her or his own.
[39] As far as tools are concerned, it is quite clear that some tools are owned by the Workers and other tools, including some of the heavier equipment, are owned by the appellants and used by the Workers. But, here too, the payment to the appellants by the Workers of one-third of their fees includes the right to use this equipment. However, this element is not particularly dominant in the relationship between the appellants and the Workers.
[40] The economic reality of the facts at bar is that the Workers carry on business on their own account. They form relationships with patients. The amount of income they make, once their initial four-month period is completed, depends solely on the particular physician. They help in the appellants' business but their success (or failure) depends on themselves alone. They are carrying on their own businesses in conjunction with the business carried on by the appellants.
[41] The Workers were engaged under a contract for service with the appellants.
[42] The Workers were therefore not engaged in insurable employment within the meaning of subsection 5(1) of the EIA. Neither were they engaged in pensionable service within the meaning of paragraph 6(1)(a) of the CPP. The appeals are allowed.
Signed at Ottawa, Canada, this 17th day of October 2000.
"Gerald J. Rip"
J.T.C.C.