Work Scams

This information applies to British Columbia, Canada. Last reviewed for legal accuracy by People's Law School in March 2017.

Looking for work? If you see a job offer or business opportunity that looks too good to be true, it probably is. Here are some work scams to watch out for.

Work at home, make huge profits

The offer may be to do such things as:

• stuff envelopes,
• clip coupons,
• assemble craft, or
• enter data on a computer.

The advertisement may be on online, on television or in the newspaper. Or you may get a phone call, text, or letter, or see a notice at the local community centre or even on a telephone pole. Example: Make $50,000 in less than 90 days from home!

Warning signs

This scam often:

• Demands you buy a "start-up kit" or something similar in order to begin the program.
• Promises you guaranteed markets, huge demand, big profits, and big earnings for part-time work.

Fact

The Better Business Bureau has not received any reports that work-at-home schemes produce income.

What the law says

It is illegal for an employer to require a prospective employee in BC to pay a fee in order to obtain a job. Legitimate companies usually do not place open ads for work-at-home programs and do not require any type of payment in advance.

What you can do

1. Learn as much as you can about the company, product and market potential. Get everything in writing. Check with the Better Business Bureau to see what they know about the company. See the Sources of Help for Consumers section for contact details.
2. Get a complete description of the work involved before you send any money. You should never have to pay for a job description or for needed materials.

Mystery shopper scams

Mystery shopping scammers use newspaper ads and emails to give the impression there are lucrative mystery shopper jobs available with legitimate companies. Typically, you are directed to a website where you can "register" to become a mystery shopper. But first you have to pay a fee for a certification program, a directory of companies, or a guarantee of a job.

In a variant of this scam, you are hired to "secret shop" a wire-transfer service. You are sent a cheque and told to deposit it. You get to keep a small percentage of the money as your wage and then you wire the rest, and fill out a survey on your experience. After you have done this, you find out the cheque was a fake and you are out of pocket for the money you wired.

Bogus franchises

Some franchises are legitimate business opportunities. Others are scams.

What is a franchise?

A franchise is where you buy the right to sell a company's goods and services. Examples:

• "chains" such as many fast food outlets,
• vending machines,
• magazine racks, or
• video game machines.

A business opportunity is considered a "franchise" if:

• You will sell or distribute goods or services that are supplied by either the company or a designated supplier.
• The company will help you by securing locations or sites for the vending machines or display racks.
• You are required to pay the company a sum of money when you sign the contract or within a set period of time after you begin operations.

Warning signs of a franchise scam:

• High pressure sales tactics. If you are pressured to sign immediately because "prices will go up tomorrow," or "another buyer wants this deal," do not sign.
• Be wary if the salesperson makes the job sounds too easy.
• Promises of extraordinary profits with little risk are usually too good to be true. Example: No experience required. No selling. Earn $5,000+ per month.
• Excessively high start-up fees.
• Evasive answers to your questions. If a seller won't agree to put verbal promises in writing, avoid this seller and look for a legitimate company.
• With franchise scams you will find that promoters:
  • do not deliver the equipment they promised, or
  • do not provide the support services they promised in a sales pitch, such as repairing or replacing damaged items.

Tips for people interested in buying a franchise

• Shop around. Compare franchises with other business opportunities.
• Talk to people who have franchises. Find out how many sales people are in the area and whether you will have an exclusive territory.
• Ask the seller for a list of the names and addresses of current owners and operators. The company’s list of selected references is not a substitute for a list of franchise owners.
• Be very wary if the seller provides recommendations from people but never gives you a way to contact those people yourself.
• Ask to see a Uniform Franchise Offering Circular (UFOC) and review it carefully. This document lists current franchisees, those who have left or quit, and gives financial statements of the business. It should give you the true picture of the franchise operations beyond the glossy sales brochures. UFOCs are not legally required in BC, but demand one anyway. UFOCs are required by law in most parts of the US.
• Get professional advice from a lawyer and/or accountant or business advisor. Go over all the details of the franchise system. Always question where the franchise company makes its money.
• Get the seller's promises in writing. If the salesperson says one thing but the written contract says nothing about it or says something different, the written contract is what counts. Sales claims about successful areas of business — "Be a part of our five billion dollar industry," for example — may have no bearing on your likelihood of success. Once you buy the business, you may be competing with franchise owners or independent business people with more experience.
• Before you sign any contract, take it to a lawyer who is familiar with franchise operations. Be sure you understand who owns what.
• Report any problems to the Better Business Bureau. See the Sources of Help for Consumers section for contact details.

Pyramid schemes

"Pyramid schemes" aim for quick profits by selling the right to recruit other people to the scheme. In a pyramid scheme, you are asked to pay money to become a "distributor" of a product or service. Typically you are invited to attend a presentation about a business opportunity. Usually you are pressured to pay ("invest") a large amount to become a "distributor." You then recruit a number of other distributors. Each of those distributors is supposed to recruit the same number of distributors, and so on.

How to spot a pyramid scheme

The focus is on profits you can make by sales to new recruits who buy the products in order to participate in the scheme. There is more emphasis on recruiting than on selling the products or service.

Pyramid schemes are confusing. They look a lot like "multi-level marketing," which is legal in Canada. Under "multi-level marketing" people sell consumer products, usually in customers' homes. The products are supplied by a multi-level marketing company. You can obtain information about a multi-level marketing company from the Competition Bureau: 1-800-348-5358.

While multi-level marking focuses on selling products or services, the pyramid scheme focuses on recruiting more people.

What the law says

Pyramid schemes are illegal in Canada.

Facts

• Only the people at the top of pyramid make any money.
• Most of the people who invest money in pyramid schemes lose all of it.
• Do not expect to get your money back.

What you can do

You can report a suspected pyramid scheme or get help deciding if it's a pyramid or legitimate multilevel marketing by phoning the Better Business Bureau or Consumer Protection BC. See the Sources of Help for Consumers section for contact details.

Additional resources

For more information, contact "Dial-A-Law", a service that provides legal information on tapes. Select the tape, "Dishonest Business Practices and Schemes" (Tape 260).

Scams to Avoid © People's Law School is, except for the images, licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International Licence.