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These notes refer to the Outworking Bill
1. These explanatory notes relate to the Outworking Bill as introduced in the House of Commons on 17 January 2001. They have been provided by the Department of Trade and Industry, with the consent of Richard Burden MP, the Member in charge of the Bill, in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.
2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.
SUMMARY AND BACKGROUND
3. The Bill creates new criminal offences to curb unfair and unscrupulous practices which have grown up which exploit people seeking to work largely but not necessarily exclusively from home. These practices are ways of obtaining money by deceiving others. They are defined and described in the bill as "outworking proposals". The problem which the bill seeks to tackle occurs when unscrupulous people seek advance payment by promising work from home or information about work from home when in reality no work will be provided. Often the amount of money collected from an individual respondent is relatively small, but when many people respond, this adds up to large sums of money for the organiser. £600,000 would signify a medium sized operation. Sometimes the schemes are more complex, and involve paying for materials in advance, to construct goods from kits for example. The promise is that these goods will be paid for once completed. In reality there is no intention to pay for them and in most cases there are in any event no markets for these goods. People completing the task and expecting to be paid for it are often told that the goods made are not up to standard, (however perfectly they may have been made). Such a response prevents some people from realising initially that they have been cheated and they may be persuaded to provide a further payment to receive a different kit which they are told will be more suited to their level of ability.
4. In other cases the individual receives, in return for a fee, which can be up to £40 information about work from home which is no more than a list of similar cheating schemes. Directories can mean that people are cheated twice - once for the cost of the directory and again when they respond to one of the so-called opportunities listed within it.
5. The Government is aware of complaints about this practice which have built up over a long period. Agencies such as the National Association of Citizens' Advice Bureaux and the National Group on Homeworking and Local Authority Trading Standards Departments report that these practices are widespread and prey on vulnerable individuals who can least afford to lose the money. The Government proposed taking action to curb this malpractice in its 1999 White Paper, Modern Markets: Confident Consumers. In Autumn 2000, there was further consultation on possible legislative proposals. This was conducted by the Department of Trade and Industry with a small number of key groups representing business, the advice and consumer agencies, regulatory agencies and Trading Standards. The Government has concluded that there is widespread support to take action to stop this malpractice and has welcomed the introduction of this Private Member's Bill on this subject.
OVERVIEW OF THE BILL
6. The Bill defines these unscrupulous practices as outworking proposals and introduces criminal offences in relation to advertising and receiving money from individuals for such proposals or for information about them. The extension of the Bill to Scotland is subject to the approval of the Scottish Parliament which is due to consider this matter in a debate scheduled for 31 January. The Bill extends to Northern Ireland in accordance with the provisions of the Northern Ireland Act 1998 (further explanation is given in relation to clause 8). The subject matter of the Bill is not devolved under the Government of Wales Act 1998 and therefore the Bill's provisions apply to Wales. The enforcement provisions of the Bill are set out in the Schedule to the Bill. The Bill's provisions will be enforced by local authority Trading Standards officers in Great Britain and by the Department of Enterprise, Trade and Investment in Northern Ireland.
COMMENTARY ON CLAUSES
7. Clause 1 defines the type of work offer which will be treated as an "outworking proposal" for the purposes of the Act and which will be subject to criminal offences as set out in clauses 2 and 3. Essentially, to qualify as an "outworking proposal", there must be a holding out that work will be provided in return for advance payment and that the person undertaking the work will be paid for it (though not necessarily by the provider of the work). The worker is therefore required to send an advance payment, meaning a payment that must be paid by the worker before he or she is paid for the work done. The examples of descriptions of advance payments given in the Bill (returnable deposit, registration fee and so on) are not intended to be exhaustive.
8. The Bill provides that certain types of arrangements are not outworking proposals. Thus, these excluded arrangements are not within the scope of the Bill. As employment agencies and employment businesses are already governed by legislative controls under the Employment Agencies Act 1973, a proposal which is made in the course of such business does not come within the ambit of the Bill (clause 1(2)(c)). Provision is also made in order not to inhibit legitimate business opportunities and arrangements such as franchise arrangements and direct selling (clause 1(3)). Furthermore, the Secretary of State is given power to make regulations to exempt from these provisions categories of proposals which would otherwise count as outworking proposals (clause 1(2)(b)).
9. Possible categories of proposals for exemption would need to be considered on a case by case basis and their exclusion would need to be justified. It is not envisaged that a case will emerge very often. However, where a category of outworking proposal is regarded as legitimate and would genuinely benefit workers, the exemption provisions could be used provided that the category is distinguishable from the types of unscrupulous practice which these provisions make unlawful. The power therefore acts as a useful safety-net to ensure that legitimate business arrangements and opportunities are not inhibited.
10. Clauses 2 and 3 make provision for criminal offences. It is a criminal offence to seek or receive a payment made in response to an outworking proposal (clause 2(1)). "Payment" in these clauses bears its ordinary meaning. It catches, therefore, simple payments such as a cheque as well as more unusual forms such as monies received in relation to telephone premium rate lines.
11. The organiser of an outworking proposal commits an offence if he or she places an advert for outworking, if it contains information about an outworking proposal which renders it likely that a person will respond by making a payment in advance. The organiser also commits an offence if he asks anyone else to place or distribute such an advert (clauses 2(2) and 2(3)).
12. The Bill also creates criminal offences where a person who is not the organiser issues, circulates or distributes an advert if he or she knows or ought to know that it is about an outworking proposal or if he or she causes someone else to do so (clauses 2(4) and 2(5)). If there is no actual knowledge and no reason why that person ought to have known then they will have committed no offence. Even if the elements of one or other of these offences are satisfied, it should be noted that where an advertiser is accused of carrying or distributing an advertisement for an outworking proposal or causing someone else to do so, he or she may be able to rely on the defence provisions contained in clause 4.
13. In relation to the advertising offences by a person other than the organiser, it should be noted that outworking proposals are currently advertised in a number of ways. They can appear in newspapers, on television and the internet. They might appear on notice boards in shops, on the back of till receipts, pinned to lampposts or on flyers which are posted through people's letter boxes, often inside reputable free newspapers or magazines.
14. In some cases it will be obvious to the advertiser that the advertisement is for an outworking proposal. This is because the advert may expressly state that the worker is required to make a payment when responding to the advert. In cases where it is not obvious from the advert itself, the commission of an offence will depend upon whether the advertiser ought to know that the advert is for an "outworking proposal". It is not possible to state in advance all the circumstances in which a person "ought to know". It should be emphasised that the degree to which someone "ought to know" will depend upon factors such as, if applicable, the size of his or her enterprise and the resources available.
15 Clause 3 creates a criminal offence to receive money for the provision of information about homeworking or outworking when the information given actually relates to outworking proposals of the type outlined in clause 1. A directory may contain a number of suggestions for finding work from home. If any of these fall into the category of outworking proposals, the fee charged for the directory will be unlawful. Clause 3 also makes it unlawful to, or to cause another person to, publish or circulate an advert likely to cause someone to pay for information about outworking proposals.
16 Clause 4 sets out the defence of due diligence whereby it is open to someone charged with any of the offences under this Act except under clauses 2(2) or 3(2) to prove that he has gone down this route for one of the reasons listed and that he had taken reasonable precautions and exercised due diligence to avoid the commission of an offence by himself or any person under his control. There is no provision for these conditions ever to be satisfied in respect of offences under clauses 2(2) and 3(2) because a mistake etc could not arise where the organiser himself issues, circulates or distributes material.
17. For the defences to apply, the defendant must be able to show firstly that his actions were due to a mistake; reliance on information supplied to him by another person; the act or default of another person; or an accident or some other cause beyond his control. Secondly the defendant must be able to show that he took all reasonable steps to avoid committing any offence.
18. In relation to these provisions, circumstances can be envisaged where an advertiser or publisher might wish to plead the defence that he was relying on information supplied to him by another person, at the same time demonstrating that he also took reasonable steps to ensure it was accurate. Blindly accepting an assurance from someone that an advert which invites payment in return for the provision of work would be unlikely to be a successful defence without the advertiser taking further steps to verify this.
19. In rare circumstances it might be possible to plead successfully that a mistake has been made although misunderstanding of the law will not constitute a defence.
20 Clause 5 and Schedule. This clause gives effect to the Schedule which sets out how the offences in the bill are to be enforced.
21 Paragraph 1 of the Schedule places a duty on those local authorities which are weights and measures authorities to enforce the Act in Great Britain. The Department of Enterprise, Trade and Investment (DETI) will be the enforcement authority in Northern Ireland. Paragraph 2 gives powers of entry, of requiring production of documents and of seizure to enable enforcement officers to find out if an offence has been committed if they have reasonable grounds for suspecting this. Powers of seizure can be used to seize goods or documents where these might be required as evidence, although documents cannot be seized where they are subject to legal privilege, for example where they contain legal advice. Paragraph 3 provides that an enforcement officer may apply for a warrant from the courts. A warrant can be issued if the court is satisfied that documents or goods are on the premises which are likely to disclose the commission of an offence or that an offence has been or is about to be committed on the premises. A warrant can only be obtained in certain circumstances, including where entry has been refused or the element of surprise is necessary.
22 Paragraph 4 will allow enforcement officers to test out proposals of work by responding to them to see if they fall within the category of an outworking proposal. This will allow trading standards to take swift enforcement action against these practices before they prey on a wide sector of the public.
23 Paragraph 5 of the Schedule provides that prosecutions of these offences will be notified to the Director General of Fair Trading. This will help to coordinate prosecutions, especially where a number of authorities are taking action against the same organiser.
24. In Scotland, whilst the provisions are enforced by Trading Standards, prosecutions are dealt with by the Procurator Fiscal. The Bill does not affect this.
25 Paragraph 6 sets out the offences and penalties which will be incurred by someone obstructing an enforcement officer carrying out his duties under these provisions. A person who makes a false statement may be subject to a maximum fine of £5,000 on summary conviction or an unlimited fine on indictment. The maximum penalty for the other offences is a £5,000 fine on summary conviction.
26 Paragraph 7 makes it an offence to impersonate an enforcement officer acting under the Act.
27 Paragraph 8 makes it an offence to disclose information gained by enforcement officers through their powers under this Act. Information can be disclosed lawfully only for the purposes of enforcement of this Act; for the purpose of facilitating the performance by Ministers or enforcement authorities of their functions under a number of other statutes providing for consumer protection; to comply with a European Community obligation; or in connection with the investigation of any criminal offence for the purposes of any criminal or civil proceedings. The offence is triable either way.
28 Clause 6 provides that any order excluding categories of outworking proposal (under clause 1 (2)(b)) will be subject to the negative resolution procedure. Clause 7 provides for any public expenditure on the enforcement of the Act.
29 Clause 8. The Bill's provisions extend to Northern Ireland. This is possible because the main subject matter is the creation of criminal offences. Its subject matter is reserved under Schedule 3, paragraph 9(b) of the Northern Ireland Act 1998.
EFFECT OF THE BILL ON PUBLIC EXPENDITURE
30. The legislation should put an end to outworking proposals. At any one time it is estimated that 300 schemes are operating. Investigation and prosecution of these under the new legislation in the first year will help to publicise it and deter other scams. The cost of additional investigations and some prosecutions, which will be conducted by local authority Trading Standards departments in Great Britain and by DETI in Northern Ireland is estimated to be £350,000 in the first year, non-recurring. Additional magistrates' court costs are put at £23,000 in the first year.
COSTS TO BUSINESS AND REGULATORY IMPACT
31. The legislation has been carefully drawn so as to be effective with minimal effects on legitimate business. Genuine businesses who rely on outworking will benefit because they will not be stigmatised by association with these schemes. Legitimate businesses recruiting outworkers do not require payment in advance. Were such a business practice to emerge as justifiable, it would be possible to exclude it from this legislation under the power in the bill. The Department of Trade and Industry (DTI) will take steps to promote awareness of the new legislation. Advertisers may need to review their procedures to ensure they are capable of identifying outworking proposals. The DTI already advises the public not to pay money in advance to secure outworking and small traders already cooperate and display cards warning people not to send money in advance. The money currently lost by consumers will be saved and could benefit local business instead. In one case where it has been possible to accumulate information, it is estimated that between £2.5 million and £6.5 million has been extracted from at least 103,000 people over a period of 4 years. The Department of Trade and Industry will place a Regulatory Impact Assessment in the libraries of both Houses of Parliament. Copies of this will also be available from the DTI (telephone 020 7215 5469) Room 2130, 1 Victoria Street, SW1H 0ET.
32 Clause 9. The main provisions of the Outworking Act will come into force by commencement order. It is envisaged that this will be some 12 weeks after the Bill receives Royal Assent. This will allow a period of time for the Government to promote awareness of the provisions of the Bill, with a view to both reducing the number of outworking proposals in the system and alerting advertisers to the new provisions.
|© Parliamentary copyright 2001||Prepared: 30 January 2001|