Violet, Klaus and Sunny Baudelaire have been transferred to yet another guardian. However, this time, their prospects seem to be even bleaker than before. Their new guardian, who prefers to be called Sir, insists that the children work in the mill in exchange for his efforts to keep Count Olaf away.

At first, the children rationalize that this bargain, while not entirely fair, may be working. Count Olaf is nowhere to be seen, at least to their eyes. That changes when Klaus is tripped by the mill's foreman and is forced to visit the eye doctor. The building that serves as the eye doctor's office is an exact replica of the tattoo on Count Olaf's left leg, right down to the eyelashes.

When Klaus returns, Violet and Sunny realize that he is not himself and his behavior is very disturbing. The following day, a horrible accident occurs at the mill and the blame is laid on Klaus. He seems to briefly snap back to his senses, but the foreman trips him again, forcing another visit to the eye doctor. The children begin to understand what has happened to Klaus and realize that he had been hypnotized.

Violet and Sunny accompany him this time and they find that the eye doctor, Dr. Georgina Orwell, is a very nice person, but somewhat strange. Her strangeness is explained when Violet and Sunny go into the waiting room and find Count Olaf disguised as a receptionist named Shirley. However, he doesn't try to capture them immediately and Klaus is released along with them.

When they return to the mill, they find a memo from Sir stating that if another accident occurs, he will be forced to give them up. By happy chance, he has found a woman in town who would be thrilled to adopt three children. The woman is, of course, Shirley. Suddenly, Count Olaf's plan becomes clear.

Violet can't seem to get Klaus back to normal and spends the night researching hypnosis in the mill's pathetic library. Of the three books found in the library, the one by Dr. Georgina Orwell seems to be their only hope. Unfortunately, it is written in extremely difficult language and Violet is no master of vocabulary.

The next day, a horrible accident is staged at the mill and it is up to the Baudelaire children to thwart the accident before someone is killed. They'll need to switch their strengths to come out on top of Count Olaf's scheme. Violet will need to learn to be a researcher and Klaus will have to become an inventor.

Will the Baudelaire children be able to surmount this latest obstacle from Count Olaf, or has he finally found a way to beat them and steal their fortune?