Build the defense
Three-Scenario Exposure Template
Carrier-Ready Reporting Format
Why three scenarios.
A single exposure number is either too high (plaintiff's demand) or too low (defense minimization). Neither is useful for settlement authority, mediation preparation, or client counseling. The three-scenario model presents the full range: what the plaintiff claims, what the data supports, and what the defense can achieve with all available tools. The realistic middle scenario — driven by actual violation rates from time records and payroll data — is the number that drives informed decision-making.
The audience.
This template serves three audiences: the carrier (who needs a defensible authority range), the client (who needs to understand the risk), and the mediator (who needs to evaluate the reasonableness of the parties' positions). Each audience reads the same three numbers but uses them differently. The carrier uses Scenario 2 for reserve setting. The client uses the gap between Scenarios 1 and 3 to understand the value of defense strategy. The mediator uses the methodology's rigor to assess credibility.
The exposure model is organized by violation category. Each category receives its own three-scenario analysis. The per-category totals are then aggregated into a case-level summary.
This scenario uses the plaintiff's methodology and assumptions. It represents the upper bound of exposure — the number the plaintiff will use in the demand letter and at mediation.
The 100% assumption.
Plaintiff's counsel almost always assumes a 100% violation rate — every employee, every pay period. This assumption is nearly always inflated. The actual violation rate, derived from time records and payroll data, is typically 15–40%. The gap between 100% and the actual rate is the most consequential variable in the exposure model.
This scenario uses actual violation rates derived from the employer's own records. It is the most labor-intensive scenario to build — and the most valuable.
How to Calculate Actual Violation Rates
Meal period violations
Pull every shift over 5 hours. Identify shifts where no meal period was recorded, or the meal period was shorter than 30 minutes, or the meal period began after the end of the 5th hour. Divide by total qualifying shifts. This is the actual violation rate. Under Donohue, short punches (< 30 min) are presumed violations — but the employer can rebut with evidence of voluntary shortening.
Overtime violations
Recalculate the regular rate for each pay period using the correct methodology (include all non-discretionary compensation per Ferra/Alvarado). Compare to the rate actually used. Any pay period where the rate was incorrect is a violation. Divide by total pay periods to get the violation rate.
Wage statement violations
Review a statistically valid sample of wage statements against the nine § 226(a) elements. Identify which elements are deficient. If the deficiency is systemic (e.g., missing hourly rate display), the violation rate may approach 100% for that element. If sporadic, sample to determine the rate.
The data must be defensible.
Scenario 2 is only as strong as the underlying data. Pull complete time records, not samples. Use the employer's own records — they are the best evidence. If the records are incomplete, note the gaps and apply reasonable assumptions. The methodology must be transparent and replicable.
This scenario applies every available defense tool to the data-driven violation rates: penalty caps, standing challenges, anti-stacking, recoverability limitations, and temporal bifurcation.
The carrier needs a specific authority recommendation with supporting rationale. This format provides the information carriers require.
Lead with the data.
Carriers respond to quantitative analysis, not qualitative assessments. The three-scenario model with actual violation rates is dramatically more persuasive than 'we believe the case is defensible.' The model demonstrates that defense counsel has done the work — and that the authority recommendation is based on data, not intuition.
For illustrative and educational purposes only. All calculations are hypothetical. Use the Penalty Estimator tool for case-specific modeling.