Three-Scenario Exposure Template

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.

01

Template Structure

Entity name. PAGA notice filing date. PAGA period (one year before notice filing through present or estimated trial). Total aggrieved employees. Pay period frequency (bi-weekly = 26 periods/year, semi-monthly = 24). Violation categories alleged. Reform applicability (pre- or post-June 19, 2024 notice). Cure eligibility (employer under 100 employees). Applicable penalty caps.

For each violation category: three scenarios with specific inputs (violation rate, penalty rate, applicable reform provisions). Employee count, pay period count, violation rate, penalty per violation, applicable cap, and net exposure.

Aggregated exposure across all categories. Per-scenario total. Settlement range recommendation based on Scenario 2 (realistic) with litigation risk adjustment. Attorney fee estimate.

02

Scenario 1 — Plaintiff Maximum

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.

03

Scenario 2 — Data-Driven Realistic

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.

04

Scenario 3 — Defense Best Case

05

Settlement Authority Recommendation Format

One paragraph: parties, violation categories, aggrieved employee count, PAGA period, reform applicability, procedural posture.

Three-scenario summary table. Per-category breakdown. Methodology description (data sources, violation rate calculation, reform provisions applied). Key assumptions and limitations.

Available defenses: penalty caps, standing challenges, arbitration, manageability, affirmative defenses. Strength assessment for each. Litigation timeline and cost estimate.

Recommended settlement authority: specific dollar range based on Scenario 2. Early resolution discount. Attorney fee estimate (plaintiff's counsel will request fees). Litigation cost comparison: settlement now versus trial cost. Risk factors that could increase or decrease exposure.

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.