Contract analysis

I. Executive Summary This memorandum provides our analysis of the demand letter dated January 14, 2026, from Garza, Linden & Okafor LLP ("GLO"), addressed to Verimark Hospitality Group Inc. ("VHG" or the "Company") and received by VHG General Counsel Devin K. Arroyo on January 16, 2026. The demand letter was issued on behalf of Daniela M. Serrano ("Serrano"), a former front-desk associate at the Verimark Regency Tamp

1. Failure to pay overtime at one-and-one-half times the regular rate for hours worked over 40 per workweek;

2. Illegal automatic meal-break deductions of 30 minutes per shift despite employees being required to remain on-call and perform duties during meal periods;

3. Failure to compensate employees for pre-shift and post-shift work, including donning and doffing uniforms, booting up computer systems, and attending shift-handover briefings, totaling an estimated 15–25 minutes per shift;

4. Failure to pay the Florida minimum wage for tipped employees in compliance with Article X, Section 24 of the Florida Constitution, applicable to certain front-desk and concierge roles participating in pooled tip arrangements; and

5. Willful misclassification of certain "lead" and "senior" hourly roles as exempt under the FLSA's administrative exemption. The demand letter defines the putative collective and class as all current and former hourly, non-exempt employees at Verimark-branded properties in Florida from January 2023 to the present. GLO estimates this group comprises between 4,100 and 5,900 individuals, depending on the ultimate scope

II. Background A. The Parties Verimark Hospitality Group Inc. VHG is a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol VMHG. The Company is headquartered at 2400 Bayshore Boulevard, Suite 1100, Tampa, Florida 33629. VHG reported fiscal year 2025 revenue of approximately $1.42 billion. The Company's executive leadership relevant to this matter includes: Theodore R. Langford, Ch

III. Summary of Demand Letter Allegations For ease of reference throughout this memorandum, we restate each of the five categories of violations alleged in the GLO demand letter, as well as the putative collective and class definition and the monetary demand. Allegation 1: Failure to Pay Overtime GLO alleges that VHG systematically failed to pay overtime compensation at one-and-one-half times the regular rate for all

IV. Applicable Legal Framework A. Fair Labor Standards Act — Overtime (29 U.S.C. § 207(a))

Section 7(a) of the FLSA requires that employers pay non-exempt employees overtime compensation at a rate of not less than one and one-half times the employee's "regular rate" of pay for all hours worked in excess of 40 in a workweek. 29 U.S.C. § 207(a)(1). The regular rate is not simply the employee's hourly wage; rather, it includes "all remuneration for employment paid to, or on behalf of, the employee," subject t

Article X, Section 24 of the Florida Constitution establishes a state minimum wage that is adjusted annually and, as of September 30, 2025, stands at $14.00 per hour. The Florida minimum wage supersedes the federal minimum wage of $7.25 per hour under the FLSA, requiring Florida employers to pay the higher state rate. The Florida minimum wage provision was amended by voter initiative in 2020 to provide for a series o

V. Analysis of Each Category of Allegations A. Allegation 1: Overtime Violations (29 U.S.C. § 207(a))

1. Substance of the Allegation GLO alleges that VHG systematically failed to pay overtime premiums to hourly, non-exempt employees who worked in excess of 40 hours per workweek across all seven at-issue properties. The demand letter does not provide extensive detail as to the specific mechanism by which overtime was allegedly unpaid, but the claim appears to rest on two related theories. First, GLO contends that cert

2. Initial Assessment of VHG's Potential Defenses Strengths. VHG's use of the Luminos TimeTrack automated payroll system provides a potential defense to the extent that the system is designed to automatically calculate and apply overtime premiums whenever an employee's recorded time-punch data reflects hours in excess of 40 in a workweek. If the time-punch data accurately captures all hours worked, the Luminos system

3. Key Factual Questions Requiring Investigation The following factual questions must be investigated to evaluate the merits of this allegation:

1. Whether the Luminos TimeTrack platform accurately captured all hours worked by hourly, non-exempt employees at the seven at-issue properties;

2. Whether overtime was properly calculated and paid at one-and-one-half times the regular rate for all recorded hours in excess of 40 per workweek;

3. Whether the addition of off-the-clock hours from Allegations 2 and 3 (uncompensated meal-break time and pre-/post-shift time) would push employees' actual weekly hours above 40 and, if so, the frequency and magnitude of such occurrences;

4. Whether VHG maintained an overtime authorization policy, whether it was effectively communicated to employees, and whether it was consistently enforced;

5. Whether there are property-level variations in overtime practices, including differences in scheduling, staffing, and supervisory enforcement; and

6. Whether the blended average hourly rate of $16.50 used in GLO's calculations is consistent with actual wage data across the seven properties and across the relevant time period. B. Allegation 2: Automatic Meal-Break Deductions

1. Substance of the Allegation GLO alleges that VHG's Luminos TimeTrack system, pursuant to automatic deduction rule AR-MEAL-030, deducted 30 minutes from the recorded hours of every employee who worked a shift of six or more hours, regardless of whether the employee actually received an uninterrupted, duty-free 30-minute meal break. The demand letter further alleges that employees — particularly those in front-desk

2. Initial Assessment of VHG's Potential Defenses Strengths. Automatic meal-break deduction systems are not per se unlawful. An employer may use such a system where employees do, in fact, consistently receive bona fide, duty-free meal breaks and where a reasonable mechanism exists for employees to report missed or interrupted breaks and to receive a correction to their pay. If VHG can demonstrate that it maintained a

3. Key Factual Questions Requiring Investigation

1. Configuration details of Luminos TimeTrack rule AR-MEAL-030: the implementation date, the specific parameters of the rule, whether an employee-facing correction mechanism exists within the system, and whether the correction mechanism has been activated for VHG's account;

2. Whether VHG's employee handbook (version 7.2 or prior versions) addresses meal-break procedures, including how to report missed or interrupted meal breaks, and whether employees were trained on these procedures;

3. Whether employees at each property were actually completely relieved of all duties during meal periods, including whether adequate coverage staffing was provided to allow employees to leave their workstations;

4. Whether supervisors or managers at any of the seven properties instructed or expected employees to remain available, monitor work communications, or perform tasks during meal breaks;

5. Whether any employees successfully used the correction process (if one exists) to reverse auto-deductions for missed or interrupted breaks, and the frequency of such corrections relative to the total number of deductions across all seven properties;

6. Any internal complaints, grievances, or feedback regarding the meal-break auto-deduction practice; and

7. Audit logs or system records from Luminos that document changes to the AR-MEAL-030 configuration or employee-initiated corrections. C. Allegation 3: Pre-Shift and Post-Shift Off-the-Clock Work

1. Substance of the Allegation GLO alleges that VHG failed to compensate hourly, non-exempt employees for between 15 and 25 minutes per shift of pre-shift and post-shift activities. These activities encompass three categories: (a) donning and doffing of required uniforms, which must be performed at the property rather than at home; (b) booting up computer systems, including point-of-sale terminals and property manage

2. Initial Assessment of VHG's Potential Defenses Strengths. The Portal-to-Portal Act provides a potentially viable defense to the extent that the challenged activities are classified as "preliminary" or "postliminary" rather than "integral and indispensable" to the employee's principal activity. If VHG's uniform policy permits employees to don and doff their uniforms at home — for example, if the uniforms are not su

3. Key Factual Questions Requiring Investigation

1. Whether VHG's uniform policy requires on-site donning and doffing or permits employees to wear their uniforms to and from work; whether this policy varies by property or position;

2. Whether employees are expected or required to be logged in, uniformed, and "ready to work" at the start of their scheduled shift, as opposed to beginning the log-in and preparation process at the start of their shift;

3. The nature, duration, and mandatory or voluntary character of shift-handover briefings at each property — whether they are formally scheduled, supervisor-directed, and attended by all shift employees, or informal and voluntary;

4. Time-punch data from Luminos TimeTrack showing patterns of employees clocking in before their scheduled start times and clocking out after their scheduled end times, and the frequency and magnitude of such pre-shift and post-shift time;

5. Whether Luminos TimeTrack employs a rounding policy (e.g., rounding to the nearest 5, 6, 7.5, or 15 minutes) and, if so, whether the rounding results in systematic underpayment of actual time worked; and

6. Any written communications, policy memos, or training materials addressing pre-shift preparation requirements, computer log-in procedures, or shift-briefing protocols. D. Allegation 4: Florida Tipped-Employee Minimum Wage Violations

1. Substance of the Allegation GLO alleges that VHG violated Article X, Section 24 of the Florida Constitution by failing to pay the applicable Florida minimum wage to tipped employees, specifically certain front-desk associates and concierge employees who participated in a pooled tip arrangement. The allegation encompasses both substantive claims — that employees' direct wages plus tips did not consistently equal or

2. Initial Assessment of VHG's Potential Defenses Strengths. VHG may have proper tip-credit notice procedures in place. If VHG provided written notice to all affected tipped employees of the amount of the direct wage, the amount of the tip credit being claimed, the fact that the tip credit cannot exceed actual tips received, and the fact that all tips are the property of the employee, the procedural requirements for

3. Key Factual Questions Requiring Investigation

1. Which job codes and positions at each of the seven at-issue properties participated in tip pools during the relevant lookback period (January 14, 2021 to present);

2. Whether VHG provided written tip-credit notices to all affected tipped employees, and whether copies of executed acknowledgment forms are available;

3. The composition of tip pools at each property: which positions were included, and whether any non-customarily-tipped positions (e.g., housekeeping, maintenance) were part of the pool;

4. Whether direct wages plus tips equaled or exceeded the applicable full Florida minimum wage in every pay period for every affected employee;

5. Pre-Luminos payroll records (prior to January 1, 2022) for periods within the five-year Florida lookback, including records of tip credits claimed, tips reported, and direct wages paid;

6. Property-level variations in tip-pool practices, including the pool distribution methodology and the positions eligible to participate; and

7. Whether VHG retained any portion of tips or applied tips to offset any non-tip-credit-related costs. E. Allegation 5: Willful Misclassification — FLSA Administrative Exemption

1. Substance of the Allegation GLO alleges that VHG willfully misclassified certain employees in "lead" and "senior" hourly roles as exempt from overtime under the FLSA's administrative exemption, 29 C.F.R. § 541.200. The demand letter identifies several positions by title, including "Lead Front Desk Associate," "Senior Housekeeper," "Lead Banquet Server," and similar designations, across the seven at-issue propertie

2. Initial Assessment of VHG's Potential Defenses Strengths. If VHG obtained legal advice or conducted an internal classification review supporting its exemption determinations, this evidence would bear on both the substantive merits of the classification and the willfulness inquiry. Evidence that VHG acted in good faith reliance on counsel's advice would negate the willfulness finding and limit the lookback to two y

3. Key Factual Questions Requiring Investigation

1. Identification of all job codes and titles at the seven at-issue properties that are currently classified as exempt from FLSA overtime, or that were classified as exempt at any time during the relevant lookback period;

2. Review of job descriptions, position profiles, and actual duties performed for all "lead" and "senior" roles, with particular attention to the degree of discretion and independent judgment exercised;

3. Whether these roles are compensated on an hourly or salary basis, and whether they receive overtime pay;

4. Whether VHG sought legal advice regarding its exemption classification decisions, and when such advice was obtained;

5. The number of employees in each potentially misclassified role at each property, and their compensation history; and

6. Whether any internal audits, DOL investigations, or state agency inquiries have previously examined VHG's exemption classifications.

VI. Cross-Cutting Defense and Strategic Considerations A. Willfulness GLO's demand letter characterizes the alleged violations across all five categories as "willful," invoking the three-year limitations period under 29 U.S.C. § 255(a). A finding of willfulness would effectively double the class period relative to a non-willful finding and correspondingly increase the aggregate exposure. VHG's primary defense against