Contract analysis

I. Executive Summary This memorandum analyzes the legality of Verimark Hospitality Group Inc.'s ("VHG" or the "Company") automatic thirty-minute meal-break deduction practice under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., and its implementing regulations, with particular focus on the standards set forth in 29 C.F.R. § 785.19. This analysis is prepared in response to a demand letter received fro

II. Background and Factual Context A. VHG's Workforce and Properties at Issue Verimark Hospitality Group Inc. is a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol VMHG. The Company's principal executive offices are located at 2400 Bayshore Boulevard, Suite 1100, Tampa, Florida 33629. VHG operates a portfolio of upscale and upper-upscale hotel and resort properties throughout t

1. Verimark Regency Tampa — 1200 North Westshore Boulevard, Tampa, FL 33607 — 320 rooms — approximately 410 employees, of whom an estimated 295 are hourly non-exempt workers. This is the property at which the named claimant, Daniela M. Serrano, was employed as a front-desk associate from March 14, 2022, through August 22, 2025.

2. Verimark Grand Orlando — 8750 International Drive, Orlando, FL 32819 — 485 rooms — approximately 580 employees, of whom an estimated 420 are hourly non-exempt workers. This is VHG's largest property by room count and employee headcount, and given its location along Orlando's primary tourist corridor, it is likely to have among the highest volumes of guest-facing interactions across the portfolio.

3. Verimark Shores Clearwater — 455 Mandalay Avenue, Clearwater Beach, FL 33767 — 210 rooms — approximately 260 employees, of whom an estimated 190 are hourly non-exempt workers. Notably, this property is owned by Palomar Realty Partners LLC and managed by VHG under Hotel Management Agreement HMA-2021-0601-PC. The management-agreement structure raises separate questions regarding employer status and allocation of lia

4. Verimark Bayfront St. Petersburg — 100 First Avenue South, St. Petersburg, FL 33701 — 275 rooms — approximately 340 employees, of whom an estimated 245 are hourly non-exempt workers.

5. Verimark Resort & Spa Boca Raton — 2600 North Ocean Boulevard, Boca Raton, FL 33431 — 390 rooms — approximately 470 employees, of whom an estimated 340 are hourly non-exempt workers.

6. Verimark Oceanview Fort Lauderdale — 3030 Holiday Drive, Fort Lauderdale, FL 33316 — 305 rooms — approximately 365 employees, of whom an estimated 265 are hourly non-exempt workers.

7. Verimark Key West Collection — 1500 Reynolds Street, Key West, FL 33040 — 150 rooms — approximately 195 employees, of whom an estimated 140 are hourly non-exempt workers. This property is VHG's smallest by room count and headcount among the at-issue properties. In aggregate, the seven at-issue properties employ approximately 2,620 individuals, of whom approximately 1,895 are hourly non-exempt workers. The putative

Section 4.07 of the Handbook, titled "Meal and Rest Breaks," states that employees working shifts of six hours or more "are entitled to a thirty (30)-minute uninterrupted meal break." The Handbook further states that employees "are expected to take their meal breaks during their scheduled shifts" and "should notify their supervisor if they are unable to do so for any reason." The use of the word "expected" rather tha

III. Legal Framework A. FLSA Meal-Break Provisions — 29 C.F.R. § 785.19 The FLSA itself does not mandate that employers provide meal breaks to their employees. There is no provision in the statute requiring employers to schedule or offer meal periods of any particular length. However, where an employer elects to provide a meal break and wishes to exclude that time from the employee's compensable working hours, the em

Section 785.19(a) provides that a "bona fide meal period" is not compensable work time. To qualify as a bona fide meal period, the regulation establishes that the employee must be "completely relieved from duty for the purposes of eating regular meals." The regulation further clarifies that the bona fide meal period is "not limited to the mere ingesting of food" — in other words, the employee need not actually eat du

Section 785.19(b) addresses the critical boundary between compensable and non-compensable meal time. It provides that if the employee "is required to perform any duties, whether active or inactive, during the meal period," the period does not qualify as a bona fide meal period and the time must be treated as compensable work time. The regulation draws no distinction between active duties (such as answering phones or

IV. Analysis of VHG's Automatic Meal-Break Deduction Practice A. Configuration of Luminos TimeTrack Rule AR-MEAL-030 As described in Section II.B above, auto-deduction rule AR-MEAL-030 is applied universally to all non-exempt employees at all fourteen VHG properties for any shift of six hours or more. The deduction is effectuated at the payroll-processing stage without requiring an affirmative clock-out by the employ

1. Communication and Training. The threshold question is whether the exception/correction process was clearly and effectively communicated to all employees. The mere existence of a policy in an employee handbook does not establish that employees were aware of it or understood how to use it. Courts have found correction processes inadequate where employees were not informed of the process during onboarding, where the

2. Accessibility. The design of the correction process raises concerns about accessibility. Under the current Handbook, the process requires the employee to notify the supervisor, who then submits the correction to payroll. This two-step process — employee notification followed by supervisor action — creates a gatekeeping dynamic. The employee cannot submit a correction directly; the employee must rely on the supervi

3. Supervisor Compliance. Even if the correction process is clearly communicated and accessible in design, its effectiveness depends on whether supervisors are trained to accept and process meal-break corrections, and whether there is any evidence of supervisors discouraging or refusing to process corrections. The GLO demand letter alleges that Ms. Serrano was told by her supervisor that the correction process was "n

4. Effectiveness and Audit Trail. A critical indicator of the correction process's effectiveness is the volume of corrections actually submitted and processed relative to the total number of shifts to which the auto-deduction was applied. If VHG's records show a very low correction rate — for example, fewer than 1% of eligible shifts resulting in a meal-break correction across thousands of employees and tens of thous

5. Timeliness. Finally, we need to determine how quickly meal-break corrections are processed once submitted. If there is a significant delay between the submission of a correction and the employee's receipt of compensation for the missed meal break, the process may be viewed as insufficiently responsive, particularly if the delay discourages future correction requests. Preliminary assessment. Based on the informatio

V. Quantification of Potential Meal-Break Exposure A. Per-Employee Weekly Impact The automatic deduction rule AR-MEAL-030 deducts thirty minutes of compensable time per shift for any shift of six hours or more. For a standard five-day workweek, the total weekly deduction per employee is: 30 minutes/shift × 5 shifts/week = 150 minutes/week = 2.5 hours per week If the deductions are determined to be improper — because

VI. Potential Defenses A. Good-Faith Defense Under FLSA § 259 / § 260 The FLSA provides two related defenses that may limit an employer's exposure for violations:

Section 260 — Reduction or Elimination of Liquidated Damages. Under 29 U.S.C. § 260, a court has discretion to reduce or eliminate the award of liquidated damages (which otherwise are mandatory and equal in amount to the unpaid wages) if the employer demonstrates that the FLSA violation was "in good faith" and that the employer "had reasonable grounds for believing that his act or omission was not a violation of the

Section 259 — Reliance on Administrative Ruling or Interpretation. Under 29 U.S.C. § 259, an employer may defend against FLSA liability by showing that it acted in conformity with and in reliance on a written administrative regulation, order, ruling, approval, or interpretation of the DOL Administrator, or a written administrative practice or enforcement policy communicated to the employer by the Administrator. This