CALDERWOOD & HARKNESS LLP 100 Southeast Second Street, Suite 3400 Miami, Florida 33131 Telephone: (305) 555-7200
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Bernard Crawford, Responsible Partner, Labor & Employment Renata Vasquez, Billing Partner, Labor & Employment
FROM: Nadia Petrov, Lead Associate, Labor & Employment James Underwood, Working Associate, Labor & Employment
DATE: February 7, 2026
RE: Analysis of Demand Letter from Garza, Linden & Okafor LLP on Behalf of Daniela M. Serrano — Verimark Hospitality Group Inc.
MATTER NO.: 1021-00005
CLIENT: Verimark Hospitality Group Inc. (Nasdaq: VMHG)
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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 Tampa, and was signed by Marco A. Garza, named partner and plaintiff-side employment class-action specialist, and Priya N. Chandrasekaran, associate, of GLO's offices at 600 Brickell Avenue, Suite 2200, Miami, Florida 33131.
Serrano was employed by VHG at the Verimark Regency Tampa from March 14, 2022 through August 22, 2025, in an hourly, non-exempt front-desk associate position (employee ID VHG-EMP-20220314-5587). The demand letter threatens the commencement of a collective and class action against VHG under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. ("FLSA"), and Article X, Section 24 of the Florida Constitution, asserting five distinct categories of alleged wage-and-hour violations:
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. The demand letter seeks $18.5 million in back pay, liquidated damages, and attorneys' fees and establishes a response deadline of February 28, 2026.
Seven VHG properties are specifically named in the demand letter as being "at issue": (1) Verimark Regency Tampa; (2) Verimark Grand Orlando; (3) Verimark Shores Clearwater; (4) Verimark Bayfront St. Petersburg; (5) Verimark Resort & Spa Boca Raton; (6) Verimark Oceanview Fort Lauderdale; and (7) Verimark Key West Collection. These seven properties collectively employ approximately 2,620 individuals, of whom approximately 1,895 are hourly, non-exempt workers. VHG, in total, has approximately 8,200 employees across 14 Florida properties, of whom approximately 5,900 are non-exempt hourly workers.
The purpose of this memorandum is to: (a) analyze each of the five categories of allegations asserted in the demand letter; (b) evaluate the legal bases underpinning each allegation; (c) identify the initial strengths and weaknesses of VHG's potential defenses; (d) assess cross-cutting strategic considerations, including collective and class action viability, willfulness, joint-employer exposure, and the interplay among the five categories of claims; and (e) recommend areas requiring further factual investigation and propose a workplan for the scoping phase of this engagement. A separate Preliminary Exposure Assessment memorandum has been prepared and is being provided directly to General Counsel Arroyo under separate cover.
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, Chief Executive Officer; Marguerite A. Dunning, Chief Financial Officer; Devin K. Arroyo, General Counsel; Carla S. Whitfield, Vice President of Human Resources; and Enrique J. Fuentes, Director of Payroll & Workforce Compliance. VHG owns and operates a portfolio of full-service and select-service hospitality properties throughout the State of Florida, with additional properties under development or management agreements in Georgia, South Carolina, and the U.S. Virgin Islands.
Daniela M. Serrano. Serrano is the named claimant in the demand letter. She was employed as a front-desk associate at the Verimark Regency Tampa, located at 1200 North Westshore Boulevard, Tampa, Florida 33607. Her employment commenced on March 14, 2022 and terminated on August 22, 2025. Throughout her tenure, Serrano held an hourly, non-exempt position. Her employee identification number within VHG's human resources information system is VHG-EMP-20220314-5587. The demand letter does not specify the circumstances of Serrano's separation from employment, and we do not yet have access to her personnel file or separation documentation.
Garza, Linden & Okafor LLP. GLO is a plaintiff-side employment litigation firm with offices in Miami, Florida. The firm is known for its focus on employment class and collective actions, particularly in the hospitality, retail, and food-service industries. Marco A. Garza, the lead attorney on this matter, is a named partner and recognized plaintiff-side employment class-action specialist. He is assisted by Priya N. Chandrasekaran, an associate at the firm. GLO's involvement is significant because the firm has a track record of pursuing FLSA collective actions to conditional certification and beyond, and its participation signals that this matter is likely to proceed to litigation if a pre-suit resolution is not reached.
B. Payroll and Timekeeping Infrastructure
VHG outsourced its payroll processing and timekeeping functions to Luminos Payroll Solutions Inc. ("Luminos"), a Georgia corporation with offices at 3300 Peachtree Road NE, Suite 800, Atlanta, Georgia 30326. This outsourcing arrangement became effective on January 1, 2022. VHG's designated account is identified within the Luminos system under the system ID LTT-VHG-2022-0041. The key client-services contact for VHG's account is Shannon D. Prewitt, Senior Account Manager at Luminos.
VHG utilizes the Luminos TimeTrack platform for all employee time-punch recording across its Florida properties. Employees record the beginning and end of their shifts, as well as any meal-break periods where applicable, through electronic time clocks at each property. The Luminos TimeTrack platform is integrated with Luminos's payroll-processing engine, which calculates gross wages, applies overtime premiums, processes deductions, and generates wage statements and payroll registers for all VHG properties.
A critical feature of the Luminos TimeTrack configuration for VHG is the automatic meal-break deduction rule designated as AR-MEAL-030. Under this rule, the system automatically deducts 30 minutes from the recorded hours of any employee who works a shift of six or more hours, on the assumption that the employee has taken a 30-minute unpaid meal break. The configuration details of this rule — including when it was first implemented, whether an employee-facing exception or correction mechanism exists, and how exceptions are processed — are among the most important factual questions this investigation must address.
Luminos generates and maintains wage statements and payroll registers for all VHG properties. These records constitute the primary source of documentary evidence regarding hours worked, wages paid, overtime calculations, and deductions applied. For periods prior to January 1, 2022, before VHG transitioned to Luminos, payroll processing was handled internally by VHG's finance and human resources departments using a system that has not yet been identified. Access to and availability of pre-Luminos payroll records will be an important consideration given the extended lookback period applicable to certain Florida constitutional claims, as discussed in Section IV.F below.
C. The Seven At-Issue Properties
The demand letter identifies seven VHG-branded properties in Florida as the locations at which the alleged violations occurred. Below is a summary of each property, including location, room count, total employees, and estimated hourly, non-exempt employees:
One property warrants special note. The Verimark Shores Clearwater property is not owned by VHG. It is owned by Palomar Realty Partners LLC ("Palomar"), a Florida limited liability company managed by Ricardo E. Montalvo as Managing Member, with offices at 1901 West Cypress Street, Suite 400, Tampa, Florida 33607. VHG manages the Verimark Shores Clearwater property pursuant to a Hotel Management Agreement designated HMA-2021-0601-PC, dated June 1, 2021. Under that agreement, VHG directly employs all on-site staff at the property, including the approximately 260 total employees and 190 hourly employees referenced above. This ownership structure raises potential joint-employer considerations, which are discussed further in Section VI.C below.
D. Procedural Timeline
The following is a chronological summary of key events to date:
• January 14, 2026: GLO dates and sends the demand letter on behalf of Serrano.
• January 16, 2026: VHG General Counsel Devin K. Arroyo receives the demand letter via certified mail and email.
• January 17, 2026: VHG issues an internal litigation-hold memorandum to all property-level general managers, HR managers, and the Director of Payroll & Workforce Compliance, instructing the preservation of all documents, electronic records, communications, and data relating to employee timekeeping, payroll, meal breaks, uniforms, shift scheduling, tip pools, and job classifications at the seven at-issue properties from January 1, 2021 to the present.
• January 29, 2026: The VHG Audit Committee of the Board of Directors authorizes the engagement of outside counsel for purposes of analyzing the demand letter and conducting a scoping-phase investigation, with a budget authorization of up to $350,000.
• January 30, 2026: Calderwood & Harkness LLP opens matter 1021-00005 and begins its review.
• February 28, 2026: Response deadline set forth in the demand letter.
• March 15, 2026: Deadline for VHG to tender notice of the demand to its Employment Practices Liability insurance carrier, Pinnacle Indemnity Corp., under Policy No. PIN-EPL-2025-44781.
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 hours worked in excess of 40 per workweek, in violation of Section 7(a) of the Fair Labor Standards Act, 29 U.S.C. § 207(a). The demand letter asserts that this failure affected hourly, non-exempt employees across all seven at-issue properties and that the resulting underpayments were pervasive and ongoing throughout the relevant limitations period.
Allegation 2: Illegal Automatic Meal-Break Deductions
GLO alleges that VHG implemented and maintained an automatic payroll deduction of 30 minutes per shift for all employees working shifts of six or more hours, notwithstanding that employees were allegedly required to remain on-call and to perform duties during their designated meal periods. The demand letter contends that this practice resulted in the systematic failure to compensate employees for time during which they were not completely relieved of duties, rendering the purported meal breaks compensable working time under applicable law.
Allegation 3: Uncompensated Pre-Shift and Post-Shift Work
GLO alleges that VHG failed to compensate hourly, non-exempt employees for pre-shift and post-shift activities that were integral and indispensable to their principal work activities. Specifically, the demand letter identifies three categories of uncompensated work: (a) donning and doffing required uniforms at the property; (b) booting up computer systems, including point-of-sale terminals and property management software; and (c) attending shift-handover briefings. The demand letter estimates that these uncompensated activities totaled between 15 and 25 minutes per shift.
Allegation 4: Florida Tipped-Employee Minimum Wage Violations
GLO alleges that VHG failed to pay the Florida minimum wage for tipped employees in compliance with Article X, Section 24 of the Florida Constitution, as applicable to certain front-desk and concierge employees who participated in a pooled tip arrangement at the at-issue properties. The demand letter contends that VHG improperly claimed a tip credit against the Florida minimum wage without satisfying the statutory prerequisites and that the composition of the tip pools included employees who do not customarily and regularly receive tips.
Allegation 5: Willful Misclassification Under FLSA Administrative Exemption
GLO alleges that VHG willfully misclassified certain employees holding "lead" and "senior" hourly roles as exempt from FLSA overtime requirements under the administrative exemption set forth at 29 C.F.R. § 541.200. The demand letter identifies positions such as "Lead Front Desk Associate," "Senior Housekeeper," and "Lead Banquet Server" as examples of roles that were improperly classified as exempt despite the fact that the primary duties of these positions did not satisfy the duties test for the administrative exemption. The allegation of willfulness is significant because it extends the applicable statute of limitations from two years to three years under 29 U.S.C. § 255(a).
Putative Collective and Class Definition
The demand letter defines the putative collective and class as:
All current and former hourly, non-exempt employees employed at Verimark-branded properties in the State of Florida at any time from January 2023 to the present.
GLO estimates this group to comprise between 4,100 and 5,900 individuals, depending on the ultimate scope of the collective and class as determined through discovery and certification proceedings. The demand letter seeks a total of $18.5 million, stated to be inclusive of back pay, liquidated damages, and attorneys' fees.
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 to eight statutory exclusions enumerated in 29 U.S.C. § 207(e). Proper calculation of the regular rate is a frequent source of litigation, particularly where employers fail to include non-discretionary bonuses, shift differentials, or other forms of compensation.
The threshold determination for overtime liability is whether the employee's "hours worked" in a given workweek exceed 40. The FLSA defines "hours worked" broadly to include all time during which an employee is "suffered or permitted to work," regardless of whether the work was specifically requested or authorized by the employer. 29 C.F.R. Part 785 provides detailed guidance on the compensability of various categories of time, including waiting time, on-call time, rest periods, meal periods, and travel time. The employer's obligation to compensate for hours worked exists even when the employer did not request the work, provided the employer knew or had reason to know that the work was being performed. See 29 C.F.R. § 785.11.
The FLSA also places the burden of maintaining accurate records of hours worked and wages paid squarely on the employer. Section 11(c), 29 U.S.C. § 211(c), requires employers to make, keep, and preserve records of employees' wages, hours, and other conditions of employment in accordance with regulations prescribed by the Administrator of the Wage and Hour Division. Where an employer's records are inaccurate or incomplete, a "just and reasonable inference" is drawn against the employer, and the employee's testimony regarding hours worked may be credited. Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687–88 (1946).
The FLSA provides for the recovery of both unpaid wages and an equal amount as liquidated damages. 29 U.S.C. § 216(b). Liquidated damages are presumptively available to prevailing plaintiffs, and the burden falls on the employer to demonstrate that it acted in subjective good faith and had objectively reasonable grounds for believing its practices complied with the FLSA. 29 U.S.C. § 260. If the employer makes this showing, the court has discretion to reduce or eliminate the liquidated damages award.
B. FLSA — Meal Period and Break Time (29 C.F.R. § 785.19)
Under 29 C.F.R. § 785.19, bona fide meal periods are not compensable working time. To qualify as a bona fide meal period, the break must typically last at least 30 minutes, and the employee must be "completely relieved from duty for the purposes of eating regular meals." The regulation emphasizes that the employee is not relieved if he or she "is required to perform any duties, whether active or inactive, while eating." Id. Where an employee is required to remain at his or her workstation, to be available for calls, or to perform any work-related task during the ostensible meal period, the entire period constitutes compensable working time.
Automatic deduction systems — in which the employer's payroll software deducts a fixed amount of time for each shift on the assumption that a meal break was taken — are not per se unlawful. However, such systems are lawful only to the extent that they accurately reflect reality: employees must in fact receive uninterrupted, duty-free breaks, and there must be a reasonable mechanism by which employees can report missed or interrupted breaks and receive a correction to their pay. Courts have increasingly scrutinized automatic deduction systems, particularly in industries where continuous operations make it difficult for employees to be completely relieved of duties. See, e.g., Ruffin v. MotivAction, LLC, 904 F.3d 1063 (9th Cir. 2018); Adair v. Charter Cnty. of Wayne, 452 F.3d 482 (6th Cir. 2006). Where the employer cannot demonstrate that the deduction accurately reflects time actually taken off, the deduction is impermissible and the deducted time is compensable.
C. FLSA — Compensability of Pre-Shift and Post-Shift Activities
The compensability of time spent on pre-shift and post-shift activities is governed by the interplay between the FLSA, the Portal-to-Portal Act of 1947, and the continuous-workday doctrine. The Portal-to-Portal Act, 29 U.S.C. §§ 251–262, excludes from compensable hours any time spent on activities that are "preliminary to" or "postliminary to" the employee's principal activity, as well as time spent walking, riding, or traveling to and from the actual place of performance of the principal activity. Id. § 254(a).
However, the Supreme Court has held that activities that are "integral and indispensable" to an employee's principal activities are themselves principal activities and therefore compensable, notwithstanding the Portal-to-Portal Act's general exclusion. IBP, Inc. v. Alvarez, 546 U.S. 21 (2005); Steiner v. Mitchell, 350 U.S. 247 (1956). Under the continuous-workday rule, once an employee begins a principal activity (including an integral-and-indispensable activity), all subsequent time until the employee completes his or her last principal activity of the day is compensable working time, subject only to bona fide meal periods and other recognized exceptions.
The application of this framework to the specific activities alleged in the demand letter requires analysis of three distinct categories:
Donning and doffing uniforms. Whether donning and doffing a uniform constitutes an integral-and-indispensable activity depends on whether the employer requires the employee to change into and out of the uniform at the workplace, or whether the employee may wear the uniform to and from work. Where the employer's uniform policy, or the nature of the work, requires on-site donning and doffing — for instance, due to branding standards, hygiene requirements, or security considerations — the time spent changing is compensable. See IBP, 546 U.S. at 31–32.
Computer boot-up time. Courts have increasingly recognized that time spent booting up a computer system, logging in, and launching work-related applications is compensable where the computer is the employee's primary work tool and the employee cannot begin performing his or her duties without first completing the boot-up process. See, e.g., Cadenas v. Am. Multi-Cinema, Inc., No. 20-cv-9628 (S.D.N.Y. 2022); Kuebel v. Black & Decker Inc., 643 F.3d 352 (2d Cir. 2011).
Shift-handover briefings. Time spent in employer-directed shift-handover briefings — where employees receive updates on guest requests, property status, outstanding tasks, or other operational matters — is generally compensable working time because the briefing is for the employer's benefit and is integral to the employee's ability to perform his or her duties during the ensuing shift.
The de minimis doctrine, which holds that insubstantial or insignificant periods of time beyond the scheduled working hours may be disregarded, is an affirmative defense available to employers. However, the doctrine is narrowly applied, and courts have generally held that periods exceeding approximately seven to ten minutes are not de minimis. See Lindow v. United States, 738 F.2d 1057, 1063 (9th Cir. 1984). The 15–25 minutes per shift alleged in the demand letter is well in excess of the threshold typically recognized by courts, including courts within the Eleventh Circuit, and is unlikely to be successfully characterized as de minimis.
D. Florida Minimum Wage — Art. X, § 24, Florida Constitution
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 of annual increases culminating in a $15.00 per hour minimum wage by September 30, 2026.
For tipped employees — defined as employees who customarily and regularly receive more than $30 per month in tips — Florida law permits a tip credit of $3.02 per hour as of September 30, 2025, resulting in a direct-wage obligation of $10.98 per hour for tipped employees. Prior to September 30, 2025, both the full minimum wage and the tip credit were lower, and the applicable rates varied with each annual adjustment. Any exposure analysis must account for the specific minimum wage and tip credit in effect during each pay period within the relevant lookback.
To lawfully claim a tip credit, the employer must satisfy several requirements. Under FLSA § 3(m)(2)(A), 29 U.S.C. § 203(m)(2)(A), as interpreted by the Department of Labor, the employer must inform the tipped employee, in advance and in writing, of the amount of the direct wage to be paid, the additional amount claimed as a tip credit, the fact that the tip credit cannot exceed the actual tips received, and the fact that all tips are the property of the employee. Failure to provide this notice invalidates the tip credit, and the employer is liable for the full minimum wage for all hours worked. Furthermore, tip pooling arrangements must be limited to employees who customarily and regularly receive tips; the inclusion of non-tipped employees in the pool may invalidate the entire arrangement.
Claims arising under Article X, Section 24 of the Florida Constitution are subject to a five-year statute of limitations under Section 95.11(2)(b), Florida Statutes. Applying this limitations period to the January 14, 2026 demand letter date yields a lookback to January 14, 2021 — a date that substantially predates VHG's transition to Luminos Payroll Solutions on January 1, 2022. This extended lookback will require examination of VHG's pre-Luminos payroll records and may present data-access and data-integrity challenges.
E. FLSA Administrative Exemption (29 C.F.R. § 541.200)
The FLSA's administrative exemption, set forth at 29 C.F.R. § 541.200, exempts from overtime requirements employees who satisfy a three-part test: (1) the employee is compensated on a salary basis at a rate of not less than the applicable minimum salary threshold per week (the "salary-basis test"); (2) the employee's compensation meets the applicable minimum salary level (the "salary-level test"); and (3) the employee's primary duty is the performance of office or non-manual work directly related to the management policies or general business operations of the employer or the employer's customers, and the employee's work includes the exercise of discretion and independent judgment with respect to matters of significance (the "duties test"). 29 C.F.R. § 541.200(a).
The employer bears the burden of proving that an employee qualifies for the administrative exemption, and FLSA exemptions are narrowly construed against the employer. See Encino Motorcars, LLC v. Navarro, 584 U.S. 79 (2018) (modifying the interpretive canon to give the exemptions a "fair reading" but not overruling the general principle that the employer bears the burden). In the hospitality industry, "lead" and "senior" roles — such as Lead Front Desk Associate, Senior Housekeeper, and Lead Banquet Server — typically involve substantial hands-on operational work, supervision of a small number of subordinates, and limited exercise of independent judgment on matters of significance. Courts have generally been reluctant to classify such roles as exempt under the administrative exemption, although the analysis is necessarily fact-specific and depends on the actual duties performed rather than the job title or job description. See, e.g., Pig Improvement Co. v. Middle States Holding Co., No. 4:17-cv-01230 (N.D. Fla. 2019).
The allegation of "willful" misclassification is significant because, under 29 U.S.C. § 255(a), an action arising out of a willful violation of the FLSA may be commenced within three years of the violation, rather than the standard two-year period for non-willful violations. The Supreme Court has defined "willful" in this context to mean that the employer either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute. McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988). An employer who acts without a reasonable basis for believing its classification decisions were lawful — for example, an employer that failed to seek legal advice or conduct any analysis of the duties test — may be found to have acted willfully.
F. Statutes of Limitations
The applicable statutes of limitations are as follows:
• FLSA — non-willful violations: Two-year lookback from the date of the demand letter, yielding a lookback date of January 14, 2024. 29 U.S.C. § 255(a).
• FLSA — willful violations: Three-year lookback from the date of the demand letter, yielding a lookback date of January 14, 2023. 29 U.S.C. § 255(a).
• Florida constitutional minimum-wage claims: Five-year lookback under Fla. Stat. § 95.11(2)(b), yielding a lookback date of January 14, 2021.
The willfulness standard established by the Supreme Court in McLaughlin v. Richland Shoe Co., 486 U.S. 128 (1988), requires a showing that the employer knew or showed reckless disregard for whether its conduct violated the FLSA. This is a lower bar than requiring proof of specific intent to violate the statute. The characterization of violations as "willful" in GLO's demand letter is significant because the putative collective period identified — from January 2023 to the present — presupposes a three-year willful-violation lookback. If VHG successfully rebuts the willfulness characterization, the applicable FLSA limitations period would shrink to two years, reducing the class period and aggregate exposure accordingly. The Florida constitutional claims, however, are unaffected by the willfulness determination and carry an independent five-year lookback that extends to January 14, 2021.
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 certain employees worked more than 40 hours per workweek and did not receive the required overtime premium for hours in excess of 40. Second, and more significantly, the overtime claim appears to be largely derivative of Allegations 2 and 3: when uncompensated meal-break time and pre-/post-shift time are added back to employees' recorded hours, the recalculated total hours worked per week exceed 40, triggering overtime obligations that were not met.
Based on the demand letter's assumptions, the estimated average weekly hours worked by affected employees (including uncompensated time) is 42.5 hours, yielding an average of 2.5 overtime hours per week per employee. The demand letter uses a blended average hourly rate of $16.50 across all hourly positions, resulting in a calculated overtime rate of $24.75 (1.5 × $16.50) and an unpaid overtime premium of $8.25 per hour per overtime hour worked. While we have not yet independently verified these figures, they appear to be within a plausible range for the hospitality positions at issue.
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 should be generating correct overtime calculations. Luminos payroll registers and wage statements should be available to demonstrate that overtime was, in fact, paid when punched hours exceeded 40. Additionally, VHG's employee handbook (version 7.2, effective January 1, 2025) presumably contains an overtime authorization policy requiring employees to obtain prior supervisory approval before working overtime hours. While such a policy does not eliminate the employer's obligation to pay for overtime actually worked, it may serve as a partial mitigating factor in demonstrating VHG's good-faith efforts to control overtime and ensure compliance.
Critically, however, the strength of the overtime defense is substantially dependent on the viability of VHG's defenses to Allegations 2 and 3. If the overtime claim is primarily derivative — arising from the addition of uncompensated meal-break and pre-/post-shift time to recorded hours — then VHG's overtime exposure rises and falls with those underlying claims.
Weaknesses. If the automatic meal-break deductions (Allegation 2) and the failure to capture pre-shift and post-shift time (Allegation 3) are confirmed as violations, the recalculated hours worked per week would in many cases exceed 40, generating substantial overtime liability that was not reflected in employees' paychecks. The employer bears the burden of maintaining accurate time records under 29 U.S.C. § 211(c), and any inaccuracies in VHG's timekeeping data — whether caused by the automatic deduction system, the failure to capture pre-/post-shift time, or other factors — will redound against VHG.
Furthermore, liquidated damages equal to the unpaid overtime wages are presumed under 29 U.S.C. § 216(b) unless VHG can demonstrate good faith and reasonable grounds for believing its practices were lawful. The systemic nature of the payroll configurations that give rise to this claim — configurations applied uniformly through the Luminos TimeTrack platform across all seven at-issue properties — means that the violation, if proven, would affect all similarly situated employees in a largely uniform manner. This uniformity strengthens the case for collective treatment and increases the aggregate exposure.
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 and concierge roles, such as Serrano — were routinely required to remain on-call and to perform work-related duties during their designated meal periods. These duties allegedly included answering telephone calls, assisting guests at the front desk, processing check-ins and check-outs, and responding to guest requests, all during what was nominally a meal break.
The alleged weekly impact of this practice is significant. At 30 minutes per shift and five shifts per week, the automatic deduction results in 150 minutes, or 2.5 hours, of potentially uncompensated time per employee per week. This time, if properly classified as compensable working time, would increase employees' total weekly hours and, in conjunction with the pre-/post-shift time alleged in Allegation 3, would in many cases push total hours over 40, generating overtime obligations.
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 and effectively implemented such a correction process — whether through a feature within the Luminos TimeTrack platform, through a supervisory sign-off procedure, or through another accessible mechanism — the auto-deduction practice is defensible.
Additionally, property-level variations may benefit VHG's defense. The seven at-issue properties vary in size, operational profile, and staffing levels. Some properties may have dedicated break rooms, adequate coverage staffing, and operational procedures that genuinely allow employees to be completely relieved of duties during meal periods. If VHG can demonstrate that the auto-deduction accurately reflected actual practice at some or all properties, the claim's viability as a systemic, class-wide challenge is weakened.
Weaknesses. The legal standard under 29 C.F.R. § 785.19 is unambiguous: a meal break is compensable working time if the employee is not "completely relieved from duty." The hospitality industry, by its nature, requires continuous guest-facing operations, particularly at the front desk. Front-desk associates like Serrano are the primary point of contact for arriving and departing guests, and the operational demands of the front desk do not pause during meal breaks. Unless VHG can demonstrate that it provided adequate coverage staffing to allow front-desk employees to leave the desk and be completely relieved of duties for a full 30 minutes, the auto-deduction is highly vulnerable.
If VHG lacks a robust exception or correction process, or if such a process exists in the employee handbook or in the Luminos system configuration but is not effectively communicated to employees, not practically accessible, or not consistently utilized, the auto-deduction practice becomes very difficult to defend. Courts in the Eleventh Circuit and elsewhere have been skeptical of auto-deduction systems where the employer cannot present affirmative evidence that employees were actually relieved of duty during the deducted periods. See, e.g., Myracle v. Gen. Elec. Co., 33 F.4th 1318 (11th Cir. 2022) (discussing employer's burden regarding meal-break compensability).
The uniform, system-wide application of rule AR-MEAL-030 across all seven properties is a double-edged sword. While uniformity might support a defense that VHG applied its policies consistently, it also creates a facially uniform practice that aids plaintiffs' arguments for collective and class certification. If the rule was configured identically at all properties, the same potential violation exists at all properties, and the issue of whether employees were completely relieved of duties becomes the primary factual question — one that may be susceptible to resolution on a representative or statistical basis rather than requiring individualized inquiry for each class member.
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 management software platforms, so that the employee's workstation is operational at the start of the scheduled shift; and (c) attending shift-handover briefings, during which outgoing-shift employees communicate operational updates, guest requests, and unresolved issues to incoming-shift employees.
Using a midpoint estimate of 20 minutes per shift, the weekly uncompensated time for a five-shift workweek is approximately 100 minutes, or 1.667 hours. This time, when combined with the 2.5 hours per week from the auto-deduction claim, totals approximately 4.167 hours per week of allegedly uncompensated time — an amount that, added to employees' recorded hours, would in many cases push total weekly hours well above 40 and trigger substantial overtime liability.
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 subject to hygiene, contamination, or security restrictions that necessitate on-site changing — then the time spent changing may fall outside the scope of compensable activity under the Portal-to-Portal Act.
The de minimis doctrine also provides a theoretical defense, although, as noted in Section IV.C above, the doctrine has narrow application and is unlikely to succeed where the alleged uncompensated time is 15–25 minutes per shift. Nevertheless, VHG may argue that the actual time spent on each individual task (e.g., computer boot-up of three to five minutes, donning of uniform of five to seven minutes) is individually minimal and administratively difficult to capture with precision.
Property-level differences in uniform requirements, computer systems, and shift-briefing practices may also undermine class-wide proof. If the at-issue activities vary significantly in nature, duration, or employer requirement across the seven properties, GLO may face challenges in proving a common, uniform practice that supports class treatment.
Weaknesses. The weight of legal authority disfavors VHG's position on this allegation. Computer boot-up time is increasingly recognized as compensable when the computer system is the employee's primary work tool, as it is for front-desk associates who rely on property management software to perform their core duties. If VHG requires employees to be logged in and "ready to work" at the start of their scheduled shift — a common practice in the hospitality industry — then employees must arrive before the start of their shift to complete the boot-up process, and the resulting pre-shift time is integral and indispensable to their principal activities.
Shift-handover briefings that are directed or supervised by the employer, or that are necessary for the employee to perform his or her duties during the upcoming shift, are generally compensable working time under the continuous-workday rule. If these briefings are mandatory — whether by formal policy or by practical necessity — the time spent in them is compensable.
On the donning and doffing issue, the critical factual question is whether VHG's uniform policy requires on-site changing. In the hospitality industry, employers frequently require employees to change into branded uniforms at the property for reasons of brand integrity, cleanliness, and guest-facing appearance standards. If VHG's policy includes such a requirement, the donning and doffing time is integral and indispensable under IBP, Inc. v. Alvarez.
Finally, 15–25 minutes per shift is well above what courts have recognized as de minimis. The Eleventh Circuit has not adopted a bright-line rule, but the weight of authority across circuits treats periods in excess of approximately seven to ten minutes as non-de-minimis. The aggregate impact across the workforce — potentially thousands of employees over a multi-year period — further undermines the de minimis defense, as courts consider not only the daily amount of time but also the aggregate effect.
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 exceed the full minimum wage in every pay period — and procedural claims — that VHG failed to satisfy the prerequisites for lawfully claiming a tip credit, including the provision of proper written notice to affected employees.
The Florida minimum wage effective September 30, 2025 is $14.00 per hour, with a tip credit of $3.02 and a tipped-employee direct-wage minimum of $10.98 per hour. Prior rates were lower, in accordance with the graduated schedule of increases mandated by the 2020 constitutional amendment. For example, the Florida minimum wage was $12.00 per hour effective September 30, 2023, and $13.00 per hour effective September 30, 2024. The exposure analysis must account for the rate in effect during each pay period within the applicable lookback.
This allegation is subject to a five-year statute of limitations under Fla. Stat. § 95.11(2)(b), extending the lookback to January 14, 2021. This is particularly significant because the five-year lookback encompasses a period before VHG's transition to Luminos Payroll Solutions on January 1, 2022, requiring examination of VHG's pre-Luminos payroll records for the period from January 14, 2021 through December 31, 2021.
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 claiming a tip credit may be satisfied. Copies of executed tip-credit acknowledgment forms would be the strongest evidence on this point.
If VHG can demonstrate through payroll records that direct wages plus tips consistently equaled or exceeded the full Florida minimum wage in every pay period for every affected employee, there may be no substantive shortfall even if procedural deficiencies exist. However, the procedural and substantive analyses are independent: failure to provide proper notice invalidates the tip credit regardless of whether the employee's total compensation exceeded the full minimum wage.
The scope of this claim may be narrower than the other four allegations. The tipped-employee minimum-wage claim applies only to employees who participated in tip pools — primarily front-desk and concierge roles — rather than to the entire hourly workforce. This may limit the affected population and reduce the aggregate exposure attributable to this claim.
Weaknesses. Failure to provide the required written tip-credit notice is a complete defense to the employer's right to claim the tip credit. If VHG did not provide the notice, or if the notice was deficient in substance or form, VHG would be liable for the full minimum wage (currently $14.00 per hour) for all hours worked by the affected employees, without any offset for tips received. This is a strict liability standard, and the employer's subjective good faith is not a defense to the notice requirement.
If VHG's tip pool included employees who do not customarily and regularly receive tips — such as housekeeping, maintenance, or back-of-house staff — the entire tip pool may be invalidated. The inclusion of non-tipped employees in a tip pool is a common source of liability in the hospitality industry, and GLO's demand letter specifically raises this concern.
The record-keeping requirements for tip credits are stringent, and any gaps in documentation weaken VHG's position. The employer must maintain records of each tipped employee's direct wage, tips received, and the tip-credit amount claimed. For the period prior to January 1, 2022, before Luminos became VHG's payroll vendor, these records may have been maintained in a different format or system, and their availability and integrity are unknown.
The classification of front-desk associates as "tipped" employees may itself be subject to challenge. Whether front-desk roles at hotels customarily and regularly receive tips is a fact-dependent inquiry. Unlike restaurant servers or bartenders, front-desk associates may receive tips sporadically rather than regularly, potentially undermining the classification of these roles as "tipped" positions for purposes of the tip-credit framework.
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 properties. The allegation of willfulness is intended to extend the statute of limitations from two years to three years under 29 U.S.C. § 255(a).
The demand letter's framing of this allegation contains an internal tension that warrants attention. GLO describes the affected employees as occupying "hourly" roles, yet alleges they were classified as "exempt." Exempt status under the FLSA is generally associated with salary-basis compensation, not hourly pay. This tension suggests one of several possibilities: (a) the affected employees were, in fact, paid on a salary basis and mischaracterized as "hourly" in the demand letter; (b) the affected employees were paid hourly but were nonetheless treated as exempt from overtime by VHG, perhaps through a scheduling or pay-code error; or (c) the allegation rests on a misunderstanding of VHG's actual classification practices. Clarification of VHG's classification and pay structure for these roles is an essential first step in evaluating this claim.
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 years.
As noted above, the demand letter's reference to "hourly" employees classified as "exempt" is internally inconsistent. If the affected employees are, in fact, paid hourly and receive overtime, they may already be classified as non-exempt, and this allegation may rest on a factual error or misunderstanding. Verification of VHG's actual classification and pay practices for the identified roles may resolve this claim quickly.
Even if some employees in lead or senior roles were classified as exempt, the number of affected individuals may be relatively small compared to the total hourly workforce, limiting the aggregate exposure attributable to this claim.
Weaknesses. If VHG did, in fact, classify any lead or senior roles as exempt from overtime and paid them on a salary basis, the duties test becomes the decisive inquiry. In the hospitality industry, employees in lead and senior operational roles typically spend the majority of their time performing the same hands-on operational work as their non-exempt subordinates — checking in guests, cleaning rooms, serving banquet guests — with the addition of some limited supervisory or coordinating responsibilities. Such duties generally do not satisfy the administrative exemption's requirement that the employee's primary duty involve the exercise of discretion and independent judgment on matters of significance.
Courts and the Department of Labor construe FLSA exemptions narrowly, and the employer bears the burden of proof. The fact-intensive nature of the duties test means that VHG cannot rely on job titles or generic job descriptions alone; the actual day-to-day work performed by each employee in each role at each property is relevant.
If misclassification is found to have been willful — that is, if VHG knew or showed reckless disregard for whether the classifications were proper — the three-year lookback applies, expanding both the size of the affected group and the aggregate damages. Even if the number of misclassified employees is small relative to the overall workforce, the individual damages per employee could be significant given the volume of overtime hours that should have been compensated.
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 a willfulness finding rests on demonstrating that it acted in good faith and with a reasonable belief that its practices complied with the FLSA. Relevant factors include VHG's reliance on legal advice regarding its employment practices; its engagement of a reputable third-party payroll vendor (Luminos Payroll Solutions Inc.) to handle timekeeping and payroll processing; the existence of written policies in the employee handbook addressing overtime, meal breaks, and other relevant topics; and VHG's compliance with industry standards for hospitality-sector employers.
However, several factors could undermine VHG's good-faith defense. If VHG was aware of employee complaints regarding unpaid time, interrupted meal breaks, or questionable exemption classifications and took no corrective action, willfulness may be established. Similarly, if internal audits, HR investigations, or external inquiries (such as DOL audits or state agency investigations) had previously flagged wage-and-hour concerns and VHG failed to remediate them, the willfulness standard would likely be met. The investigation must prioritize a comprehensive search for any such prior complaints, investigations, or audit findings.
It is also worth noting that the automatic meal-break deduction (rule AR-MEAL-030) was a deliberate configuration choice made by VHG (or by Luminos at VHG's direction) when implementing the Luminos T