1021-00005 · Verimark Hospitality Group · Analysis & Advice

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

This memorandum is a privileged and confidential communication prepared by counsel at Calderwood & Harkness LLP for the exclusive use of the attorneys and client identified herein. It is protected from disclosure by the attorney-client privilege and the work-product doctrine. Any unauthorized review, use, disclosure, or distribution is strictly prohibited.

TO: Bernard Crawford, Responsible Partner Renata Vasquez, Billing Partner

FROM: James Underwood, Associate, Labor & Employment

DATE: February 8, 2026

RE: Applicable Statutes of Limitations — FLSA and Florida Constitutional Minimum-Wage Claims — Verimark Hospitality Group Inc. Wage-and-Hour Matter

MATTER NO.: 1021-00005

CLIENT: Verimark Hospitality Group Inc. (Nasdaq: VMHG)

I. Executive Summary

The purpose of this memorandum is to analyze the statutes of limitations applicable to the five categories of wage-and-hour claims asserted in the demand letter dated January 14, 2026, from Garza, Linden & Okafor LLP ("GLO") on behalf of Daniela M. Serrano and a putative class and collective of current and former hourly, non-exempt employees of Verimark Hospitality Group Inc. ("VHG" or the "Company"). This analysis is intended to inform Calderwood & Harkness's ("C&H") scoping-phase audit, data-collection strategy, preliminary exposure modeling, and demand-letter response preparation.

Two distinct limitations regimes apply to the claims at issue. First, the Fair Labor Standards Act ("FLSA") limitations periods established under 29 U.S.C. § 255(a) govern claims for unpaid overtime, off-the-clock work, automatic meal-break deductions, and misclassification of employees as exempt. Second, the Florida constitutional minimum-wage claim limitations period, which Florida courts have held is governed by Fla. Stat. § 95.11(2)(b), applies to claims arising under Article X, Section 24 of the Florida Constitution for failure to pay the Florida minimum wage to tipped employees.

The key findings of this memorandum are as follows:

• FLSA limitations: Claims brought under the FLSA are subject to a two-year statute of limitations for non-willful violations and a three-year statute of limitations for willful violations, pursuant to 29 U.S.C. § 255(a). The determination of whether VHG's alleged violations were "willful" within the meaning of McLaughlin v. Richland Shoe Co., 486 U.S. 128 (1988), will be critical in defining the temporal scope of the FLSA collective action. A finding of willfulness would extend the lookback period by one full year — from two years to three years — potentially expanding the putative collective by several hundred to over one thousand additional members and increasing damages exposure substantially.

• Florida minimum-wage limitations: Florida constitutional minimum-wage claims under Article X, Section 24 are subject to a five-year statute of limitations under Fla. Stat. § 95.11(2)(b), which establishes the limitations period for actions founded on a "liability created by statute." This five-year period significantly exceeds the FLSA's two- or three-year limitations periods and creates a substantially longer lookback window for Claim 4 (failure to pay the Florida minimum wage for tipped employees).

• Putative collective period: The demand letter asserts a putative collective period beginning January 2023 to the present, which corresponds precisely to a three-year willful lookback measured from the demand letter date of January 14, 2026. This signals GLO's intent to argue that VHG's violations were willful, thereby invoking the extended three-year FLSA limitations period.

• Florida five-year lookback: The Florida minimum-wage claims (pertaining to tipped employees) could reach back to January 14, 2021, capturing conduct that predates VHG's transition to Luminos Payroll Solutions Inc. on January 1, 2022. This creates a data-collection challenge, as records from VHG's prior payroll system for the period January 2021 through December 2021 must be located, preserved, and reviewed.

• Implications for audit scope: To cover the longest potential lookback period — five years for the Florida constitutional minimum-wage claims — C&H should ensure that VHG collects and preserves records from January 1, 2021 through the present. The litigation hold issued on January 17, 2026 should be reviewed and expanded, if necessary, to encompass this full date range and all relevant custodians.

This memorandum addresses each of these topics in detail below, beginning with the factual background necessary to frame the limitations analysis, proceeding through the FLSA and Florida limitations frameworks, and concluding with recommendations for the scoping-phase audit, data collection, and defense strategy.

II. Factual Background

A. The Demand Letter and Allegations

On January 14, 2026, Garza, Linden & Okafor LLP ("GLO"), through lead attorney Marco A. Garza and associate Priya N. Chandrasekaran, transmitted a demand letter to VHG's General Counsel. GLO is located at 600 Brickell Avenue, Suite 2200, Miami, Florida 33131, and is a well-known plaintiff-side labor and employment firm with significant experience in FLSA collective actions and Florida wage-and-hour litigation. VHG received the demand letter on January 16, 2026.

The demand letter was sent on behalf of Daniela M. Serrano, a former front-desk associate (hourly, non-exempt) at the Verimark Regency Tampa property. Ms. Serrano was employed by VHG from March 14, 2022 through August 22, 2025 (Employee ID: VHG-EMP-20220314-5587). She held a non-exempt hourly position throughout her tenure with the Company.

The demand letter asserts five distinct categories of wage-and-hour violations, which are summarized as follows:

1. Failure to pay overtime at the rate of one and one-half times the regular rate of pay for hours worked in excess of forty per workweek, in violation of 29 U.S.C. § 207(a). The demand letter alleges that VHG systematically miscalculated the regular rate of pay for purposes of overtime computation and, in certain instances, failed to record all compensable hours, resulting in underpayment of overtime premiums.

2. Illegal automatic meal-break deductions of thirty minutes per shift while employees remained on-call and were not fully relieved of all duties, in violation of the FLSA's compensable-time requirements. The demand letter alleges that VHG's timekeeping system automatically deducted thirty minutes from each employee's recorded hours for a purported meal break, regardless of whether the employee actually received an uninterrupted, duty-free break of at least thirty minutes as contemplated by 29 C.F.R. § 785.19.

3. Failure to compensate employees for pre-shift and post-shift work, including donning and doffing of uniforms and personal protective equipment, computer boot-up and system login procedures, and shift-handover briefings. The demand letter estimates that these activities consumed approximately fifteen to twenty-five minutes per shift and were performed off the clock — that is, before the employee clocked in at the start of a shift or after the employee clocked out at the end of a shift.

4. Failure to pay the Florida minimum wage for tipped employees, in violation of Article X, Section 24 of the Florida Constitution. The demand letter alleges that VHG claimed a tip credit against its tipped employees' wages but failed to satisfy the requirements for doing so, including providing adequate notice to employees regarding the tip credit and ensuring that total compensation (direct wages plus tips) met or exceeded the applicable Florida minimum wage for each pay period.

5. Willful misclassification of "lead" and "senior" hourly roles as exempt under the FLSA administrative exemption, in violation of 29 U.S.C. §§ 206 and 207. The demand letter alleges that VHG improperly classified certain experienced hourly employees who held "lead" or "senior" designations as exempt from FLSA overtime requirements under the administrative exemption, despite the fact that these employees' primary duties did not involve the exercise of discretion and independent judgment with respect to matters of significance, as required by 29 C.F.R. § 541.200.

The demand letter defines the putative class and collective as all current and former hourly, non-exempt employees at Verimark-branded properties in the State of Florida from January 2023 to the present. GLO estimates that this putative collective encompasses approximately 4,100 to 5,900 individuals. The demand letter demands $18.5 million in total recovery, inclusive of back pay, liquidated damages, and reasonable attorneys' fees and costs. GLO has set a response deadline of February 28, 2026.

B. Properties and Workforce at Issue

The demand letter identifies seven Verimark-branded hotel and resort properties located in the Tampa Bay, Orlando, and South Florida markets as the properties at which the alleged violations occurred. Six of these seven properties are directly owned and operated by VHG. The seventh property — Verimark Shores Clearwater, located at 455 Mandalay Avenue, Clearwater Beach, Florida 33767 — is owned by Palomar Realty Partners LLC and managed by VHG pursuant to Hotel Management Agreement HMA-2021-0601-PC, dated June 1, 2021 (the "HMA"). Under the HMA, VHG serves as the exclusive operator of the Verimark Shores Clearwater property and is the employer of record for all on-site staff. The implications of the HMA for joint-employer liability and indemnification obligations are beyond the scope of this memorandum but should be addressed in a separate analysis.

As of December 31, 2025, the total employee headcount across the seven at-issue properties was approximately 2,620. Of these, approximately 1,895 were classified as hourly, non-exempt employees — the population most directly implicated by the demand letter's allegations. VHG's total company-wide employee headcount as of the same date was approximately 8,200, of whom approximately 5,900 are non-exempt hourly workers across VHG's full portfolio of 14 properties. The seven at-issue properties thus represent approximately 32 percent of VHG's total hourly workforce.

VHG transitioned its payroll processing to Luminos Payroll Solutions Inc. effective January 1, 2022. Since that date, VHG has utilized the Luminos TimeTrack platform (account number LTT-VHG-2022-0041) for timekeeping, payroll processing, and workforce compliance administration. The transition to Luminos TimeTrack is significant for this analysis because the five-year Florida lookback period extends into a period (January 2021 through December 2021) during which VHG utilized a different payroll processing system, the identity and record-retention practices of which must be verified.

C. Key Dates for Limitations Analysis

The following key dates frame the limitations analysis presented in this memorandum:

• Date of demand letter and presumptive accrual reference point: January 14, 2026.

• Date VHG received demand letter: January 16, 2026.

• Date of litigation hold: January 17, 2026 (issued by Devin K. Arroyo, VHG Associate General Counsel).

Using January 14, 2026 as the reference date for purposes of preliminary scoping, the relevant lookback dates under each potentially applicable limitations period are as follows:

An important caveat must be noted regarding the use of the demand letter date as a reference point. For purposes of the FLSA collective action, each individual plaintiff's limitations period does not run from the date of the demand letter or even from the date a complaint is filed in court. Rather, under the FLSA's opt-in mechanism set forth in 29 U.S.C. § 216(b), each individual's limitations period is measured backward from the date that individual files written consent to join the collective action. Accordingly, the actual lookback windows will shift based on when opt-in consents are filed, and the demand letter date is used in this memorandum solely for preliminary scoping purposes. For the Florida state-law class action claims, the limitations period is measured from the date the complaint is filed.

III. FLSA Statute of Limitations — 29 U.S.C. § 255(a)

A. Statutory Framework

The Portal-to-Portal Act of 1947 established the limitations periods for causes of action arising under the Fair Labor Standards Act. Specifically, 29 U.S.C. § 255(a) provides that any action commenced on or after May 14, 1947, to enforce a cause of action for unpaid minimum wages, unpaid overtime compensation, or liquidated damages under the FLSA must be commenced within two years after the cause of action accrued, except that a cause of action arising out of a "willful violation" may be commenced within three years after the cause of action accrued. The statute reads, in pertinent part:

"Any action commenced on or after the date of the enactment of this Act to enforce any cause of action for unpaid minimum wages, unpaid overtime compensation, or liquidated damages, under the Fair Labor Standards Act of 1938, as amended . . . (a) if the cause of action accrues on or after the date of the enactment of this Act — may be commenced within two years after the cause of action accrued, and every such action shall be forever barred unless commenced within two years after the cause of action accrued, except that a cause of action arising out of a willful violation may be commenced within three years after the cause of action accrued."

These limitations periods apply to all claims for unpaid minimum wages under 29 U.S.C. § 206, unpaid overtime compensation under 29 U.S.C. § 207, and liquidated damages under 29 U.S.C. § 216(b). The limitations framework thus directly governs Claims 1, 2, 3, and 5 as set forth in the demand letter, and may also partially govern the federal component of Claim 4 to the extent it implicates the FLSA's tip-credit provisions under 29 U.S.C. § 203(m).

A cause of action under the FLSA accrues at each regular payday immediately following the work period during which the alleged violation occurred. This principle — commonly referred to as the "paycheck accrual" rule — means that a new cause of action arises with each paycheck that reflects the allegedly unlawful practice. The practical consequence of this accrual rule is that the FLSA's limitations period operates on a rolling basis: each pay period in which an employer allegedly fails to pay required wages triggers a new, independently accruing cause of action, and the limitations clock begins to run anew for each such pay period.

It is important to note that the FLSA does not recognize a general "continuing violation" theory that would extend the limitations period from the date of the first violation through the date of the last violation in a continuous course of conduct. While each paycheck constitutes a discrete violation — and in that sense the violations "continue" — the limitations period for any given paycheck runs from the date of that paycheck, not from the date the employer first adopted the allegedly unlawful practice. Similarly, the discovery rule — which in some contexts delays accrual until the plaintiff knew or should have known of the violation — does not apply to FLSA claims. The FLSA limitations period begins to run from the date of each paycheck regardless of whether the employee was aware of the underpayment at that time.

B. Application to FLSA Claims in This Matter

Claims 1, 2, 3, and 5 in the demand letter — pertaining to unpaid overtime, automatic meal-break deductions, uncompensated pre-shift and post-shift work, and willful misclassification of "lead" and "senior" roles as exempt — are all brought under the FLSA and are therefore governed by the limitations periods set forth in 29 U.S.C. § 255(a).

Claim 4, which alleges failure to pay the Florida minimum wage for tipped employees, is primarily brought under Florida law (Article X, Section 24 of the Florida Constitution) and is subject to the separate five-year limitations period discussed in Section V below. However, Claim 4 also implicates the FLSA's tip-credit provisions under 29 U.S.C. § 203(m), which permit employers to count a portion of an employee's tips toward satisfaction of the federal minimum wage obligation, subject to certain notice and recordkeeping requirements. To the extent GLO asserts a parallel federal claim under FLSA § 203(m) — for example, alleging that VHG failed to satisfy the statutory prerequisites for claiming the tip credit — that federal component would be subject to the FLSA's two-year or three-year limitations period, not the Florida five-year period.

Using the demand letter date of January 14, 2026 as a preliminary reference point, the applicable lookback dates for the FLSA claims are:

• Non-willful violations (2-year period): Claims may reach back to January 14, 2024.

• Willful violations (3-year period): Claims may reach back to January 14, 2023.

GLO's demand letter expressly asserts a putative collective period beginning January 2023, which precisely corresponds to the three-year willful lookback measured from January 14, 2026. This is a clear signal that GLO intends to argue that VHG's violations were willful and to invoke the extended three-year FLSA limitations period. The willfulness determination is therefore a central issue in this litigation and will directly determine the temporal scope of the FLSA collective action.

The practical significance of the difference between a two-year and three-year lookback cannot be overstated. The hospitality industry is characterized by high employee turnover rates. VHG's internal workforce data reflects annual turnover rates in the range of 55 to 70 percent at the at-issue properties. A three-year lookback, as compared to a two-year lookback, would capture a substantial number of additional former employees who worked for VHG during the third lookback year (January 2023 through January 2024) but subsequently separated from employment. This expanded pool of potential collective members would increase both the size of the collective — and therefore the administrative burden of litigation — and the total potential damages exposure.

C. Individual Opt-In Tolling Under § 216(b)

A critical distinction between FLSA collective actions and class actions brought under Federal Rule of Civil Procedure 23 is the mechanism by which individuals become parties to the action. In a Rule 23 class action, all class members are bound by the judgment unless they affirmatively opt out. By contrast, FLSA collective actions under 29 U.S.C. § 216(b) require each individual to affirmatively opt in by filing a written consent form with the court. Only those individuals who file written consent become plaintiffs in the action and are bound by the judgment.

This opt-in mechanism has a direct and significant impact on the statute of limitations analysis. Each opt-in plaintiff's limitations period is measured backward from the date their individual consent form is filed with the court, not from the date the original complaint was filed or the demand letter was sent. The Supreme Court confirmed this principle in Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165 (1989), and it has been consistently applied by the Eleventh Circuit and district courts within this Circuit.

The practical implication of this rule is that the limitations window "slides" for each opt-in plaintiff. An individual who files consent on, say, June 1, 2026 — approximately five months after the demand letter — would have a two-year lookback to June 1, 2024 (non-willful) or a three-year lookback to June 1, 2023 (willful). An individual who files consent in September 2026 would have correspondingly later lookback dates. Delays in the litigation — including the time required to obtain conditional certification of the collective, distribute notice to potential collective members, and receive opt-in consents — could thus extend the effective lookback period, at least as measured from the date of the original complaint, by months or even more than a year.

Additionally, the equitable-tolling doctrine may apply in limited circumstances to pause or extend the FLSA limitations period. Courts in the Eleventh Circuit have recognized equitable tolling where the employer fraudulently concealed the violations — for example, by falsifying time records or affirmatively misleading employees about their compensation — or where the employee was unable, despite the exercise of due diligence, discover the violation. However, courts apply equitable tolling sparingly in the FLSA context, and it remains an exceptional remedy rather than a broadly available one. The relevance of equitable tolling to this matter is discussed further in Section VI.B below.

For scoping and data-collection purposes, C&H should collect records for the full three-year FLSA lookback period from the demand letter date — that is, from January 14, 2023 through the present — and, for the Florida constitutional minimum-wage claims, from January 14, 2021 through the present. This approach ensures that records will be available to respond to the claims even if opt-in consents are filed at later dates and the effective lookback window slides accordingly.

IV. Willfulness Standard Under the FLSA

A. Legal Standard — *McLaughlin v. Richland Shoe Co.*

The determination of whether an employer's FLSA violation was "willful" is governed by the standard established by the United States Supreme Court in McLaughlin v. Richland Shoe Co., 486 U.S. 128 (1988). In McLaughlin, the Court held that an employer's violation of the FLSA is "willful" if the employer "either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute." Id. at 133. This standard requires more than mere negligence or a reasonable-but-incorrect interpretation of the law; it demands a showing of subjective knowledge of illegality or a conscious decision not to investigate whether conduct was lawful when there was reason to believe it might not be.

The McLaughlin standard replaced the earlier, more permissive standard articulated by the Fifth Circuit in Coleman v. Jiffy June Farms, Inc., 458 F.2d 1139 (5th Cir. 1971), which had treated mere knowledge of the FLSA's applicability as sufficient to establish willfulness. Under the Coleman standard, virtually every employer that was aware of the FLSA's existence could be found to have acted willfully. The McLaughlin Court expressly rejected this approach, holding that it was "virtually impossible for an employer to show that he was unaware of the Act and its potential applicability" and that such a broad standard would effectively read the two-year limitations period out of the statute. McLaughlin, 486 U.S. at 132–33.

Under the McLaughlin standard, the plaintiff bears the burden of proving willfulness by a preponderance of the evidence. The employer need not prove that it acted in good faith; rather, the plaintiff must affirmatively establish that the employer knew or recklessly disregarded the law's requirements.

It is also important to note the availability of the Portal-to-Portal Act safe harbor. Under 29 U.S.C. § 259, an employer that acts in good faith and in conformity with, and in reliance on, any written administrative regulation, order, ruling, approval, or interpretation of the Department of Labor ("DOL") may assert such reliance as a defense. If the employer can demonstrate that it relied on written DOL guidance in formulating the practices at issue, this reliance may negate a finding of willfulness and, separately, may provide a complete defense to liability for the period during which the employer acted in reliance on such guidance. This safe harbor is narrow in application but should be investigated during the audit to determine whether VHG relied on any DOL publications, opinion letters, or fact sheets in establishing its wage-and-hour practices.

B. Factors Courts Consider in Assessing Willfulness

Courts in the Eleventh Circuit and elsewhere have identified a number of factors relevant to the willfulness determination. While no single factor is dispositive, the totality of the circumstances is evaluated to determine whether the employer knew or recklessly disregarded the FLSA's requirements. The principal factors include the following:

• Awareness of FLSA requirements. Whether the employer was aware of the FLSA's specific requirements applicable to the practices at issue — for example, through consultation with legal counsel, participation in compliance training programs, review of DOL publications, or prior audits conducted by internal or external auditors.

• Existence and adequacy of a compliance program. Whether the employer had implemented a compliance program or made meaningful efforts to comply with federal and state wage-and-hour laws. Courts have looked favorably on employers that invested in compliance infrastructure, retained outside counsel for periodic compliance reviews, and maintained written policies addressing overtime, timekeeping, and meal breaks.

• Reliance on advice of counsel or payroll vendor. Whether the employer relied on the advice of legal counsel or a payroll service provider regarding the specific practices challenged in the litigation. Reliance on professional advice is relevant to whether the employer acted in good faith and may tend to negate willfulness, although it does not automatically do so — particularly if the employer provided incomplete or inaccurate information to the advisor, or if the employer received advice indicating potential noncompliance and disregarded it.

• Prior notice of violations. Whether the employer had prior notice, from any source, that its practices may violate the FLSA. Sources of prior notice include employee complaints (whether formal or informal), DOL investigations or inquiries, findings from internal audits, notifications from payroll service providers, or industry alerts from trade associations.

• Corrective action. Whether the employer took prompt corrective action upon learning of potential violations. A prompt and good-faith response to identified compliance issues may weigh against a finding of willfulness, while a failure to act in the face of known compliance deficiencies may support such a finding.

• Reckless disregard. Whether the employer failed to investigate or address known risk areas despite having reason to believe that its practices may violate the FLSA. Reckless disregard is the more demanding prong of the McLaughlin test and requires a showing that the employer consciously chose not to investigate whether its conduct was lawful — an "ostrich-like" refusal to look into potential problems. An employer that never sought to determine whether its timekeeping practices, overtime calculations, or exemption classifications complied with the FLSA may be found to have acted with reckless disregard, particularly if the practices at issue are ones that a reasonable employer in the same industry would have recognized as posing FLSA compliance risks.

C. Application to VHG

Application of the willfulness factors to VHG's circumstances requires a detailed factual investigation that will constitute a central component of the scoping-phase audit. At this preliminary stage, the following key questions have been identified for investigation:

1. Prior complaints. Did VHG receive any prior complaints — whether from individual employees, groups of employees, or through any internal reporting mechanism such as a compliance hotline — regarding unpaid overtime, automatic meal-break deductions, uncompensated pre-shift or post-shift work, or tip-credit compliance? The existence of prior complaints, even if informally communicated, could support a finding that VHG was on notice of potential violations.

2. DOL investigations. Has VHG been the subject of any prior investigations by the U.S. Department of Labor, Wage and Hour Division, or any Florida state-level wage-and-hour enforcement agency? A prior investigation — even if it did not result in a finding of violation — would demonstrate that VHG's attention was called to its wage-and-hour practices.

3. Meal-break deduction configuration. Did VHG's human resources department or legal counsel review the automatic meal-break deduction configuration in the Luminos TimeTrack system (identified as rule AR-MEAL-030) at the time it was implemented on or about January 1, 2022? If VHG implemented the automatic deduction without analyzing whether employees were, in practice, receiving duty-free meal breaks of at least thirty minutes, this could support a finding of reckless disregard.

4. Internal audits. Did VHG conduct any internal audits or compliance reviews of its wage-and-hour practices at any time during the relevant period? If so, what were the findings, and what corrective actions, if any, were taken in response?

5. FLSA compliance training. What training, if any, did VHG provide to property-level human resources managers, general managers, and department heads on FLSA compliance topics, including overtime calculation, timekeeping requirements, meal-break rules, and exemption classification standards?

6. Payroll vendor guidance. Did VHG seek or receive guidance from Luminos Payroll Solutions Inc. regarding the overtime calculation algorithms, automatic deduction settings, or tip-credit configurations implemented in the Luminos TimeTrack system? If Luminos provided recommendations or warnings regarding compliance risks associated with certain system settings, and VHG disregarded or failed to act on those recommendations, this could support a willfulness finding.

In addition to the foregoing inquiries, VHG's employee handbook — currently at version 7.2, effective January 1, 2025 — and prior versions should be collected and reviewed for the Company's stated policies on meal breaks, overtime, timekeeping, and tip credits. The content of these policies may cut in either direction on willfulness: well-drafted, legally compliant policies may demonstrate good-faith compliance efforts, while policies that are inconsistent with actual practice may suggest awareness of legal requirements coupled with a failure to implement them — a hallmark of reckless disregard.

The exemption classification decisions for "lead" and "senior" hourly roles (Claim 5) warrant particular scrutiny. The FLSA administrative exemption requires, among other things, that the employee's primary duty involve "the exercise of discretion and independent judgment with respect to matters of significance." 29 C.F.R. § 541.202. Courts and the DOL have articulated detailed criteria for this determination. If VHG classified these roles as exempt without conducting a documented duties-test analysis — or if the analysis was cursory and failed to address the applicable regulatory factors — the absence of such analysis may support a finding that VHG either knew or recklessly disregarded the possibility that the exemption did not apply.

Preliminary assessment: If GLO is able to establish willfulness, the FLSA lookback period extends from two years to three years — from January 14, 2024 back to January 14, 2023. This one-year extension would expand the putative collective to include all employees who departed VHG between January 2023 and January 2024. Given annual turnover rates in the range of 55 to 70 percent at VHG's at-issue properties, this could add several hundred to potentially over one thousand additional collective members. The marginal increase in damages exposure associated with this additional year of claims is significant, though the precise amount depends on the specific claims at issue and the applicable wage rates.

D. Implications for Defense Strategy

If VHG can demonstrate good-faith compliance efforts — including a robust compliance program, documented reliance on professional advice, prompt corrective action in response to identified issues, and adequate training for management personnel — it may be positioned to resist a willfulness finding and limit the FLSA lookback to two years from each opt-in plaintiff's consent filing date. This would significantly reduce the size of the collective and the total damages exposure.

Accordingly, the scoping-phase audit should specifically investigate and document VHG's compliance efforts, including but not limited to: internal policies and procedures, compliance training records and curricula, internal audit reports and findings, corrective actions taken in response to identified compliance issues, legal opinions or memoranda received from outside counsel or in-house counsel regarding wage-and-hour practices, and communications with Luminos Payroll Solutions Inc. regarding system configurations and compliance considerations.

Additionally, counsel should evaluate whether a good-faith defense under 29 U.S.C. § 260 is viable. Section 260 provides the court with discretion to reduce or eliminate liquidated damages under the FLSA if the employer demonstrates, to the satisfaction of the court, that the act or omission giving rise to the violation was in good faith and that the employer had reasonable grounds for believing that its act or omission was not a violation of the FLSA. This inquiry is factually related to, but legally distinct from, the willfulness determination under § 255(a). Willfulness determines the applicable limitations period; good faith under § 260 determines whether liquidated damages may be reduced or eliminated. Nevertheless, the same body of evidence — compliance programs, reliance on advice, corrective actions — is relevant to both determinations. If VHG can establish both non-willfulness and good faith, the financial exposure could be substantially reduced through both a shorter lookback period and the elimination or reduction of liquidated damages (which, if awarded in full, double the compensatory damages).

V. Florida Constitutional Minimum-Wage Claims — Statute of Limitations

A. Legal Framework

Article X, Section 24 of the Florida Constitution was adopted by popular vote through a ballot initiative in November 2004 and became effective on May 2, 2005. This provision establishes a Florida minimum wage that is separate from, and in most years exceeds, the federal minimum wage established under the FLSA. The Florida minimum wage is adjusted annually based on the Consumer Price Index for Urban Wage Earners and Clerical Workers in the South Region published by the Bureau of Labor Statistics. As of September 30, 2025 — the most recent adjustment date — the Florida minimum wage is $14.00 per hour. For tipped employees, the minimum direct wage is $10.98 per hour, calculated as the full minimum wage of $14.00 minus the tip credit of $3.02.

Article X, Section 24(e) of the Florida Constitution provides a private right of action for employees who are paid less than the applicable minimum wage. An aggrieved employee may bring an action in any court of competent jurisdiction against the employer to recover the full amount of any unpaid minimum wages, together with liquidated damages in an amount equal to the unpaid wages (i.e., a mandatory doubling of unpaid wages), plus the employee's reasonable attorney's fees and court costs. Notably, the liquidated damages provision under Article X, Section 24(e) is mandatory — unlike the FLSA's liquidated damages provision, there is no good-faith defense available to the employer. If the employee proves an underpayment, liquidated damages equal to the unpaid wages are automatic.

The Florida Constitution does not itself specify a statute of limitations for claims brought under Article X, Section 24. This gap has required Florida courts to determine, by reference to the general limitations statutes, which period applies.

B. Applicable Limitations Period — Fla. Stat. § 95.11(2)(b)

In the absence of a specific limitations period set forth in Article X, Section 24, Florida courts have applied Fla. Stat. § 95.11(2)(b), which establishes a five-year statute of limitations for "[a]n action founded on a liability created by statute." Courts have reasoned that the Florida constitutional minimum-wage provision creates a statutory liability — that is, a right of action and a corresponding obligation that did not exist at common law but was created by positive law — and therefore falls within the ambit of § 95.11(2)(b). This classification is consistent with the general principle that constitutional provisions that create private rights of action are treated as analogous to statutes for limitations purposes.

This five-year limitations period significantly exceeds the FLSA's two- or three-year limitations periods and creates a substantially longer lookback window for the Florida minimum-wage claims. Using the demand letter date of January 14, 2026 as a reference point, the five-year lookback period reaches to January 14, 2021. This is two years earlier than the earliest possible FLSA lookback date (January 14, 2023, assuming willfulness) and three years earlier than the non-willful FLSA lookback date (January 14, 2024).

The five-year period is not subject to any willfulness analysis or enhancement. Unlike the FLSA, which provides a longer limitations period only for willful violations, the Florida five-year period applies uniformly regardless of the employer's intent, knowledge, or good faith. This characteristic makes the Florida limitation period a straightforward, fixed temporal boundary that does not depend on the outcome of any contested factual issue.

C. Implications for the Scope of the Putative Collective/Class

The demand letter identifies the putative collective period as beginning January 2023, which aligns with the FLSA three-year willful lookback and not the Florida five-year lookback. This appears to reflect GLO's focus, at the demand-letter stage, on the FLSA collective action claims. However, to the extent GLO separately pursues Florida minimum-wage claims — specifically Claim 4, alleging failure to pay the Florida minimum wage for tipped employees — the applicable five-year lookback period would extend the relevant class period to January 14, 2021.

This extended lookback has several significant implications for this matter:

Pre-Luminos records. The five-year lookback period covers a full year (January 14, 2021 through December 31, 2021) during which VHG had not yet transitioned to the Luminos TimeTrack payroll system. Luminos TimeTrack data — which is the primary source for timekeeping, payroll, and compensation records from January 1, 2022 forward — is simply not available for this earlier period. VHG must identify its prior payroll processing system or vendor and locate, preserve, and produce records from that system for the period January 2021 through December 2021. The identification and preservation of these pre-Luminos records should be treated as an urgent priority.

Pre-HMA period. The five-year lookback also extends into a period before the execution of the Hotel Management Agreement with Palomar Realty Partners LLC on June 1, 2021. For the Verimark Shores Clearwater property, the period from January 14, 2021 through May 31, 2021 may involve different employment arrangements, depending on whether VHG was managing the property on an interim basis prior to the formal execution of the HMA or whether a different management arrangement was in place. This may raise questions about VHG's status as the employer of record for Verimark Shores Clearwater employees during this pre-HMA period.

Class action mechanics. The Florida minimum-wage claim would proceed as a state-law class action under Florida Rule of Civil Procedure 1.220 (or, if filed in federal court, under Federal Rule of Civil Procedure 23), rather than as an FLSA collective action under § 216(b). This distinction affects certification standards and the opt-in/opt-out mechanics. In a Rule 23 class action, class members are automatically included in the class and bound by the judgment unless they affirmatively opt out; in an FLSA collective action, individuals must affirmatively opt in. The opt-out nature of a Rule 23 class action generally results in larger class sizes relative to FLSA collectives, as the inertia of non-action favors inclusion.

D. Interplay Between FLSA and Florida Limitations Periods

Where both FLSA and Florida claims are brought, as is anticipated in this matter, each claim is governed by its own limitations period. The FLSA claims (Claims 1, 2, 3, and 5, plus the federal component of Claim 4) are governed by the two- or three-year period under 29 U.S.C. § 255(a), while the Florida constitutional minimum-wage claim (the state-law component of Claim 4) is governed by the five-year period under Fla. Stat. § 95.11(2)(b).

Counsel should anticipate that GLO will plead both sets of claims in parallel, with overlapping but non-identical class and collective periods. The FLSA collective would encompass a two- or three-year lookback (depending on the willfulness determination), while the Florida class would encompass a five-year lookback. The resulting litigation structure would involve a single action with multiple, partially overlapping plaintiff groups — a common feature of wage-and-hour litigation that combines federal collective and state class claims.

Several additional distinctions between the FLSA and Florida claims merit attention in the context of limitations analysis:

• No willfulness analysis for Florida claims. The five-year period under Fla. Stat. § 95.11(2)(b) applies regardless of the employer's intent or knowledge. There is no shorter alternative period available to the employer.

• Mandatory liquidated damages under Florida law. Article X, Section 24(e) provides for mandatory liquidated damages equal to the amount of unpaid wages. Unlike the FLSA, which permits the court to exercise discretion under 29 U.S.C. § 260 to reduce or eliminate liquidated damages upon a showing of good faith, the Florida provision contains no good-faith exception. If the plaintiff proves an underpayment, liquidated damages are automatic and non-discretionary.

• Attorneys' fees. Both the FLSA and the Florida constitutional provision provide for recovery of reasonable attorney's fees and costs by prevailing employees. This fee-shifting mechanism increases the total litigation exposure beyond the direct wage and liquidated-damages calculations.

VI. Accrual and Tolling Considerations

A. FLSA Accrual

As discussed in Section III.A above, a cause of action under the FLSA accrues at each regular payday immediately following the work period during which the alleged violation occurred. Each pay period in which the employer allegedly fails to pay the required minimum wage, overtime premium, or other compensation constitutes a separate and independently accruing cause of action. The limitations period runs independently for each such cause of action.

There is no "continuing violation" theory available under the FLSA that would aggregate multiple pay-period violations into a single cause of action with a single limitations period running from the date of the most recent violation. While the Supreme Court has recognized continuing-violation theories in certain other statutory contexts — most notably in Title VII hostile-work-environment claims — the FLSA's paycheck-accrual rule operates differently. Each paycheck is a discrete event, and any claim based on that paycheck must be brought within the applicable limitations period measured from the date of that paycheck.

Similarly, the discovery rule — which in some legal contexts delays the accrual of a cause of action until the plaintiff knew or should have known of the injury — does not apply to FLSA claims. The cause of action accrues on the date of the paycheck, regardless of whether the employee was aware of the underpayment at that time. This principle reflects the view that employees receive pay stubs or other wage statements that disclose (or should disclose) the hours worked and compensation paid, and that employees are on constructive notice of any deficiencies reflected in those documents.

B. Equitable Tolling Under the FLSA

Although the FLSA's limitations period is generally a firm boundary, courts retain the equitable power to toll the limitations period in extraordinary circumstances. The Eleventh Circuit has recognized equitable tolling in FLSA cases, but has applied the doctrine sparingly and only where the circumstances warrant departure from the general rule. The principal circumstances in which equitable tolling may be available include the following:

• Fraudulent concealment. Where the employer affirmatively concealed the violations — for example, by falsifying time records, manipulating payroll data, or deliberately structuring pay practices to obscure the true nature of the compensation — the limitations period may be tolled for the period during which the concealment prevented the employee from discovering the violation.

• Affirmative misleading. Where the employer affirmatively misled employees about their pay — for example, by representing that employees were receiving all compensation to which they were legally entitled, when in fact they were not — equitable tolling may apply.

• Inability discover the violation. Where the employee was unable, despite the exercise of due diligence, discover the violation — for example, because the employer's pay practices were so complex or opaque that a reasonable employee could not have identified the underpayment — equitable tolling may apply in limited circumstances.

The Eleventh Circuit has cautioned that equitable tolling is an extraordinary remedy that should not be applied liberally. The party seeking tolling bears the burden of demonstrating that the circumstances are sufficiently extraordinary to warrant departure from the statutory limitations period.

Risk assessment for this matter: If VHG's automatic meal-break deduction system (Luminos TimeTrack rule AR-MEAL-030) was not transparent to employees — for example, if employees could not see the deduction on their pay stubs, were not informed of the existence or operation of the automatic deduction, or were not provided with a mechanism to report that they did not receive a duty-free break — GLO could argue that VHG fraudulently concealed or affirmatively obscured the deductions, supporting equitable tolling. Conversely, if VHG's wage statements clearly disclosed the meal-break deduction and employees were informed of the process for requesting correction of improperly applied deductions, this would weigh against equitable tolling.

Recommendation: The scoping-phase audit should examine whether VHG's wage statements (pay stubs) clearly and conspicuously disclosed the automatic meal-break deductions; whether VHG communicated to employees the existence of the automatic deduction policy; and whether VHG provided employees with a mechanism to report instances in which they did not receive a bona fide, duty-free meal break and to request correction of the automatic deduction for those instances. The presence or absence of such transparency measures will be relevant both to the equitable-tolling analysis and to the underlying merits of the meal-break deduction claim.

C. Florida Claims — Accrual and Tolling

A similar paycheck-accrual rule applies to Florida constitutional minimum-wage claims. Each pay period in which the employer fails to pay the required Florida minimum wage gives rise to a separate cause of action, and the five-year limitations period runs independently from each such pay period. There is no continuing-violation theory that would aggregate multiple pay-period violations into a single claim.

Florida law recognizes equitable tolling in limited circumstances, including fraudulent concealment by the defendant. The standards for equitable tolling under Florida law are generally consistent with those applied under federal law: the plaintiff must demonstrate extraordinary circumstances that prevented timely filing, and the plaintiff must have exercised due diligence in pursuing the claim.

No special tolling provisions unique to Article X, Section 24 have been identified. The standard Florida equitable-tolling principles apply.

VII. Impact of Limitations Periods on Exposure Estimates

The applicable statute of limitations directly affects the temporal scope of the claims and, consequently, the total potential damages exposure. This section presents preliminary exposure estimates under the three lookback scenarios corresponding to the three potentially applicable limitations periods. These estimates are preliminary and are intended to provide order-of-magnitude guidance for strategic decision-making; they should not be treated as definitive calculations. A more rigorous damages analysis should be conducted by a forensic accounting or economic consulting firm if this matter progresses to litigation. C&H has identified Ridgepoint Advisory Group LLC as a potential engagement for this purpose, with an estimated engagement cost of $85,000 to $120,000.

A. Exposure Under 2-Year Non-Willful FLSA Lookback

Under a two-year non-willful FLSA lookback, the relevant period is January 14, 2024 through January 14, 2026. The affected population consists of all current hourly employees at the seven at-issue properties (approximately 1,895 individuals) plus all employees who departed during this two-year window.

C&H has prepared a preliminary Scenario A exposure estimate limited to the overtime claim (Claim 1) only, using the following assumptions and methodology:

• Estimated unpaid overtime premium: 2.5 hours per employee per week (based on the demand letter's allegations regarding pre-shift, post-shift, and meal-break time)

• Average hourly rate for overtime premium calculation: $8.25 (representing the half-time premium on an average regular rate of approximately $16.50)

• Number of weeks in the lookback period: 104 weeks (2 years)

• Affected population: 1,895 employees (current headcount at at-issue properties; does not include departed employees)

• Liquidated damages: 100 percent of unpaid wages (doubling)

Based on these assumptions:

• Unpaid overtime premium: 2.5 hours × $8.25 × 104 weeks × 1,895 employees = $4,073,850

• Liquidated damages (100% of unpaid wages): $4,073,850

• Scenario A total (overtime only): $8,147,700

This Scenario A estimate does not include claims for meal-break deductions (Claim 2), pre-/post-shift off-the-clock work (Claim 3), tipped-employee minimum wage (Claim 4), or misclassification (Claim 5). It represents a floor estimate under the most favorable limitations scenario and the narrowest claim category.

B. Exposure Under 3-Year Willful FLSA Lookback

Under a three-year willful FLSA lookback, the relevant period is January 14, 2023 through January 14, 2026. The affected population expands substantially to include all current hourly employees plus all employees who departed during this three-year window. The demand letter estimates that the putative collective during this period encompasses approximately 4,100 to 5,900 individuals.

C&H has prepared a preliminary Scenario B exposure estimate encompassing all five claim categories, using the following assumptions:

• Estimated total unpaid hours per employee per week across all claim categories: 6.667 hours (comprising overtime premium, meal-break deduction time, and pre-/post-shift time)

• Average effective hourly rate for calculation purposes: $16.50 (full regular rate, used as a blended rate across claim categories)

• Number of weeks in the lookback period: 156 weeks (3 years)

• Affected population: 5,900 employees (upper end of GLO's estimate)

• Liquidated damages: 100 percent of unpaid wages (doubling)

Based on these assumptions:

• Unpaid wages: 6.667 hours × $16.50 × 156 weeks × 5,900 employees = approximately $101,200,000

• Liquidated damages (100% of unpaid wages): approximately $101,200,000

• Scenario B total (all claims, theoretical ceiling): approximately $202,400,000

This Scenario B estimate represents an extreme-case, theoretical-ceiling calculation. It assumes that every individual in the putative collective experienced every category of violation for every week of the lookback period, that the maximum estimated unpaid time is proven for each shift, and that all 5,900 individuals opt in (for FLSA claims) or remain in the class (for Florida claims). In practice, actual damages would be substantially lower, as they would depend on proof of individual violations on a claim-by-claim and employee-by-employee basis, realistic opt-in rates (which in FLSA collective actions typically range from 5 to 30 percent of the notice population), and the availability of defenses to specific claims. This estimate is provided solely to illustrate the theoretical maximum and to underscore the significance of the willfulness determination.

C. Exposure Under 5-Year Florida Lookback (Tipped-Employee Claims)

Under the five-year Florida lookback, the relevant period is January 14, 2021 through January 14, 2026. This extended period is applicable only to the Florida constitutional minimum-wage claims pertaining to tipped employees (Claim 4). The affected population for the tipped-employee claims is a subset of the broader putative collective — it is limited to employees in job codes that participated in tip pools, primarily front-desk associates and concierge staff.

The five-year lookback creates a significant data-collection challenge. The period from January 14, 2021 through December 31, 2021 predates VHG's transition to Luminos TimeTrack, and records from VHG's prior payroll system must be located and preserved for this approximately eleven-and-a-half-month period. Until those records are obtained and reviewed, C&H is unable to prepare a reliable damages estimate for the Florida tipped-employee claims during the pre-Luminos period.

A separate, detailed damages calculation for the Florida tipped-employee claims should be modeled by Ridgepoint Advisory Group LLC if engaged. The estimated engagement cost for Ridgepoint's services is $85,000 to $120,000, which includes construction of a damages model, analysis of payroll and timekeeping data, and preparation of a preliminary expert report.

D. Calderwood & Harkness Working Mid-Range Estimate

Taking into account realistic opt-in rates, a blended analysis of the two-year and three-year FLSA lookback scenarios, partial success on some but not all claim categories, and the separate Florida five-year claims for the tipped-employee subset, C&H's current working mid-range estimate for total exposure in this matter is:

$22,000,000 – $38,000,000 (inclusive of liquidated damages; exclusive of attorneys' fees and costs)

This mid-range estimate is a preliminary assessment based on currently available information and assumptions. It will be refined as additional data is gathered during the scoping-phase audit and, if applicable, through the engagement of Ridgepoint Advisory Group LLC. The mid-range estimate should be communicated to VHG's Board of Directors and executive management team, with appropriate caveats regarding its preliminary nature and the key variables (particularly the willfulness determination) that could cause actual exposure to fall at the lower or higher end of the range — or, in extreme scenarios, outside the range entirely.

VIII. Implications for Audit Scope and Data Collection

A. Document Preservation and Collection Date Range

Based on the limitations analysis set forth in this memorandum, records should be collected from January 1, 2021 through the present to cover the full five-year Florida lookback period, with a modest buffer to ensure completeness. This date range captures all three lookback scenarios:

• The two-year FLSA non-willful lookback (from January 14, 2024);

• The three-year FLSA willful lookback (from January 14, 2023); and

• The five-year Florida statutory lookback (from January 14, 2021).

For the period from January 1, 2021 through December 31, 2021 — the pre-Luminos period — VHG must identify and preserve records from its prior payroll processing system. C&H should coordinate directly with Enrique J. Fuentes, Director of Payroll & Workforce Compliance, and Malik P. Jefferson, Corporate IT Administrator, to identify the prior payroll system, determine what records are available (including whether they have been archived or migrated), and ensure their immediate preservation. If the prior payroll vendor was a third-party processor, a preservation request letter should be issued to that vendor as well.

For the period from January 1, 2022 through the present, the primary source of timekeeping and payroll data is the Luminos TimeTrack platform, account number LTT-VHG-2022-0041. A preservation request letter addressed to Shannon D. Prewitt at Luminos Payroll Solutions Inc. has been prepared and is pending review by the responsible partner before transmission. The letter requests that Luminos preserve all data associated with VHG's account, including but not limited to time-punch records, payroll registers, deduction logs, system configuration records (including rule AR-MEAL-030), audit trails, and employee master files, for the period January 1, 2022 through the present.

The litigation hold issued by Devin K. Arroyo, VHG Associate General Counsel, on January 17, 2026 — triggered by receipt of the demand letter on January 16, 2026 — should be confirmed to cover the full January 2021 through present date range. The original litigation hold memorandum should be reviewed to verify that it identifies all 23 custodians previously identified by C&H and that it encompasses the full scope of documents, data, and electronically stored information relevant to the claims. If the original hold was scoped more narrowly — for example, if it referenced only the January 2023 through present period corresponding to the demand letter's asserted collective period — it should be expanded immediately to cover the full five-year lookback.

B. Defining the Putative Collective/Class Boundaries

For purposes of the FLSA collective action, the collective period will depend on the willfulness determination. If VHG's violations are found to be non-willful, the collective period will extend two years backward from each individual opt-in plaintiff's consent filing date. If willful, the collective period will extend three years backward from each opt-in date. Because opt-in dates will vary across individual plaintiffs, the effective collective period will not be a single fixed window but rather a shifting, individualized lookback for each member.

For purposes of the Florida state-law class action (applicable to the tipped-employee minimum-wage claims under Article X, Section 24), the class period will extend up to five years backward from the date the complaint is filed. Because the Florida claims proceed under a Rule 23 opt-out framework (or its state-court analog), all individuals within the class definition will be included unless they affirmatively exclude themselves.

C&H should model both the FLSA and Florida time periods when working with VHG and Ridgepoint Advisory Group LLC to define the population of potentially affected employees. VHG's HRIS and payroll records should be queried to identify all hourly, non-exempt employees who worked at any of the seven at-issue properties during each lookback period, disaggregated by job code, property, and employment dates.

Additionally, property-level variations in practices may support arguments to narrow the collective or class at the certification stage. If, for example, certain properties had different timekeeping practices, different meal-break policies, or different tip-pool arrangements, VHG may argue that the claims are not sufficiently common or typical to warrant collective or class treatment across all seven pro

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
This memorandum is a privileged and confidential communication prepared by counsel at Calderwood & Harkness LLP for the exclusive use of the attorneys and client identified herein. It is protected from disclosure by the attorney-client privilege and the work-product doctrine. Any unauthorized review, use, disclosure, or distribution is strictly prohibited.
TO: Bernard Crawford, Responsible Partner Renata Vasquez, Billing Partner
FROM: James Underwood, Associate, Labor & Employment
DATE: February 8, 2026
RE: Applicable Statutes of Limitations — FLSA and Florida Constitutional Minimum-Wage Claims — Verimark Hospitality Group Inc. Wage-and-Hour Matter
MATTER NO.: 1021-00005
CLIENT: Verimark Hospitality Group Inc. (Nasdaq: VMHG)
I. Executive Summary
The purpose of this memorandum is to analyze the statutes of limitations applicable to the five categories of wage-and-hour claims asserted in the demand letter dated January 14, 2026, from Garza, Linden & Okafor LLP ("GLO") on behalf of Daniela M. Serrano and a putative class and collective of current and former hourly, non-exempt employees of Verimark Hospitality Group Inc. ("VHG" or the "Company"). This analysis is intended to inform Calderwood & Harkness's ("C&H") scoping-phase audit, data-collection strategy, preliminary exposure modeling, and demand-letter response preparation.
Two distinct limitations regimes apply to the claims at issue. First, the Fair Labor Standards Act ("FLSA") limitations periods established under 29 U.S.C. § 255(a) govern claims for unpaid overtime, off-the-clock work, automatic meal-break deductions, and misclassification of employees as exempt. Second, the Florida constitutional minimum-wage claim limitations period, which Florida courts have held is governed by Fla. Stat. § 95.11(2)(b), applies to claims arising under Article X, Section 24 of the Florida Constitution for failure to pay the Florida minimum wage to tipped employees.
The key findings of this memorandum are as follows:
• FLSA limitations: Claims brought under the FLSA are subject to a two-year statute of limitations for non-willful violations and a three-year statute of limitations for willful violations, pursuant to 29 U.S.C. § 255(a). The determination of whether VHG's alleged violations were "willful" within the meaning of McLaughlin v. Richland Shoe Co., 486 U.S. 128 (1988), will be critical in defining the temporal scope of the FLSA collective action. A finding of willfulness would extend the lookback period by one full year — from two years to three years — potentially expanding the putative collective by several hundred to over one thousand additional members and increasing damages exposure substantially.
• Florida minimum-wage limitations: Florida constitutional minimum-wage claims under Article X, Section 24 are subject to a five-year statute of limitations under Fla. Stat. § 95.11(2)(b), which establishes the limitations period for actions founded on a "liability created by statute." This five-year period significantly exceeds the FLSA's two- or three-year limitations periods and creates a substantially longer lookback window for Claim 4 (failure to pay the Florida minimum wage for tipped employees).
• Putative collective period: The demand letter asserts a putative collective period beginning January 2023 to the present, which corresponds precisely to a three-year willful lookback measured from the demand letter date of January 14, 2026. This signals GLO's intent to argue that VHG's violations were willful, thereby invoking the extended three-year FLSA limitations period.
• Florida five-year lookback: The Florida minimum-wage claims (pertaining to tipped employees) could reach back to January 14, 2021, capturing conduct that predates VHG's transition to Luminos Payroll Solutions Inc. on January 1, 2022. This creates a data-collection challenge, as records from VHG's prior payroll system for the period January 2021 through December 2021 must be located, preserved, and reviewed.
• Implications for audit scope: To cover the longest potential lookback period — five years for the Florida constitutional minimum-wage claims — C&H should ensure that VHG collects and preserves records from January 1, 2021 through the present. The litigation hold issued on January 17, 2026 should be reviewed and expanded, if necessary, to encompass this full date range and all relevant custodians.
This memorandum addresses each of these topics in detail below, beginning with the factual background necessary to frame the limitations analysis, proceeding through the FLSA and Florida limitations frameworks, and concluding with recommendations for the scoping-phase audit, data collection, and defense strategy.
II. Factual Background
A. The Demand Letter and Allegations
On January 14, 2026, Garza, Linden & Okafor LLP ("GLO"), through lead attorney Marco A. Garza and associate Priya N. Chandrasekaran, transmitted a demand letter to VHG's General Counsel. GLO is located at 600 Brickell Avenue, Suite 2200, Miami, Florida 33131, and is a well-known plaintiff-side labor and employment firm with significant experience in FLSA collective actions and Florida wage-and-hour litigation. VHG received the demand letter on January 16, 2026.
The demand letter was sent on behalf of Daniela M. Serrano, a former front-desk associate (hourly, non-exempt) at the Verimark Regency Tampa property. Ms. Serrano was employed by VHG from March 14, 2022 through August 22, 2025 (Employee ID: VHG-EMP-20220314-5587). She held a non-exempt hourly position throughout her tenure with the Company.
The demand letter asserts five distinct categories of wage-and-hour violations, which are summarized as follows:
1. Failure to pay overtime at the rate of one and one-half times the regular rate of pay for hours worked in excess of forty per workweek, in violation of 29 U.S.C. § 207(a). The demand letter alleges that VHG systematically miscalculated the regular rate of pay for purposes of overtime computation and, in certain instances, failed to record all compensable hours, resulting in underpayment of overtime premiums.
2. Illegal automatic meal-break deductions of thirty minutes per shift while employees remained on-call and were not fully relieved of all duties, in violation of the FLSA's compensable-time requirements. The demand letter alleges that VHG's timekeeping system automatically deducted thirty minutes from each employee's recorded hours for a purported meal break, regardless of whether the employee actually received an uninterrupted, duty-free break of at least thirty minutes as contemplated by 29 C.F.R. § 785.19.
3. Failure to compensate employees for pre-shift and post-shift work, including donning and doffing of uniforms and personal protective equipment, computer boot-up and system login procedures, and shift-handover briefings. The demand letter estimates that these activities consumed approximately fifteen to twenty-five minutes per shift and were performed off the clock — that is, before the employee clocked in at the start of a shift or after the employee clocked out at the end of a shift.
4. Failure to pay the Florida minimum wage for tipped employees, in violation of Article X, Section 24 of the Florida Constitution. The demand letter alleges that VHG claimed a tip credit against its tipped employees' wages but failed to satisfy the requirements for doing so, including providing adequate notice to employees regarding the tip credit and ensuring that total compensation (direct wages plus tips) met or exceeded the applicable Florida minimum wage for each pay period.
5. Willful misclassification of "lead" and "senior" hourly roles as exempt under the FLSA administrative exemption, in violation of 29 U.S.C. §§ 206 and 207. The demand letter alleges that VHG improperly classified certain experienced hourly employees who held "lead" or "senior" designations as exempt from FLSA overtime requirements under the administrative exemption, despite the fact that these employees' primary duties did not involve the exercise of discretion and independent judgment with respect to matters of significance, as required by 29 C.F.R. § 541.200.
The demand letter defines the putative class and collective as all current and former hourly, non-exempt employees at Verimark-branded properties in the State of Florida from January 2023 to the present. GLO estimates that this putative collective encompasses approximately 4,100 to 5,900 individuals. The demand letter demands $18.5 million in total recovery, inclusive of back pay, liquidated damages, and reasonable attorneys' fees and costs. GLO has set a response deadline of February 28, 2026.
B. Properties and Workforce at Issue
The demand letter identifies seven Verimark-branded hotel and resort properties located in the Tampa Bay, Orlando, and South Florida markets as the properties at which the alleged violations occurred. Six of these seven properties are directly owned and operated by VHG. The seventh property — Verimark Shores Clearwater, located at 455 Mandalay Avenue, Clearwater Beach, Florida 33767 — is owned by Palomar Realty Partners LLC and managed by VHG pursuant to Hotel Management Agreement HMA-2021-0601-PC, dated June 1, 2021 (the "HMA"). Under the HMA, VHG serves as the exclusive operator of the Verimark Shores Clearwater property and is the employer of record for all on-site staff. The implications of the HMA for joint-employer liability and indemnification obligations are beyond the scope of this memorandum but should be addressed in a separate analysis.
As of December 31, 2025, the total employee headcount across the seven at-issue properties was approximately 2,620. Of these, approximately 1,895 were classified as hourly, non-exempt employees — the population most directly implicated by the demand letter's allegations. VHG's total company-wide employee headcount as of the same date was approximately 8,200, of whom approximately 5,900 are non-exempt hourly workers across VHG's full portfolio of 14 properties. The seven at-issue properties thus represent approximately 32 percent of VHG's total hourly workforce.
VHG transitioned its payroll processing to Luminos Payroll Solutions Inc. effective January 1, 2022. Since that date, VHG has utilized the Luminos TimeTrack platform (account number LTT-VHG-2022-0041) for timekeeping, payroll processing, and workforce compliance administration. The transition to Luminos TimeTrack is significant for this analysis because the five-year Florida lookback period extends into a period (January 2021 through December 2021) during which VHG utilized a different payroll processing system, the identity and record-retention practices of which must be verified.
C. Key Dates for Limitations Analysis
The following key dates frame the limitations analysis presented in this memorandum:
• Date of demand letter and presumptive accrual reference point: January 14, 2026.
• Date VHG received demand letter: January 16, 2026.
• Date of litigation hold: January 17, 2026 (issued by Devin K. Arroyo, VHG Associate General Counsel).
Using January 14, 2026 as the reference date for purposes of preliminary scoping, the relevant lookback dates under each potentially applicable limitations period are as follows:
An important caveat must be noted regarding the use of the demand letter date as a reference point. For purposes of the FLSA collective action, each individual plaintiff's limitations period does not run from the date of the demand letter or even from the date a complaint is filed in court. Rather, under the FLSA's opt-in mechanism set forth in 29 U.S.C. § 216(b), each individual's limitations period is measured backward from the date that individual files written consent to join the collective action. Accordingly, the actual lookback windows will shift based on when opt-in consents are filed, and the demand letter date is used in this memorandum solely for preliminary scoping purposes. For the Florida state-law class action claims, the limitations period is measured from the date the complaint is filed.
III. FLSA Statute of Limitations — 29 U.S.C. § 255(a)
A. Statutory Framework
The Portal-to-Portal Act of 1947 established the limitations periods for causes of action arising under the Fair Labor Standards Act. Specifically, 29 U.S.C. § 255(a) provides that any action commenced on or after May 14, 1947, to enforce a cause of action for unpaid minimum wages, unpaid overtime compensation, or liquidated damages under the FLSA must be commenced within two years after the cause of action accrued, except that a cause of action arising out of a "willful violation" may be commenced within three years after the cause of action accrued. The statute reads, in pertinent part:
"Any action commenced on or after the date of the enactment of this Act to enforce any cause of action for unpaid minimum wages, unpaid overtime compensation, or liquidated damages, under the Fair Labor Standards Act of 1938, as amended . . . (a) if the cause of action accrues on or after the date of the enactment of this Act — may be commenced within two years after the cause of action accrued, and every such action shall be forever barred unless commenced within two years after the cause of action accrued, except that a cause of action arising out of a willful violation may be commenced within three years after the cause of action accrued."
These limitations periods apply to all claims for unpaid minimum wages under 29 U.S.C. § 206, unpaid overtime compensation under 29 U.S.C. § 207, and liquidated damages under 29 U.S.C. § 216(b). The limitations framework thus directly governs Claims 1, 2, 3, and 5 as set forth in the demand letter, and may also partially govern the federal component of Claim 4 to the extent it implicates the FLSA's tip-credit provisions under 29 U.S.C. § 203(m).
A cause of action under the FLSA accrues at each regular payday immediately following the work period during which the alleged violation occurred. This principle — commonly referred to as the "paycheck accrual" rule — means that a new cause of action arises with each paycheck that reflects the allegedly unlawful practice. The practical consequence of this accrual rule is that the FLSA's limitations period operates on a rolling basis: each pay period in which an employer allegedly fails to pay required wages triggers a new, independently accruing cause of action, and the limitations clock begins to run anew for each such pay period.
It is important to note that the FLSA does not recognize a general "continuing violation" theory that would extend the limitations period from the date of the first violation through the date of the last violation in a continuous course of conduct. While each paycheck constitutes a discrete violation — and in that sense the violations "continue" — the limitations period for any given paycheck runs from the date of that paycheck, not from the date the employer first adopted the allegedly unlawful practice. Similarly, the discovery rule — which in some contexts delays accrual until the plaintiff knew or should have known of the violation — does not apply to FLSA claims. The FLSA limitations period begins to run from the date of each paycheck regardless of whether the employee was aware of the underpayment at that time.
B. Application to FLSA Claims in This Matter
Claims 1, 2, 3, and 5 in the demand letter — pertaining to unpaid overtime, automatic meal-break deductions, uncompensated pre-shift and post-shift work, and willful misclassification of "lead" and "senior" roles as exempt — are all brought under the FLSA and are therefore governed by the limitations periods set forth in 29 U.S.C. § 255(a).
Claim 4, which alleges failure to pay the Florida minimum wage for tipped employees, is primarily brought under Florida law (Article X, Section 24 of the Florida Constitution) and is subject to the separate five-year limitations period discussed in Section V below. However, Claim 4 also implicates the FLSA's tip-credit provisions under 29 U.S.C. § 203(m), which permit employers to count a portion of an employee's tips toward satisfaction of the federal minimum wage obligation, subject to certain notice and recordkeeping requirements. To the extent GLO asserts a parallel federal claim under FLSA § 203(m) — for example, alleging that VHG failed to satisfy the statutory prerequisites for claiming the tip credit — that federal component would be subject to the FLSA's two-year or three-year limitations period, not the Florida five-year period.
Using the demand letter date of January 14, 2026 as a preliminary reference point, the applicable lookback dates for the FLSA claims are:
• Non-willful violations (2-year period): Claims may reach back to January 14, 2024.
• Willful violations (3-year period): Claims may reach back to January 14, 2023.
GLO's demand letter expressly asserts a putative collective period beginning January 2023, which precisely corresponds to the three-year willful lookback measured from January 14, 2026. This is a clear signal that GLO intends to argue that VHG's violations were willful and to invoke the extended three-year FLSA limitations period. The willfulness determination is therefore a central issue in this litigation and will directly determine the temporal scope of the FLSA collective action.
The practical significance of the difference between a two-year and three-year lookback cannot be overstated. The hospitality industry is characterized by high employee turnover rates. VHG's internal workforce data reflects annual turnover rates in the range of 55 to 70 percent at the at-issue properties. A three-year lookback, as compared to a two-year lookback, would capture a substantial number of additional former employees who worked for VHG during the third lookback year (January 2023 through January 2024) but subsequently separated from employment. This expanded pool of potential collective members would increase both the size of the collective — and therefore the administrative burden of litigation — and the total potential damages exposure.
C. Individual Opt-In Tolling Under § 216(b)
A critical distinction between FLSA collective actions and class actions brought under Federal Rule of Civil Procedure 23 is the mechanism by which individuals become parties to the action. In a Rule 23 class action, all class members are bound by the judgment unless they affirmatively opt out. By contrast, FLSA collective actions under 29 U.S.C. § 216(b) require each individual to affirmatively opt in by filing a written consent form with the court. Only those individuals who file written consent become plaintiffs in the action and are bound by the judgment.
This opt-in mechanism has a direct and significant impact on the statute of limitations analysis. Each opt-in plaintiff's limitations period is measured backward from the date their individual consent form is filed with the court, not from the date the original complaint was filed or the demand letter was sent. The Supreme Court confirmed this principle in Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165 (1989), and it has been consistently applied by the Eleventh Circuit and district courts within this Circuit.
The practical implication of this rule is that the limitations window "slides" for each opt-in plaintiff. An individual who files consent on, say, June 1, 2026 — approximately five months after the demand letter — would have a two-year lookback to June 1, 2024 (non-willful) or a three-year lookback to June 1, 2023 (willful). An individual who files consent in September 2026 would have correspondingly later lookback dates. Delays in the litigation — including the time required to obtain conditional certification of the collective, distribute notice to potential collective members, and receive opt-in consents — could thus extend the effective lookback period, at least as measured from the date of the original complaint, by months or even more than a year.
Additionally, the equitable-tolling doctrine may apply in limited circumstances to pause or extend the FLSA limitations period. Courts in the Eleventh Circuit have recognized equitable tolling where the employer fraudulently concealed the violations — for example, by falsifying time records or affirmatively misleading employees about their compensation — or where the employee was unable, despite the exercise of due diligence, discover the violation. However, courts apply equitable tolling sparingly in the FLSA context, and it remains an exceptional remedy rather than a broadly available one. The relevance of equitable tolling to this matter is discussed further in Section VI.B below.
For scoping and data-collection purposes, C&H should collect records for the full three-year FLSA lookback period from the demand letter date — that is, from January 14, 2023 through the present — and, for the Florida constitutional minimum-wage claims, from January 14, 2021 through the present. This approach ensures that records will be available to respond to the claims even if opt-in consents are filed at later dates and the effective lookback window slides accordingly.
IV. Willfulness Standard Under the FLSA
A. Legal Standard — *McLaughlin v. Richland Shoe Co.*
The determination of whether an employer's FLSA violation was "willful" is governed by the standard established by the United States Supreme Court in McLaughlin v. Richland Shoe Co., 486 U.S. 128 (1988). In McLaughlin, the Court held that an employer's violation of the FLSA is "willful" if the employer "either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute." Id. at 133. This standard requires more than mere negligence or a reasonable-but-incorrect interpretation of the law; it demands a showing of subjective knowledge of illegality or a conscious decision not to investigate whether conduct was lawful when there was reason to believe it might not be.
The McLaughlin standard replaced the earlier, more permissive standard articulated by the Fifth Circuit in Coleman v. Jiffy June Farms, Inc., 458 F.2d 1139 (5th Cir. 1971), which had treated mere knowledge of the FLSA's applicability as sufficient to establish willfulness. Under the Coleman standard, virtually every employer that was aware of the FLSA's existence could be found to have acted willfully. The McLaughlin Court expressly rejected this approach, holding that it was "virtually impossible for an employer to show that he was unaware of the Act and its potential applicability" and that such a broad standard would effectively read the two-year limitations period out of the statute. McLaughlin, 486 U.S. at 132–33.
Under the McLaughlin standard, the plaintiff bears the burden of proving willfulness by a preponderance of the evidence. The employer need not prove that it acted in good faith; rather, the plaintiff must affirmatively establish that the employer knew or recklessly disregarded the law's requirements.
It is also important to note the availability of the Portal-to-Portal Act safe harbor. Under 29 U.S.C. § 259, an employer that acts in good faith and in conformity with, and in reliance on, any written administrative regulation, order, ruling, approval, or interpretation of the Department of Labor ("DOL") may assert such reliance as a defense. If the employer can demonstrate that it relied on written DOL guidance in formulating the practices at issue, this reliance may negate a finding of willfulness and, separately, may provide a complete defense to liability for the period during which the employer acted in reliance on such guidance. This safe harbor is narrow in application but should be investigated during the audit to determine whether VHG relied on any DOL publications, opinion letters, or fact sheets in establishing its wage-and-hour practices.
B. Factors Courts Consider in Assessing Willfulness
Courts in the Eleventh Circuit and elsewhere have identified a number of factors relevant to the willfulness determination. While no single factor is dispositive, the totality of the circumstances is evaluated to determine whether the employer knew or recklessly disregarded the FLSA's requirements. The principal factors include the following:
• Awareness of FLSA requirements. Whether the employer was aware of the FLSA's specific requirements applicable to the practices at issue — for example, through consultation with legal counsel, participation in compliance training programs, review of DOL publications, or prior audits conducted by internal or external auditors.
• Existence and adequacy of a compliance program. Whether the employer had implemented a compliance program or made meaningful efforts to comply with federal and state wage-and-hour laws. Courts have looked favorably on employers that invested in compliance infrastructure, retained outside counsel for periodic compliance reviews, and maintained written policies addressing overtime, timekeeping, and meal breaks.
• Reliance on advice of counsel or payroll vendor. Whether the employer relied on the advice of legal counsel or a payroll service provider regarding the specific practices challenged in the litigation. Reliance on professional advice is relevant to whether the employer acted in good faith and may tend to negate willfulness, although it does not automatically do so — particularly if the employer provided incomplete or inaccurate information to the advisor, or if the employer received advice indicating potential noncompliance and disregarded it.
• Prior notice of violations. Whether the employer had prior notice, from any source, that its practices may violate the FLSA. Sources of prior notice include employee complaints (whether formal or informal), DOL investigations or inquiries, findings from internal audits, notifications from payroll service providers, or industry alerts from trade associations.
• Corrective action. Whether the employer took prompt corrective action upon learning of potential violations. A prompt and good-faith response to identified compliance issues may weigh against a finding of willfulness, while a failure to act in the face of known compliance deficiencies may support such a finding.
• Reckless disregard. Whether the employer failed to investigate or address known risk areas despite having reason to believe that its practices may violate the FLSA. Reckless disregard is the more demanding prong of the McLaughlin test and requires a showing that the employer consciously chose not to investigate whether its conduct was lawful — an "ostrich-like" refusal to look into potential problems. An employer that never sought to determine whether its timekeeping practices, overtime calculations, or exemption classifications complied with the FLSA may be found to have acted with reckless disregard, particularly if the practices at issue are ones that a reasonable employer in the same industry would have recognized as posing FLSA compliance risks.
C. Application to VHG
Application of the willfulness factors to VHG's circumstances requires a detailed factual investigation that will constitute a central component of the scoping-phase audit. At this preliminary stage, the following key questions have been identified for investigation:
1. Prior complaints. Did VHG receive any prior complaints — whether from individual employees, groups of employees, or through any internal reporting mechanism such as a compliance hotline — regarding unpaid overtime, automatic meal-break deductions, uncompensated pre-shift or post-shift work, or tip-credit compliance? The existence of prior complaints, even if informally communicated, could support a finding that VHG was on notice of potential violations.
2. DOL investigations. Has VHG been the subject of any prior investigations by the U.S. Department of Labor, Wage and Hour Division, or any Florida state-level wage-and-hour enforcement agency? A prior investigation — even if it did not result in a finding of violation — would demonstrate that VHG's attention was called to its wage-and-hour practices.
3. Meal-break deduction configuration. Did VHG's human resources department or legal counsel review the automatic meal-break deduction configuration in the Luminos TimeTrack system (identified as rule AR-MEAL-030) at the time it was implemented on or about January 1, 2022? If VHG implemented the automatic deduction without analyzing whether employees were, in practice, receiving duty-free meal breaks of at least thirty minutes, this could support a finding of reckless disregard.
4. Internal audits. Did VHG conduct any internal audits or compliance reviews of its wage-and-hour practices at any time during the relevant period? If so, what were the findings, and what corrective actions, if any, were taken in response?
5. FLSA compliance training. What training, if any, did VHG provide to property-level human resources managers, general managers, and department heads on FLSA compliance topics, including overtime calculation, timekeeping requirements, meal-break rules, and exemption classification standards?
6. Payroll vendor guidance. Did VHG seek or receive guidance from Luminos Payroll Solutions Inc. regarding the overtime calculation algorithms, automatic deduction settings, or tip-credit configurations implemented in the Luminos TimeTrack system? If Luminos provided recommendations or warnings regarding compliance risks associated with certain system settings, and VHG disregarded or failed to act on those recommendations, this could support a willfulness finding.
In addition to the foregoing inquiries, VHG's employee handbook — currently at version 7.2, effective January 1, 2025 — and prior versions should be collected and reviewed for the Company's stated policies on meal breaks, overtime, timekeeping, and tip credits. The content of these policies may cut in either direction on willfulness: well-drafted, legally compliant policies may demonstrate good-faith compliance efforts, while policies that are inconsistent with actual practice may suggest awareness of legal requirements coupled with a failure to implement them — a hallmark of reckless disregard.
The exemption classification decisions for "lead" and "senior" hourly roles (Claim 5) warrant particular scrutiny. The FLSA administrative exemption requires, among other things, that the employee's primary duty involve "the exercise of discretion and independent judgment with respect to matters of significance." 29 C.F.R. § 541.202. Courts and the DOL have articulated detailed criteria for this determination. If VHG classified these roles as exempt without conducting a documented duties-test analysis — or if the analysis was cursory and failed to address the applicable regulatory factors — the absence of such analysis may support a finding that VHG either knew or recklessly disregarded the possibility that the exemption did not apply.
Preliminary assessment: If GLO is able to establish willfulness, the FLSA lookback period extends from two years to three years — from January 14, 2024 back to January 14, 2023. This one-year extension would expand the putative collective to include all employees who departed VHG between January 2023 and January 2024. Given annual turnover rates in the range of 55 to 70 percent at VHG's at-issue properties, this could add several hundred to potentially over one thousand additional collective members. The marginal increase in damages exposure associated with this additional year of claims is significant, though the precise amount depends on the specific claims at issue and the applicable wage rates.
D. Implications for Defense Strategy
If VHG can demonstrate good-faith compliance efforts — including a robust compliance program, documented reliance on professional advice, prompt corrective action in response to identified issues, and adequate training for management personnel — it may be positioned to resist a willfulness finding and limit the FLSA lookback to two years from each opt-in plaintiff's consent filing date. This would significantly reduce the size of the collective and the total damages exposure.
Accordingly, the scoping-phase audit should specifically investigate and document VHG's compliance efforts, including but not limited to: internal policies and procedures, compliance training records and curricula, internal audit reports and findings, corrective actions taken in response to identified compliance issues, legal opinions or memoranda received from outside counsel or in-house counsel regarding wage-and-hour practices, and communications with Luminos Payroll Solutions Inc. regarding system configurations and compliance considerations.
Additionally, counsel should evaluate whether a good-faith defense under 29 U.S.C. § 260 is viable. Section 260 provides the court with discretion to reduce or eliminate liquidated damages under the FLSA if the employer demonstrates, to the satisfaction of the court, that the act or omission giving rise to the violation was in good faith and that the employer had reasonable grounds for believing that its act or omission was not a violation of the FLSA. This inquiry is factually related to, but legally distinct from, the willfulness determination under § 255(a). Willfulness determines the applicable limitations period; good faith under § 260 determines whether liquidated damages may be reduced or eliminated. Nevertheless, the same body of evidence — compliance programs, reliance on advice, corrective actions — is relevant to both determinations. If VHG can establish both non-willfulness and good faith, the financial exposure could be substantially reduced through both a shorter lookback period and the elimination or reduction of liquidated damages (which, if awarded in full, double the compensatory damages).
V. Florida Constitutional Minimum-Wage Claims — Statute of Limitations
A. Legal Framework
Article X, Section 24 of the Florida Constitution was adopted by popular vote through a ballot initiative in November 2004 and became effective on May 2, 2005. This provision establishes a Florida minimum wage that is separate from, and in most years exceeds, the federal minimum wage established under the FLSA. The Florida minimum wage is adjusted annually based on the Consumer Price Index for Urban Wage Earners and Clerical Workers in the South Region published by the Bureau of Labor Statistics. As of September 30, 2025 — the most recent adjustment date — the Florida minimum wage is $14.00 per hour. For tipped employees, the minimum direct wage is $10.98 per hour, calculated as the full minimum wage of $14.00 minus the tip credit of $3.02.
Article X, Section 24(e) of the Florida Constitution provides a private right of action for employees who are paid less than the applicable minimum wage. An aggrieved employee may bring an action in any court of competent jurisdiction against the employer to recover the full amount of any unpaid minimum wages, together with liquidated damages in an amount equal to the unpaid wages (i.e., a mandatory doubling of unpaid wages), plus the employee's reasonable attorney's fees and court costs. Notably, the liquidated damages provision under Article X, Section 24(e) is mandatory — unlike the FLSA's liquidated damages provision, there is no good-faith defense available to the employer. If the employee proves an underpayment, liquidated damages equal to the unpaid wages are automatic.
The Florida Constitution does not itself specify a statute of limitations for claims brought under Article X, Section 24. This gap has required Florida courts to determine, by reference to the general limitations statutes, which period applies.
B. Applicable Limitations Period — Fla. Stat. § 95.11(2)(b)
In the absence of a specific limitations period set forth in Article X, Section 24, Florida courts have applied Fla. Stat. § 95.11(2)(b), which establishes a five-year statute of limitations for "[a]n action founded on a liability created by statute." Courts have reasoned that the Florida constitutional minimum-wage provision creates a statutory liability — that is, a right of action and a corresponding obligation that did not exist at common law but was created by positive law — and therefore falls within the ambit of § 95.11(2)(b). This classification is consistent with the general principle that constitutional provisions that create private rights of action are treated as analogous to statutes for limitations purposes.
This five-year limitations period significantly exceeds the FLSA's two- or three-year limitations periods and creates a substantially longer lookback window for the Florida minimum-wage claims. Using the demand letter date of January 14, 2026 as a reference point, the five-year lookback period reaches to January 14, 2021. This is two years earlier than the earliest possible FLSA lookback date (January 14, 2023, assuming willfulness) and three years earlier than the non-willful FLSA lookback date (January 14, 2024).
The five-year period is not subject to any willfulness analysis or enhancement. Unlike the FLSA, which provides a longer limitations period only for willful violations, the Florida five-year period applies uniformly regardless of the employer's intent, knowledge, or good faith. This characteristic makes the Florida limitation period a straightforward, fixed temporal boundary that does not depend on the outcome of any contested factual issue.
C. Implications for the Scope of the Putative Collective/Class
The demand letter identifies the putative collective period as beginning January 2023, which aligns with the FLSA three-year willful lookback and not the Florida five-year lookback. This appears to reflect GLO's focus, at the demand-letter stage, on the FLSA collective action claims. However, to the extent GLO separately pursues Florida minimum-wage claims — specifically Claim 4, alleging failure to pay the Florida minimum wage for tipped employees — the applicable five-year lookback period would extend the relevant class period to January 14, 2021.
This extended lookback has several significant implications for this matter:
Pre-Luminos records. The five-year lookback period covers a full year (January 14, 2021 through December 31, 2021) during which VHG had not yet transitioned to the Luminos TimeTrack payroll system. Luminos TimeTrack data — which is the primary source for timekeeping, payroll, and compensation records from January 1, 2022 forward — is simply not available for this earlier period. VHG must identify its prior payroll processing system or vendor and locate, preserve, and produce records from that system for the period January 2021 through December 2021. The identification and preservation of these pre-Luminos records should be treated as an urgent priority.
Pre-HMA period. The five-year lookback also extends into a period before the execution of the Hotel Management Agreement with Palomar Realty Partners LLC on June 1, 2021. For the Verimark Shores Clearwater property, the period from January 14, 2021 through May 31, 2021 may involve different employment arrangements, depending on whether VHG was managing the property on an interim basis prior to the formal execution of the HMA or whether a different management arrangement was in place. This may raise questions about VHG's status as the employer of record for Verimark Shores Clearwater employees during this pre-HMA period.
Class action mechanics. The Florida minimum-wage claim would proceed as a state-law class action under Florida Rule of Civil Procedure 1.220 (or, if filed in federal court, under Federal Rule of Civil Procedure 23), rather than as an FLSA collective action under § 216(b). This distinction affects certification standards and the opt-in/opt-out mechanics. In a Rule 23 class action, class members are automatically included in the class and bound by the judgment unless they affirmatively opt out; in an FLSA collective action, individuals must affirmatively opt in. The opt-out nature of a Rule 23 class action generally results in larger class sizes relative to FLSA collectives, as the inertia of non-action favors inclusion.
D. Interplay Between FLSA and Florida Limitations Periods
Where both FLSA and Florida claims are brought, as is anticipated in this matter, each claim is governed by its own limitations period. The FLSA claims (Claims 1, 2, 3, and 5, plus the federal component of Claim 4) are governed by the two- or three-year period under 29 U.S.C. § 255(a), while the Florida constitutional minimum-wage claim (the state-law component of Claim 4) is governed by the five-year period under Fla. Stat. § 95.11(2)(b).
Counsel should anticipate that GLO will plead both sets of claims in parallel, with overlapping but non-identical class and collective periods. The FLSA collective would encompass a two- or three-year lookback (depending on the willfulness determination), while the Florida class would encompass a five-year lookback. The resulting litigation structure would involve a single action with multiple, partially overlapping plaintiff groups — a common feature of wage-and-hour litigation that combines federal collective and state class claims.
Several additional distinctions between the FLSA and Florida claims merit attention in the context of limitations analysis:
• No willfulness analysis for Florida claims. The five-year period under Fla. Stat. § 95.11(2)(b) applies regardless of the employer's intent or knowledge. There is no shorter alternative period available to the employer.
• Mandatory liquidated damages under Florida law. Article X, Section 24(e) provides for mandatory liquidated damages equal to the amount of unpaid wages. Unlike the FLSA, which permits the court to exercise discretion under 29 U.S.C. § 260 to reduce or eliminate liquidated damages upon a showing of good faith, the Florida provision contains no good-faith exception. If the plaintiff proves an underpayment, liquidated damages are automatic and non-discretionary.
• Attorneys' fees. Both the FLSA and the Florida constitutional provision provide for recovery of reasonable attorney's fees and costs by prevailing employees. This fee-shifting mechanism increases the total litigation exposure beyond the direct wage and liquidated-damages calculations.
VI. Accrual and Tolling Considerations
A. FLSA Accrual
As discussed in Section III.A above, a cause of action under the FLSA accrues at each regular payday immediately following the work period during which the alleged violation occurred. Each pay period in which the employer allegedly fails to pay the required minimum wage, overtime premium, or other compensation constitutes a separate and independently accruing cause of action. The limitations period runs independently for each such cause of action.
There is no "continuing violation" theory available under the FLSA that would aggregate multiple pay-period violations into a single cause of action with a single limitations period running from the date of the most recent violation. While the Supreme Court has recognized continuing-violation theories in certain other statutory contexts — most notably in Title VII hostile-work-environment claims — the FLSA's paycheck-accrual rule operates differently. Each paycheck is a discrete event, and any claim based on that paycheck must be brought within the applicable limitations period measured from the date of that paycheck.
Similarly, the discovery rule — which in some legal contexts delays the accrual of a cause of action until the plaintiff knew or should have known of the injury — does not apply to FLSA claims. The cause of action accrues on the date of the paycheck, regardless of whether the employee was aware of the underpayment at that time. This principle reflects the view that employees receive pay stubs or other wage statements that disclose (or should disclose) the hours worked and compensation paid, and that employees are on constructive notice of any deficiencies reflected in those documents.
B. Equitable Tolling Under the FLSA
Although the FLSA's limitations period is generally a firm boundary, courts retain the equitable power to toll the limitations period in extraordinary circumstances. The Eleventh Circuit has recognized equitable tolling in FLSA cases, but has applied the doctrine sparingly and only where the circumstances warrant departure from the general rule. The principal circumstances in which equitable tolling may be available include the following:
• Fraudulent concealment. Where the employer affirmatively concealed the violations — for example, by falsifying time records, manipulating payroll data, or deliberately structuring pay practices to obscure the true nature of the compensation — the limitations period may be tolled for the period during which the concealment prevented the employee from discovering the violation.
• Affirmative misleading. Where the employer affirmatively misled employees about their pay — for example, by representing that employees were receiving all compensation to which they were legally entitled, when in fact they were not — equitable tolling may apply.
• Inability discover the violation. Where the employee was unable, despite the exercise of due diligence, discover the violation — for example, because the employer's pay practices were so complex or opaque that a reasonable employee could not have identified the underpayment — equitable tolling may apply in limited circumstances.
The Eleventh Circuit has cautioned that equitable tolling is an extraordinary remedy that should not be applied liberally. The party seeking tolling bears the burden of demonstrating that the circumstances are sufficiently extraordinary to warrant departure from the statutory limitations period.
Risk assessment for this matter: If VHG's automatic meal-break deduction system (Luminos TimeTrack rule AR-MEAL-030) was not transparent to employees — for example, if employees could not see the deduction on their pay stubs, were not informed of the existence or operation of the automatic deduction, or were not provided with a mechanism to report that they did not receive a duty-free break — GLO could argue that VHG fraudulently concealed or affirmatively obscured the deductions, supporting equitable tolling. Conversely, if VHG's wage statements clearly disclosed the meal-break deduction and employees were informed of the process for requesting correction of improperly applied deductions, this would weigh against equitable tolling.
Recommendation: The scoping-phase audit should examine whether VHG's wage statements (pay stubs) clearly and conspicuously disclosed the automatic meal-break deductions; whether VHG communicated to employees the existence of the automatic deduction policy; and whether VHG provided employees with a mechanism to report instances in which they did not receive a bona fide, duty-free meal break and to request correction of the automatic deduction for those instances. The presence or absence of such transparency measures will be relevant both to the equitable-tolling analysis and to the underlying merits of the meal-break deduction claim.
C. Florida Claims — Accrual and Tolling
A similar paycheck-accrual rule applies to Florida constitutional minimum-wage claims. Each pay period in which the employer fails to pay the required Florida minimum wage gives rise to a separate cause of action, and the five-year limitations period runs independently from each such pay period. There is no continuing-violation theory that would aggregate multiple pay-period violations into a single claim.
Florida law recognizes equitable tolling in limited circumstances, including fraudulent concealment by the defendant. The standards for equitable tolling under Florida law are generally consistent with those applied under federal law: the plaintiff must demonstrate extraordinary circumstances that prevented timely filing, and the plaintiff must have exercised due diligence in pursuing the claim.
No special tolling provisions unique to Article X, Section 24 have been identified. The standard Florida equitable-tolling principles apply.
VII. Impact of Limitations Periods on Exposure Estimates
The applicable statute of limitations directly affects the temporal scope of the claims and, consequently, the total potential damages exposure. This section presents preliminary exposure estimates under the three lookback scenarios corresponding to the three potentially applicable limitations periods. These estimates are preliminary and are intended to provide order-of-magnitude guidance for strategic decision-making; they should not be treated as definitive calculations. A more rigorous damages analysis should be conducted by a forensic accounting or economic consulting firm if this matter progresses to litigation. C&H has identified Ridgepoint Advisory Group LLC as a potential engagement for this purpose, with an estimated engagement cost of $85,000 to $120,000.
A. Exposure Under 2-Year Non-Willful FLSA Lookback
Under a two-year non-willful FLSA lookback, the relevant period is January 14, 2024 through January 14, 2026. The affected population consists of all current hourly employees at the seven at-issue properties (approximately 1,895 individuals) plus all employees who departed during this two-year window.
C&H has prepared a preliminary Scenario A exposure estimate limited to the overtime claim (Claim 1) only, using the following assumptions and methodology:
• Estimated unpaid overtime premium: 2.5 hours per employee per week (based on the demand letter's allegations regarding pre-shift, post-shift, and meal-break time)
• Average hourly rate for overtime premium calculation: $8.25 (representing the half-time premium on an average regular rate of approximately $16.50)
• Number of weeks in the lookback period: 104 weeks (2 years)
• Affected population: 1,895 employees (current headcount at at-issue properties; does not include departed employees)
• Liquidated damages: 100 percent of unpaid wages (doubling)
Based on these assumptions:
• Unpaid overtime premium: 2.5 hours × $8.25 × 104 weeks × 1,895 employees = $4,073,850
• Liquidated damages (100% of unpaid wages): $4,073,850
• Scenario A total (overtime only): $8,147,700
This Scenario A estimate does not include claims for meal-break deductions (Claim 2), pre-/post-shift off-the-clock work (Claim 3), tipped-employee minimum wage (Claim 4), or misclassification (Claim 5). It represents a floor estimate under the most favorable limitations scenario and the narrowest claim category.
B. Exposure Under 3-Year Willful FLSA Lookback
Under a three-year willful FLSA lookback, the relevant period is January 14, 2023 through January 14, 2026. The affected population expands substantially to include all current hourly employees plus all employees who departed during this three-year window. The demand letter estimates that the putative collective during this period encompasses approximately 4,100 to 5,900 individuals.
C&H has prepared a preliminary Scenario B exposure estimate encompassing all five claim categories, using the following assumptions:
• Estimated total unpaid hours per employee per week across all claim categories: 6.667 hours (comprising overtime premium, meal-break deduction time, and pre-/post-shift time)
• Average effective hourly rate for calculation purposes: $16.50 (full regular rate, used as a blended rate across claim categories)
• Number of weeks in the lookback period: 156 weeks (3 years)
• Affected population: 5,900 employees (upper end of GLO's estimate)
• Liquidated damages: 100 percent of unpaid wages (doubling)
Based on these assumptions:
• Unpaid wages: 6.667 hours × $16.50 × 156 weeks × 5,900 employees = approximately $101,200,000
• Liquidated damages (100% of unpaid wages): approximately $101,200,000
• Scenario B total (all claims, theoretical ceiling): approximately $202,400,000
This Scenario B estimate represents an extreme-case, theoretical-ceiling calculation. It assumes that every individual in the putative collective experienced every category of violation for every week of the lookback period, that the maximum estimated unpaid time is proven for each shift, and that all 5,900 individuals opt in (for FLSA claims) or remain in the class (for Florida claims). In practice, actual damages would be substantially lower, as they would depend on proof of individual violations on a claim-by-claim and employee-by-employee basis, realistic opt-in rates (which in FLSA collective actions typically range from 5 to 30 percent of the notice population), and the availability of defenses to specific claims. This estimate is provided solely to illustrate the theoretical maximum and to underscore the significance of the willfulness determination.
C. Exposure Under 5-Year Florida Lookback (Tipped-Employee Claims)
Under the five-year Florida lookback, the relevant period is January 14, 2021 through January 14, 2026. This extended period is applicable only to the Florida constitutional minimum-wage claims pertaining to tipped employees (Claim 4). The affected population for the tipped-employee claims is a subset of the broader putative collective — it is limited to employees in job codes that participated in tip pools, primarily front-desk associates and concierge staff.
The five-year lookback creates a significant data-collection challenge. The period from January 14, 2021 through December 31, 2021 predates VHG's transition to Luminos TimeTrack, and records from VHG's prior payroll system must be located and preserved for this approximately eleven-and-a-half-month period. Until those records are obtained and reviewed, C&H is unable to prepare a reliable damages estimate for the Florida tipped-employee claims during the pre-Luminos period.
A separate, detailed damages calculation for the Florida tipped-employee claims should be modeled by Ridgepoint Advisory Group LLC if engaged. The estimated engagement cost for Ridgepoint's services is $85,000 to $120,000, which includes construction of a damages model, analysis of payroll and timekeeping data, and preparation of a preliminary expert report.
D. Calderwood & Harkness Working Mid-Range Estimate
Taking into account realistic opt-in rates, a blended analysis of the two-year and three-year FLSA lookback scenarios, partial success on some but not all claim categories, and the separate Florida five-year claims for the tipped-employee subset, C&H's current working mid-range estimate for total exposure in this matter is:
$22,000,000 – $38,000,000 (inclusive of liquidated damages; exclusive of attorneys' fees and costs)
This mid-range estimate is a preliminary assessment based on currently available information and assumptions. It will be refined as additional data is gathered during the scoping-phase audit and, if applicable, through the engagement of Ridgepoint Advisory Group LLC. The mid-range estimate should be communicated to VHG's Board of Directors and executive management team, with appropriate caveats regarding its preliminary nature and the key variables (particularly the willfulness determination) that could cause actual exposure to fall at the lower or higher end of the range — or, in extreme scenarios, outside the range entirely.
VIII. Implications for Audit Scope and Data Collection
A. Document Preservation and Collection Date Range
Based on the limitations analysis set forth in this memorandum, records should be collected from January 1, 2021 through the present to cover the full five-year Florida lookback period, with a modest buffer to ensure completeness. This date range captures all three lookback scenarios:
• The two-year FLSA non-willful lookback (from January 14, 2024);
• The three-year FLSA willful lookback (from January 14, 2023); and
• The five-year Florida statutory lookback (from January 14, 2021).
For the period from January 1, 2021 through December 31, 2021 — the pre-Luminos period — VHG must identify and preserve records from its prior payroll processing system. C&H should coordinate directly with Enrique J. Fuentes, Director of Payroll & Workforce Compliance, and Malik P. Jefferson, Corporate IT Administrator, to identify the prior payroll system, determine what records are available (including whether they have been archived or migrated), and ensure their immediate preservation. If the prior payroll vendor was a third-party processor, a preservation request letter should be issued to that vendor as well.
For the period from January 1, 2022 through the present, the primary source of timekeeping and payroll data is the Luminos TimeTrack platform, account number LTT-VHG-2022-0041. A preservation request letter addressed to Shannon D. Prewitt at Luminos Payroll Solutions Inc. has been prepared and is pending review by the responsible partner before transmission. The letter requests that Luminos preserve all data associated with VHG's account, including but not limited to time-punch records, payroll registers, deduction logs, system configuration records (including rule AR-MEAL-030), audit trails, and employee master files, for the period January 1, 2022 through the present.
The litigation hold issued by Devin K. Arroyo, VHG Associate General Counsel, on January 17, 2026 — triggered by receipt of the demand letter on January 16, 2026 — should be confirmed to cover the full January 2021 through present date range. The original litigation hold memorandum should be reviewed to verify that it identifies all 23 custodians previously identified by C&H and that it encompasses the full scope of documents, data, and electronically stored information relevant to the claims. If the original hold was scoped more narrowly — for example, if it referenced only the January 2023 through present period corresponding to the demand letter's asserted collective period — it should be expanded immediately to cover the full five-year lookback.
B. Defining the Putative Collective/Class Boundaries
For purposes of the FLSA collective action, the collective period will depend on the willfulness determination. If VHG's violations are found to be non-willful, the collective period will extend two years backward from each individual opt-in plaintiff's consent filing date. If willful, the collective period will extend three years backward from each opt-in date. Because opt-in dates will vary across individual plaintiffs, the effective collective period will not be a single fixed window but rather a shifting, individualized lookback for each member.
For purposes of the Florida state-law class action (applicable to the tipped-employee minimum-wage claims under Article X, Section 24), the class period will extend up to five years backward from the date the complaint is filed. Because the Florida claims proceed under a Rule 23 opt-out framework (or its state-court analog), all individuals within the class definition will be included unless they affirmatively exclude themselves.
C&H should model both the FLSA and Florida time periods when working with VHG and Ridgepoint Advisory Group LLC to define the population of potentially affected employees. VHG's HRIS and payroll records should be queried to identify all hourly, non-exempt employees who worked at any of the seven at-issue properties during each lookback period, disaggregated by job code, property, and employment dates.
Additionally, property-level variations in practices may support arguments to narrow the collective or class at the certification stage. If, for example, certain properties had different timekeeping practices, different meal-break policies, or different tip-pool arrangements, VHG may argue that the claims are not sufficiently common or typical to warrant collective or class treatment across all seven pro

MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

MATTER NO.: 1021-00005

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