PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP Attorneys at Law
100 Southeast Second Street, Suite 3400 Miami, Florida 33131 Telephone: (305) 555-7200 Facsimile: (305) 555-7201 www.calderwoodharkness.com
MEMORANDUM
Date: February 10, 2026
To: Devin K. Arroyo, General Counsel, Verimark Hospitality Group Inc. Carla S. Whitfield, Vice President, Human Resources, Verimark Hospitality Group Inc.
From: Bernard Crawford, Responsible Partner, Calderwood & Harkness LLP Nadia Petrov, Lead Associate, Calderwood & Harkness LLP
Re: Pre-Litigation Wage-and-Hour Audit — Proposed Scope and Methodology
Matter No.: 1021-00005
CONFIDENTIALITY NOTICE: This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product prepared in anticipation of litigation. It should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. Any unauthorized disclosure, distribution, or copying of this memorandum or any portion thereof is strictly prohibited and may result in waiver of applicable legal privileges. If you have received this memorandum in error, please contact Calderwood & Harkness LLP immediately at (305) 555-7200.
I. EXECUTIVE SUMMARY
This memorandum outlines the proposed scope, methodology, phased work plan, and timeline for a comprehensive pre-litigation wage-and-hour audit of Verimark Hospitality Group Inc. ("VHG" or the "Company"). Calderwood & Harkness LLP ("C&H" or the "Firm") has prepared this proposal at the direction of VHG's General Counsel and in anticipation of potential collective and class action litigation under federal and state wage-and-hour statutes.
Background and Context. On January 14, 2026, the law firm of Garza, Linden & Okafor LLP ("GLO"), acting on behalf of former VHG employee Daniela M. Serrano (Employee ID VHG-EMP-20220314-5587), transmitted a pre-suit demand letter to VHG's General Counsel threatening a collective action under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (the "FLSA"), and a class action under Article X, Section 24 of the Florida Constitution. The demand letter, which was received by VHG on January 16, 2026, identifies five categories of alleged wage-and-hour violations spanning seven VHG-branded hotel and resort properties in the State of Florida. GLO's demand seeks $18.5 million in total relief, inclusive of back pay, liquidated damages, and attorneys' fees, and establishes a response deadline of February 28, 2026.
Engagement Authorization and Budget. On January 29, 2026, the VHG Audit Committee authorized the engagement of outside counsel to conduct a pre-litigation wage-and-hour audit, with a combined budget cap of $350,000 covering both legal fees and consultant expenses. Calderwood & Harkness opened this matter on January 30, 2026, under Matter No. 1021-00005.
Audit Objectives. The audit is designed to accomplish the following five core objectives:
1. Assess the merits and magnitude of the allegations contained in the GLO demand letter, based on a rigorous analysis of VHG's payroll data, timekeeping practices, employment policies, and actual workplace conditions at the seven at-issue properties.
2. Identify potential compliance gaps across VHG's wage-and-hour practices, including overtime calculation methodology, automatic meal-break deductions, compensable pre-shift and post-shift activities, tipped-employee minimum-wage compliance, and exemption classifications.
3. Evaluate defensive positions available to VHG under the FLSA and Florida law, including good-faith defenses, statute-of-limitations arguments, the de minimis doctrine, and potential challenges to collective-action conditional certification.
4. Develop remediation recommendations to address identified compliance deficiencies, reduce ongoing legal exposure, and strengthen the Company's position in any future regulatory examination or litigation proceeding.
5. Inform the Company's litigation-avoidance and settlement strategy, including assessment of pre-suit settlement feasibility, a reasonable settlement range, and, if litigation cannot be avoided, a comprehensive litigation-response strategy.
Preliminary Exposure Estimates. Based on the information currently available and the assumptions discussed in Section IV of this memorandum, our working preliminary exposure estimates are as follows:
• Mid-range estimate: $22 million to $38 million (inclusive of liquidated damages but exclusive of plaintiffs' attorneys' fees and costs).
• Narrow scenario estimate: $8,147,700 (assuming limited scope of violations, non-willful finding with a two-year lookback, and successful assertion of certain defenses).
• Theoretical broad ceiling: Approximately $202.4 million (assuming maximum scope, willful violations across all five categories, the broadest putative collective, treble damages, and attorneys' fees).
These preliminary estimates are based on blended averages and limited information currently in our possession. The audit described in this memorandum will refine these estimates using actual payroll data, time-punch records, and property-specific analyses. We caution against reliance on these preliminary figures for settlement or financial-reporting purposes until they have been subjected to the rigor of the proposed audit methodology.
Timeline. The audit is designed to be completed within approximately twelve weeks of engagement commencement (approximately May 8, 2026), with interim deliverables at key milestones. This timeline accounts for the overlapping phased structure described in Section VI below.
II. BACKGROUND
A. The Company
Verimark Hospitality Group Inc. ("VHG" or the "Company") is a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol VMHG. The Company's corporate headquarters are located at 2400 Bayshore Boulevard, Suite 1100, Tampa, Florida 33629. VHG operates in the hospitality and real estate sectors, focusing on the ownership, management, and operation of upscale hotel and resort properties throughout the State of Florida.
For fiscal year 2025, VHG reported consolidated revenue of approximately $1.42 billion. As of December 31, 2025, the Company maintained a total workforce of approximately 8,200 employees across fourteen hotel and resort properties in Florida. Of this total, approximately 5,900 employees—representing approximately 71.95% of the total workforce—are classified as non-exempt hourly workers. These hourly employees serve in range operational roles, including front-desk associates, housekeeping, food and beverage, maintenance, and concierge functions.
The following individuals hold key leadership positions relevant to this engagement:
• Chief Executive Officer: Theodore R. Langford
• Chief Financial Officer: Marguerite A. Dunning
• General Counsel: Devin K. Arroyo
• Vice President, Human Resources: Carla S. Whitfield
• Director, Payroll & Workforce Compliance: Enrique J. Fuentes
VHG's independent auditors are Hargrove Kessler & Co. LLP, with Nathaniel R. Webb, CPA serving as the engagement partner. The Company's payroll processing and timekeeping functions have been outsourced to Luminos Payroll Solutions Inc. ("Luminos") since January 1, 2022. Luminos provides payroll processing and time-and-attendance services through its proprietary Luminos TimeTrack platform under VHG account ID LTT-VHG-2022-0041. The key contact at Luminos for VHG's account is Shannon D. Prewitt, Senior Account Manager. Prior to January 1, 2022, VHG utilized a different payroll processor, the identity and record-keeping status of which will need to be confirmed during the audit.
B. The Demand Letter and Allegations
The Claimant. The demand letter was transmitted 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. Her employment was terminated in August 2025, and the circumstances of her separation may become relevant to motive and credibility assessments as the matter progresses.
Claimant's Counsel. Ms. Serrano is represented by the law firm of Garza, Linden & Okafor LLP ("GLO"), located at 600 Brickell Avenue, Suite 2200, Miami, Florida 33131. The lead attorney on the matter is Marco A. Garza, with Priya N. Chandrasekaran serving as the associate attorney. GLO is a well-known plaintiffs' wage-and-hour firm with significant experience in FLSA collective actions and state-law class actions in the Southern District of Florida. Mr. Garza personally has served as lead counsel in several high-profile hospitality-industry wage-and-hour cases in recent years, and the Firm's prior experience opposing GLO indicates that the threat of litigation should be taken seriously.
The Demand Letter. The demand letter is dated January 14, 2026 and was received by VHG General Counsel Devin K. Arroyo on January 16, 2026. The letter demands $18.5 million in total relief, inclusive of back pay, liquidated damages, and attorneys' fees, and establishes a response deadline of February 28, 2026. The letter indicates that GLO intends to file a collective action under FLSA Section 216(b) and a companion class action under Florida law if a satisfactory resolution is not reached prior to the response deadline.
Categories of Alleged Violations. The demand letter identifies five categories of alleged wage-and-hour violations:
1. Overtime Violations (29 U.S.C. § 207(a)). GLO alleges that VHG has systematically failed to pay overtime compensation at one and one-half times the regular rate of pay for all hours worked in excess of forty hours per workweek. The demand letter asserts that VHG's overtime calculation methodology fails to account for all components of remuneration required to be included in the regular rate under the FLSA, and that time-rounding and auto-deduction practices have artificially suppressed the number of overtime hours recorded for affected employees. The demand letter does not specify particular pay periods or provide granular data supporting the overtime claims, but references generally the claimant's own pay records and those of "similarly situated" employees at the seven identified properties.
2. Automatic Meal-Break Deductions. GLO alleges that VHG, through its Luminos TimeTrack platform, automatically deducts thirty minutes from each shift of six hours or longer for a purported meal break, regardless of whether the employee actually received a bona fide, duty-free meal period. The demand letter asserts that employees are routinely required to remain on-call during their designated meal periods and are frequently called upon to perform work duties during those periods, yet the automatic deduction is applied uniformly without regard to whether the employee was "completely relieved of duties" as required by 29 C.F.R. § 785.19. GLO contends that the auto-deduction practice systematically understates compensable hours worked and contributes to unpaid overtime.
3. Pre-Shift and Post-Shift Off-the-Clock Work. GLO alleges that VHG fails to compensate employees for compensable work performed before and after their recorded shift times. Specifically, the demand letter identifies three categories of uncompensated pre-shift and post-shift activities: (a) donning and doffing required uniforms and grooming to VHG standards; (b) booting up computer systems at workstations prior to the start of the shift; and (c) participating in shift-handover briefings with incoming or outgoing colleagues. GLO estimates that these activities collectively require fifteen to twenty-five minutes per shift, none of which is captured in employees' time records. GLO characterizes these activities as "integral and indispensable" to employees' principal activities under the continuous-workday doctrine and the Portal-to-Portal Act.
4. Tipped-Employee Minimum Wage (Art. X, § 24, Florida Constitution). GLO alleges that VHG has failed to pay the applicable Florida minimum wage for tipped employees in front-desk and concierge roles who participate in tip pools at VHG properties. Specifically, GLO contends that VHG applies a tip credit of $3.02 per hour but fails to ensure that the direct cash wage paid to tipped employees equals or exceeds the statutory tipped-employee minimum of $10.98 per hour (calculated as the Florida minimum wage of $14.00 per hour, effective September 30, 2025, minus the maximum allowable tip credit of $3.02). The demand letter further challenges the validity of VHG's tip pools, alleging that the pools include employees who are not "customarily and regularly" tipped, which would invalidate the tip credit entirely under FLSA Section 203(m).
5. Misclassification Under the FLSA Administrative Exemption. GLO alleges that VHG has willfully misclassified certain "lead" and "senior" hourly roles as exempt from overtime under the FLSA administrative exemption, 29 C.F.R. § 541.200. The demand letter identifies "lead front-desk associates," "senior housekeeping supervisors," "lead food & beverage associates," and similar titles as positions where employees perform predominantly non-exempt duties but have been classified as exempt to avoid overtime obligations. GLO asserts that these employees do not satisfy the duties test for the administrative exemption because their primary duties do not consist of the performance of office or non-manual work directly related to the management policies or general business operations of VHG, and they do not exercise discretion and independent judgment with respect to matters of significance.
Putative Class and Collective. The demand letter defines the putative collective and class as all current and former hourly, non-exempt employees at VHG-branded Florida properties from January 2023 to the present. Based on VHG's workforce data, we estimate that this putative group encompasses approximately 4,100 to 5,900 individuals, accounting for employee turnover during the relevant period. The breadth of this putative group is a significant driver of the potential exposure, and one of the critical objectives of this audit will be to assess whether the putative group can be narrowed through factual or legal arguments.
C. Litigation Hold and Preservation Steps Already Taken
VHG acted promptly upon receipt of the demand letter to initiate evidence-preservation measures. The following steps have been completed or are in progress:
• Internal Litigation Hold (January 17, 2026). VHG issued an internal litigation-hold memorandum on January 17, 2026, one business day after receipt of the demand letter. The litigation hold was directed to all relevant custodians and required the preservation of all documents and electronically stored information ("ESI") that could be relevant to the claims asserted in the demand letter.
• Custodian Identification and Notification. VHG identified twenty-three custodians across corporate headquarters and the seven at-issue properties who are reasonably likely to possess relevant documents and ESI. All twenty-three custodians have been notified of their preservation obligations.
• Supplemental Litigation Hold Advisory (Calderwood & Harkness). Upon engagement, Calderwood & Harkness issued a supplemental litigation hold advisory letter to Devin K. Arroyo, providing detailed guidance on preservation obligations under federal and Florida law, the categories of information subject to preservation, and the consequences of spoliation.
• Data Preservation Request to Luminos. On February 6, 2026, Calderwood & Harkness transmitted a data preservation request letter to Shannon D. Prewitt at Luminos Payroll Solutions Inc., directing Luminos to preserve all data associated with VHG account LTT-VHG-2022-0041, including time-punch records, payroll registers, system configuration records, audit logs, and all related data from January 1, 2022 through the present.
• Draft Litigation Hold Notice Template. Calderwood & Harkness has provided VHG with a draft litigation hold notice template for distribution to all identified custodians, incorporating best-practice language regarding preservation scope and custodian obligations.
The categories of data currently subject to the litigation hold and preservation directive include, without limitation: Luminos TimeTrack punch data, scheduling records, employee handbooks (all versions), HR policy manuals, pay stubs and wage statements, payroll registers, tip-pool records and distribution logs, time-rounding policies, meal-break policies and exception reports, uniform and grooming policies, job descriptions and exemption classification documentation, internal audit reports relating to wage-and-hour compliance, and all related electronic communications (email, instant messages, and shared-drive documents) of the twenty-three identified custodians.
D. Insurance and Budget Context
Employment Practices Liability Insurance. VHG maintains an employment practices liability ("EPL") insurance policy with Pinnacle Indemnity Corp. The relevant policy details are as follows:
• Policy Number: PIN-EPL-2025-44781
• Per-Occurrence Limit: $10,000,000
• Aggregate Limit: $25,000,000
• Self-Insured Retention ("SIR"): $500,000 per claim
• Policy Period: July 1, 2025 through June 30, 2026
On February 7, 2026, Calderwood & Harkness transmitted a notice of claim and tender letter to Lydia C. Bowman, Senior Claims Examiner at Pinnacle Indemnity Corp., providing formal notice of the GLO demand and tendering the claim under the EPL policy. The notice deadline under the policy terms is March 15, 2026; the February 7 tender letter satisfies this requirement with substantial margin. We anticipate receiving a coverage-position letter from Pinnacle within thirty to forty-five days of tender. Depending on Pinnacle's coverage position, the carrier may seek to appoint panel counsel or may agree to VHG's selection of Calderwood & Harkness as defense counsel, subject to rate and billing guidelines. We will advise VHG promptly upon receipt of Pinnacle's response.
Budget Authorization. The VHG Board of Directors' Audit Committee authorized a scoping-phase budget of $350,000 on January 29, 2026. This budget is intended to cover both Calderwood & Harkness's legal fees (estimated at $175,000 to $225,000) and the fees of any forensic consultant engaged in connection with the audit (estimated at $85,000 to $120,000 if Ridgepoint Advisory Group LLC is retained). The combined estimated cost of the scoping phase is $260,000 to $345,000, which falls within the authorized budget cap. Any cost overruns exceeding the $350,000 cap would require additional authorization from the Audit Committee.
III. PROPERTIES WITHIN SCOPE OF AUDIT
A. Identification of Seven At-Issue Properties
The GLO demand letter identifies seven VHG-branded hotel and resort properties as the locations where the alleged wage-and-hour violations occurred. The following table provides summary information for each of these properties:
B. Summary Totals
Across the seven at-issue properties, VHG currently employs a total of approximately 2,620 individuals, of whom approximately 1,895 are estimated to be hourly, non-exempt employees. These figures represent the current active workforce as of the date of this memorandum and do not account for employee turnover during the relevant lookback period.
When former employees are included over the full lookback period (which extends back as far as January 2021 for certain Florida state-law claims, and at minimum to January 2023 for FLSA claims assuming a willful-violation finding), the putative collective and class is estimated to encompass approximately 4,100 to 5,900 individuals. The precise size of the putative group will be a critical variable in the exposure analysis and will be refined during Phase 2 of the audit using employee census data and turnover records.
C. Remaining Seven VHG Properties (Not Named in Demand Letter)
VHG operates an additional seven hotel and resort properties in Florida that are not specifically identified in the GLO demand letter. The audit will initially focus on the seven at-issue properties described above. However, if the audit reveals systemic, company-wide practices that are not limited to the seven identified properties—such as uniform Luminos TimeTrack configurations, company-wide payroll policies, or corporate-level HR directives—the scope of the audit may need to be extended to encompass some or all of the remaining seven properties.
We note that all fourteen VHG properties utilize the Luminos TimeTrack platform under the same master account (LTT-VHG-2022-0041), which suggests that payroll and timekeeping configurations—including the auto-deduction rule AR-MEAL-030—may be applied uniformly across the entire VHG portfolio. Accordingly, we recommend conducting a preliminary assessment early in Phase 1 to determine whether the same Luminos TimeTrack configuration settings and the same corporate HR policies apply across all fourteen properties. If uniform configurations and policies are confirmed, the risk of claims extending beyond the seven at-issue properties increases substantially, and VHG's remediation strategy should account for enterprise-wide exposure.
Any expansion of the audit scope beyond the seven properties identified herein would require additional budget authorization from the Audit Committee.
D. Special Considerations — Verimark Shores Clearwater
The Verimark Shores Clearwater property presents unique legal considerations that warrant separate analysis. Unlike the other six at-issue properties, which are wholly owned by VHG, the Clearwater property is owned by Palomar Realty Partners LLC ("Palomar"), a separate entity. Palomar's Managing Member is Ricardo E. Montalvo, and Palomar's offices are located at 1901 West Cypress Street, Suite 400, Tampa, Florida 33607. VHG manages the Clearwater property pursuant to a Hotel Management Agreement dated June 1, 2021 (HMA-2021-0601-PC). Under this management agreement, VHG employs all on-site staff directly and is responsible for day-to-day operations, including staffing, scheduling, payroll, and compliance with employment laws.
This ownership-management structure creates potential joint-employer exposure for both VHG and Palomar. Under the FLSA and applicable Eleventh Circuit precedent, both entities may be deemed joint employers if each exercises sufficient control over the terms and conditions of employment for hourly workers at the Clearwater property. A finding of joint-employer status could expose Palomar to liability for the same wage-and-hour violations alleged against VHG, and could also affect the indemnification analysis under the management agreement.
Calderwood & Harkness is preparing a separate joint-employer analysis memorandum that will examine the specific provisions of HMA-2021-0601-PC, the respective degree of control exercised by VHG and Palomar over employment-related decisions at the Clearwater property, and the applicable legal standards for joint-employer liability in the Eleventh Circuit. Additionally, we recommend that VHG consider executing a common interest agreement with Palomar to facilitate the sharing of certain privileged information relating to the audit and the GLO demand, while preserving the attorney-client privilege and work-product protections applicable to both parties. A draft common interest agreement is under preparation and will be circulated for review by VHG General Counsel.
IV. CATEGORIES OF ALLEGED VIOLATIONS — AUDIT FOCUS AREAS
This section describes each of the five categories of alleged violations identified in the GLO demand letter, together with the specific audit objectives, key data sources, and relevant statistics for each category.
A. Category 1: Overtime Compensation (29 U.S.C. § 207(a))
Allegation. GLO alleges that VHG has systematically failed to pay overtime compensation at one and one-half times the "regular rate" of pay for all hours worked in excess of forty hours per workweek, in violation of Section 207(a) of the FLSA. The demand letter asserts that the failure is attributable to multiple contributing factors, including time-rounding practices, automatic meal-break deductions that suppress recorded hours, and a regular-rate calculation methodology that fails to include all forms of remuneration required by the FLSA.
Audit Objectives. The audit will pursue the following objectives with respect to the overtime compensation allegations:
• Verify the overtime calculation methodology programmed into the Luminos TimeTrack platform, including the formula used to determine the "regular rate" of pay for each employee and the algorithm for computing overtime premiums.
• Confirm that the regular-rate calculation includes all forms of remuneration required by FLSA Section 207(e), including, where applicable, pooled tips allocated to employees, shift differentials, non-discretionary bonuses, and any other compensation that must be factored into the regular rate.
• Compare time-punch data (clock-in and clock-out records) to payroll records for each pay period to identify workweeks in which employees worked hours in excess of forty but were not paid overtime, or were paid overtime at an incorrect rate.
• Assess whether time-rounding practices (if any are configured in the Luminos TimeTrack system) have systematically reduced recorded hours below actual hours worked, and whether such rounding practices comply with the "neutral on its face and in practice" standard established by the U.S. Department of Labor.
• Quantify the aggregate unpaid or underpaid overtime hours and compensation for the affected employee population at each of the seven at-issue properties.
Key Data Sources. Luminos TimeTrack punch records (raw clock-in/clock-out data and all amendments); payroll registers showing gross pay, overtime pay, and deductions; overtime-authorization forms and policies; scheduling data; Luminos TimeTrack configuration records for time-rounding rules (if any).
Relevant Statistics (Preliminary Estimates). Based on the information currently available, we are using the following blended averages for preliminary exposure modeling purposes:
• Average weekly hours worked by non-exempt employees: 42.5 hours
• Average overtime hours per employee per week: 2.5 hours
• Blended average hourly rate across all positions and properties: $16.50
• Overtime premium rate: $24.75 per hour ($16.50 × 1.5)
These figures are preliminary estimates based on limited data and will be replaced with actual, verified figures during Phase 2 of the audit.
B. Category 2: Automatic Meal-Break Deductions
Allegation. GLO alleges that VHG, through the Luminos TimeTrack platform, automatically deducts thirty minutes from each shift of six or more hours for a purported meal break, regardless of whether the employee actually received a bona fide, duty-free meal period. GLO contends that this practice violates 29 C.F.R. § 785.19, which requires that an employee be "completely relieved from duty" during a meal period for that period to be excluded from compensable hours worked. According to the demand letter, employees at VHG properties are routinely required to remain on-call during their designated meal periods and are frequently interrupted by work duties, rendering the automatic deduction improper.
Audit Objectives. The audit will pursue the following objectives with respect to the automatic meal-break deduction allegations:
• Review the Luminos TimeTrack automatic meal-break deduction rule, designated as AR-MEAL-030, including its configuration parameters, effective dates, and any modifications made to the rule since implementation.
• Determine whether the Luminos TimeTrack system provides employees with an effective mechanism to report interrupted or missed meal breaks and to receive timely corrections to their time records. This will include analysis of the system's exception-reporting functionality and the workflow for manager review and approval of meal-break corrections.
• Analyze the frequency and patterns of meal-break exception overrides across each of the seven properties. A low exception rate relative to total meal-break deductions may suggest that employees are either unaware of the correction mechanism or are discouraged from using it—both of which would undermine VHG's ability to rely on the auto-deduction system as a defense.
• Conduct interviews with property-level managers and hourly employees at each property to ascertain actual meal-break practices, including whether employees are genuinely "completely relieved of duties" during meal periods, whether they are required to remain on the premises, and whether they are subject to being called back to duty during designated break periods.
• Assess the legal defensibility of VHG's auto-deduction practice in light of applicable FLSA regulations and Eleventh Circuit precedent, including whether VHG can demonstrate that it had a reasonable policy for employees to report deviations from scheduled meal breaks and that the system was administered in good faith.
Key Data Sources. Luminos TimeTrack AR-MEAL-030 configuration records and system documentation; system audit logs showing edits to time records and manager overrides; meal-break exception and correction reports (frequency, timing, and resolution); VHG Employee Handbook v.7.2 (and prior versions) meal-break policy; property-level meal-break standard operating procedures ("SOPs").
Relevant Statistics (Preliminary Estimates). The automatic deduction at issue is thirty minutes per shift. For a standard five-day workweek:
• Alleged weekly meal-break deduction error: 30 minutes per shift × 5 shifts = 150 minutes = 2.5 hours per week
• At the blended average hourly rate of $16.50, this represents $41.25 per employee per week in potentially unpaid straight-time compensation, plus any additional overtime implications if the unpaid meal-break time pushes employees' compensable hours above the forty-hour overtime threshold.
C. Category 3: Pre-Shift and Post-Shift Off-the-Clock Work
Allegation. GLO alleges that VHG fails to compensate employees for compensable work performed before their scheduled shift start time and after their scheduled shift end time. The demand letter identifies three specific categories of uncompensated activities: (a) donning and doffing required uniforms and grooming to VHG appearance standards; (b) booting up computer systems at workstations used by front-desk, concierge, and other computer-dependent positions; and (c) participating in shift-handover briefings with incoming or outgoing colleagues at the start and end of each shift. GLO estimates that these activities collectively require fifteen to twenty-five minutes per shift.
Audit Objectives. The audit will address the following with respect to the pre-shift and post-shift off-the-clock work allegations:
• Determine what specific pre-shift and post-shift activities are required by VHG policy, practice, or employer expectation at each of the seven properties. This includes reviewing uniform policies, IT equipment procedures, and shift-handover protocols for each property and department.
• Assess the compensability of each identified activity under the FLSA continuous-workday doctrine, the Portal-to-Portal Act (29 U.S.C. §§ 251–262), and Eleventh Circuit precedent regarding "integral and indispensable" activities. The key legal question is whether each pre-shift and post-shift activity is "integral and indispensable" to the employee's principal activities, or whether it falls within the Portal-to-Portal Act's exclusion for "preliminary" and "postliminary" activities.
• Review VHG's uniform and grooming policies for each department and position to determine whether employees are required to don and doff uniforms on-site (as opposed to arriving at work in uniform), the time reasonably required for donning and doffing, and whether any positions require specialized personal protective equipment.
• Examine computer boot-up requirements for front-desk, concierge, and other workstation-dependent positions, including the average time required for computer systems to become operational and whether employees are required to have their systems ready and operational at the start of their scheduled shifts—which would necessitate booting up before clocking in.
• Evaluate shift-handover procedures at each property, including whether handover briefings are mandatory or discretionary, their typical duration, and whether they occur before the incoming employee's shift technically begins (and after the outgoing employee's shift technically ends).
• Analyze time-punch data for patterns indicating systematic early arrivals and late departures that are not reflected in compensable hours, including comparison of scheduled shift times to actual clock-in and clock-out times.
Key Data Sources. VHG uniform and grooming policies (by property and department); IT equipment sign-on and boot-up procedures; shift-handover checklists and SOPs; Luminos TimeTrack time-punch data (with particular focus on the gap between scheduled shift times and actual punch times); job descriptions for each position identifying required pre-shift and post-shift activities.
Relevant Statistics (Preliminary Estimates). Using the midpoint of GLO's estimated range:
• Alleged weekly unpaid pre-/post-shift time: 20 minutes per shift (midpoint of 15–25 minutes) × 5 shifts = 100 minutes per week = approximately 1.667 hours per week
• At the blended average hourly rate of $16.50, this represents approximately $27.50 per employee per week in potentially unpaid straight-time compensation, plus any additional overtime implications.
D. Category 4: Tipped-Employee Minimum Wage (Art. X, § 24, Florida Constitution)
Allegation. GLO alleges that VHG has failed to comply with the Florida constitutional minimum-wage requirements for tipped employees in front-desk and concierge roles who participate in VHG's tip pools. Specifically, GLO contends that VHG applies a tip credit of $3.02 per hour but fails to ensure that the direct cash wage paid to affected employees equals or exceeds the statutory tipped-employee minimum. GLO further challenges the validity of VHG's tip pools under FLSA Section 203(m), alleging that the pools improperly include employees who are not "customarily and regularly" tipped.
Audit Objectives. The audit will pursue the following objectives with respect to the tipped-employee minimum-wage allegations:
• Identify all job codes and positions at each of the seven properties that participate in tip pools, and determine the total number of employees affected.
• Verify that the tip credit applied by VHG ($3.02 per hour) does not reduce the direct cash wage below the statutory tipped-employee minimum of $10.98 per hour (calculated as the Florida minimum wage of $14.00 per hour less the maximum allowable tip credit of $3.02).
• Confirm compliance with the FLSA Section 203(m) requirements for a valid tip credit, including: (a) that VHG has provided adequate notice to tipped employees of the tip-credit provisions; (b) that tip-pool participants are limited to "customarily and regularly tipped" employees; and (c) that VHG allows employees to retain all tips except those contributed to a valid tip pool.
• Review tip-pool distribution records at each property to ensure equitable and lawful distribution of pooled tips, and to assess whether any non-tipped employees (such as back-of-house or management employees) are included in the pool, which would invalidate the tip credit.
• Analyze whether front-desk and concierge roles at VHG properties meet the definition of "tipped employees" under the FLSA (i.e., employees who "customarily and regularly" receive more than $30 per month in tips).
• Review historical compliance with tipped-employee minimum-wage requirements through each of the successive Florida minimum-wage increases, including the most recent increase to $14.00 per hour effective September 30, 2025. Because the Florida minimum wage has increased annually in recent years pursuant to the constitutional amendment, there is a risk that VHG's payroll configurations may not have been timely updated to reflect each successive increase.
Key Data Sources. VHG tip-pool policies, agreements, and distribution records (by property); payroll records showing direct cash wages and tip-credit amounts for all tipped employees; job descriptions for front-desk, concierge, and any other positions participating in tip pools; employee acknowledgment or notification forms regarding the tip credit; Luminos TimeTrack wage-rate configuration records.
Relevant Statutory Rates. The following statutory rates are currently in effect and form the basis for the compliance analysis:
• Florida minimum wage (effective September 30, 2025): $14.00 per hour
• Florida tipped-employee minimum wage: $10.98 per hour ($14.00 − $3.02 tip credit)
• FLSA federal minimum wage: $7.25 per hour (superseded by higher Florida rate)
• FLSA federal tipped-employee minimum wage: $2.13 per hour (superseded by higher Florida rate)
E. Category 5: Misclassification Under FLSA Administrative Exemption
Allegation. GLO alleges that VHG has willfully misclassified certain "lead" and "senior" hourly roles as exempt from overtime under the FLSA administrative exemption, 29 C.F.R. § 541.200. The demand letter identifies, without limitation, "lead front-desk associates," "senior housekeeping supervisors," "lead food & beverage associates," and similar titles as positions where the administrative exemption has been improperly applied. GLO asserts that the affected employees perform predominantly non-exempt operational duties and that their classification as exempt is a deliberate strategy to avoid overtime obligations.
Audit Objectives. The audit will pursue the following objectives with respect to the misclassification allegations:
• Identify all job codes classified as exempt from overtime at the seven at-issue properties, with a focus on "lead" and "senior" roles in the front-desk, housekeeping, food and beverage, and maintenance departments.
• For each exempt classification, evaluate compliance with all three prongs of the administrative exemption:
(a) Salary-Basis Test: Confirm that the employee is paid on a salary basis (i.e., receives a predetermined amount of compensation each pay period that is not subject to reduction based on the quality or quantity of work performed), consistent with 29 C.F.R. § 541.602.
(b) Salary-Level Test: Confirm that the employee's salary meets or exceeds the minimum threshold required by the Department of Labor's regulations. As of the date of this memorandum, the applicable salary threshold under the current FLSA regulations should be verified against any recent rulemakings or judicial decisions.
(c) Duties Test: Assess whether the employee's "primary duty" consists of the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers, and includes the exercise of discretion and independent judgment with respect to matters of significance, consistent with 29 C.F.R. § 541.200(a).
• Compare written job descriptions for each affected position to the actual duties performed in practice, based on interviews with property-level HR managers, general managers, and the affected employees themselves. The duties test focuses on what the employee actually does, not what the job description states.
• Focus particularly on whether "lead" and "senior" employees spend a majority of their time on exempt (administrative/managerial) activities or on non-exempt (operational/production) tasks such as checking in guests, cleaning rooms, preparing food, or performing maintenance work.
• Assess the risk of reclassification for each affected position and quantify the potential back-pay exposure, including unpaid overtime for all hours worked in excess of forty per workweek during the relevant lookback period.
Key Data Sources. Job descriptions for all exempt positions at the seven properties; organizational charts showing reporting relationships; compensation records (salary amounts, pay stubs); exemption classification documentation (including any written analysis supporting the classification decision); interviews with property HR managers and affected employees.
V. DATA AND DOCUMENT COLLECTION PLAN
A. Data Sources
The audit will require collection and analysis of data and documents from the following five principal sources. For each source, we identify the specific categories of data to be collected and the key contacts responsible for production.
1. Luminos Payroll Solutions Inc. (Luminos TimeTrack — Account LTT-VHG-2022-0041)
Luminos is the primary source for payroll and timekeeping data. The following categories of data will be requested from Luminos through the existing preservation-request framework, coordinated with Shannon D. Prewitt, Senior Account Manager:
• Time-punch records: Complete clock-in, clock-out, and all amendment records for all non-exempt employees at the seven at-issue properties, from January 1, 2022 (the Luminos transition date) through the present. This data must include original punch times, any manager edits or overrides, and timestamps for all modifications.
• Auto-deduction configuration records: Complete documentation of the automatic meal-break deduction rule AR-MEAL-030, including all configuration parameters, effective dates, modification history, and any property-specific or department-specific variations.
• Meal-break exception and correction reports: All records of employee-initiated or manager-initiated exceptions to the AR-MEAL-030 auto-deduction, including the date, employee, property, reason code, correction amount, and approval status.
• Payroll registers: Detailed payroll registers for all pay periods from January 1, 2022 through the present, showing gross pay, regular hours, overtime hours, overtime pay, deductions, tip-credit amounts, and net pay, broken down by employee and pay period.
• Wage statements and pay stubs: Digital copies of all wage statements and pay stubs issued to non-exempt employees at the seven properties during the relevant period.
• System audit logs: Complete audit trail logs for all edits to time records, including manager overrides, system-generated corrections, and administrative adjustments, with timestamps and user identification.
• Time-rounding rules configuration: Documentation of any time-rounding rules configured in the Luminos TimeTrack system, including rounding intervals, rounding direction (up, down, or nearest), and effective dates.
Data Export Format. Time-punch data, payroll registers, and other structured data should be exported in CSV or pipe-delimited text format suitable for analytical processing and statistical analysis. Wage statements and pay stubs should be provided in PDF format. System configuration records and audit logs should be provided in their native format or in a mutually agreed-upon format.
2. VHG Corporate Human Resources (Carla S. Whitfield, Enrique J. Fuentes)
VHG's corporate Human Resources and Payroll & Workforce Compliance departments are the primary source for corporate policies, employee records, and HR-related documentation. The following categories of documents and data will be requested:
• Employee Handbook: The current version (v.7.2, effective January 1, 2025) and all prior versions in effect since January 2021, including any supplements, addenda, or amendments.
• Meal-break and rest-break policies: All corporate-level and property-level policies governing employee meal breaks and rest breaks, including the auto-deduction policy, the exception/correction procedure, and any related training materials.
• Overtime authorization policies and procedures: All policies governing when overtime is authorized, the approval process, and any restrictions on employee overtime.
• Uniform and grooming policies: All policies governing employee dress code, uniform requirements, and grooming standards, including any requirements for on-site donning and doffing, by department and property.
• Tip-pool policies, agreements, and distribution records: All tip-pool policies, employee tip-pool participation agreements, and records of tip-pool distributions for each property, including the methodology for calculating each employee's share.
• Job descriptions: Current and historical job descriptions for all positions at the seven at-issue properties, with explicit designation of exempt or non-exempt status and the basis for the exemption classification.
• Organizational charts: Current and historical organizational charts for each of the seven properties, showing reporting relationships and supervisory structures.
• Employee census data: A comprehensive employee census database for all employees (current and former) at the seven properties from January 2021 to the present, including: employee name, employee ID, hire date, separation date (if applicable), job code, job title, department, property assignment, hourly rate or salary, exempt/non-exempt status, and tipped/non-tipped designation.
• Internal audit reports: Any internal audits, compliance reviews, self-assessments, or corrective-action plans relating to wage-and-hour practices conducted by VHG or on VHG's behalf during the relevant period.
• Employee complaints and grievances: All internal complaints, grievances, hotline reports, or other employee communications relating to pay, overtime, meal breaks, off-the-clock work, or tip-pool practices.
• Training materials: All training materials, presentations, guides, and other instructional documents relating to timekeeping procedures, meal-break compliance, overtime authorization, and payroll processing.
3. VHG Corporate IT (Malik P. Jefferson)
VHG's Corporate IT department will be the source for technology-related data relevant to the pre-shift and post-shift off-the-clock work allegations. The following categories of data will be requested:
• Computer system login logs: Login and logout records for workstations and point-of-sale systems used by front-desk associates, concierge staff, and other hourly employees at the seven properties. These records will be used to compare computer login times to Luminos TimeTrack clock-in times, which may reveal patterns of pre-shift computer boot-up activity that is not captured in compensable hours.
• Boot-up time data: Technical data regarding the average time required for workstation computers and point-of-sale systems to boot up and become operational, by system type and property.
• Electronic communications of identified custodians: Email and instant-message communications of the twenty-three custodians identified in the litigation hold, to be collected and preserved for potential review. Production of these communications will be subject to search-term and date-range parameters to be defined in the Document and Data Collection Request List.
• Scheduling software data: If VHG utilizes scheduling software separate from the Luminos TimeTrack platform, all scheduling data for non-exempt employees at the seven properties during the relevant period.
4. Property-Level Records (Seven Property HR Managers and General Managers)
Each of the seven at-issue properties maintains certain records at the property level that may supplement or differ from corporate-level records. The following categories of property-level records will be requested:
• Property-specific scheduling records (shift schedules, staffing plans, and coverage assignments)
• Shift-handover logs and checklists
• Property-level meal-break and uniform standard operating procedures
• Manager time-record override logs and related documentation
• Employee sign-in/sign-out sheets, if maintained independently of the Luminos TimeTrack system
• Any property-specific employee communications or postings regarding timekeeping, meal breaks, or overtime procedures
5. Palomar Realty Partners LLC (for Verimark Shores Clearwater)
In connection with the joint-employer analysis for the Verimark Shores Clearwater property, the following documents will be requested from Palomar Realty Partners LLC, subject to the execution of an appropriate common interest agreement:
• Hotel Management Agreement HMA-2021-0601-PC and any amendments, supplements, or side letters
• All correspondence between Palomar and VHG regarding employment practices, staffing decisions, compensation, and compliance obligations at the Clearwater property
• Any indemnification or hold-harmless provisions within the management agreement or ancillary agreements relevant to employment-related claims
• Palomar's own policies or directives relating to labor and employment matters at the Clearwater property, if any
B. Date Ranges for Data Collection
The data collection will cover the following lookback periods, designed to capture the longest potentially applicable statute of limitations:
• Primary lookback period: January 14, 2021 through the present. This period covers the five-year statute of limitations applicable to Florida minimum-wage claims under Florida Statutes § 95.11(2)(b), measured backward from the January 14, 2026 date of the demand letter. This is the longest applicable limitations period and will serve as the outer boundary for the data collection.
• FLSA claims (non-willful): January 14, 2024 through the present (two-year lookback under 29 U.S.C. § 255(a)).
• FLSA claims (willful): January 14, 2023 through the present (three-year lookback under 29 U.S.C. § 255(a)). Whether VHG's conduct is deemed "willful" will significantly affect the scope of the FLSA claims and the associated exposure.
Luminos TimeTrack Data Availability. Luminos TimeTrack data is available from January 1, 2022 (the date VHG transitioned to the Luminos platform) forward. For the period from January 2021 through December 2021, VHG utilized a prior payroll processor. The identity of the prior processor and the availability of historical payroll and timekeeping records from that system will need to be confirmed early in Phase 1. If pre-Luminos records are available, they will be collected to support the full five-year lookback for Florida state-law claims. If they are unavailable or incomplete, this limitation will be noted in the audit findings and factored into the exposure analysis.