A recent California Court of Appeal decision clarifies how employers may calculate paid sick leave for exempt outside salespersons under California’s Healthy Workplaces, Healthy Families Act (HWHF) (Hirdman v. Charter Communications, LLC, No. D084304, 2025 WL 2205862 (Aug. 4, 2025)).
Charter Communications employed Bradley Hirdman and classified him as an “exempt outside salesperson” under California law, meaning he would be exempt from overtime pay as well as meal and rest break requirements. Under the Private Attorneys General Act (PAGA), Hirdman brought a lawsuit against Charter alleging violations of several Labor Code provisions, including failure to pay sick time at the correct rate of pay under Labor Code section 246, which outlines the HWHF requirements.
California’s HWHF provides three methods employers may use for calculating sick leave pay — two for nonexempt employees and one for exempt employees.
For nonexempt employees, Labor Code section 246 states that employers can calculate paid sick time:
- In the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, regardless of whether the employee actually works overtime in that workweek; or
- Using a 90-day look back calculation by dividing the employee’s total wages — not including overtime premium pay — by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.
For exempt employees, Labor Code section 246(l)(3) states “[p]aid sick time for exempt employees shall be calculated in the same manner as the employer calculates wages for other forms of paid leave time.”
Charter calculated Hirdman’s paid sick leave using the third method for exempt employees — paying him and other outside salespersons at their hourly base rate, which excluded commissions.
Hirdman, however, argued that section 246(l)(3)’s method for exempt employees is intended only for “white collar” administrative, executive or professional exempt employees — not outside salespersons who earn commissions. Instead, exempt outside salespersons should be paid for sick leave using one of the nonexempt employee calculation methods, which would account for commissions. Hirdman supported his argument with a 2016 California Division of Labor Standards and Enforcement (DLSE) Opinion Letter, which took the same position on this issue.
Charter, on the other hand, argued that the statute’s language was clear — “exempt employees” means all exempt employees, including exempt outside salespersons. And the court agreed with Charter.
After analyzing the statute’s language, the court concluded that it was clear and unambiguous. Notably, the Legislature singled out white-collar exemptions in a different subdivision of section 246 but didn’t do so here. So, the court concluded that section 246(l)(3)’s reference to “exempt employees” encompasses all exempt employees, including outside salespersons.
The court’s ruling disagrees with the DLSE’s 2016 Opinion Letter, which was based on a parenthetical comment in a 2015 bill analysis that itself, the court stated, was subject to conflicting interpretations. The court wasn’t persuaded, noting that while committee reports can be helpful to determine legislative intent, they are not conclusive, especially when “only a single ambiguous parenthetical in a single committee report supports the interpretation urged by a party and other language in the same report and others does not.”
The court’s decision allows employers to calculate sick leave pay for exempt salespersons in the same manner as they do other forms of paid leave, which could mean simply using their base hourly pay, excluding commissions, so long as that is how the employer calculates other forms of paid leave. This may simplify the payroll process for certain commissioned employees.
Employers that previously calculated exempt salespersons’ paid sick leave using the nonexempt employee calculation methods based on the DLSE’s opinion letter should consult with legal counsel on how the recent decision will impact their policies and practices and what they should do moving forward.
James W. Ward, J.D., Employment Law Subject Matter Expert/Legal Writer and Editor, CalChamber
CalChamber members can read more about Outside Salesperson Exemptions in the HR Library. Not a member? Learn how to power your business with a CalChamber membership.
