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by James W. Ward, J.D.; Employment Law Subject Matter Expert/Legal Writer and Editor, CalChamber
Since 2015, California’s Healthy Workplaces, Healthy Families Act (HWHF) has required employers to provide paid sick leave (PSL) to employees, but courts are still working out some of the law’s nuances and details. And a recent California Court of Appeal did just that — after digging into the weeds of the statute’s construction and interpretation, it issued a decision clarifying how employers may calculate PSL for outside sales employees classified as exempt under California law. The court confirmed that employers may calculate exempt outside sales employees’ PSL at their base hourly rate, excluding commissions, so long as that’s how they calculate other forms of paid leave (Hirdman v. Charter Commc'ns, LLC, No. D084304, 2025 WL 2205862 (Aug. 4, 2025)).
Notably, the court disagreed with and declined to adopt the California Division of Labor Standards Enforcement’s (DLSE) 2016 opinion letter position on the calculation of PSL for exempt outside salespersons. Employers that have been relying on this opinion letter for the past nine years should take note of this decision and consult with legal counsel on how this may impact their policies.
Charter Communications employed Bradley Hirdman as an outside salesperson and classified him as exempt from overtime requirements under California’s outside salesperson exemption. 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.
California’s HWHF provides three methods that employers may use to calculate sick leave pay — two for nonexempt employees and one for exempt employees. Specifically, Labor Code section 246(l) provides the following calculation methods:
Charter calculated PSL for Hirdman using the third method for exempt employees under section 246(l)(3), paying him and other outside salespersons at their hourly base rate, which excluded commissions.
Hirdman argued that employers cannot use section 246(l)(3)’s exempt employee calculation method for outside salespersons because the meaning of “exempt employees” in that provision includes only the “white-collar” administrative, executive or professional exemptions — not outside salespersons.
Although he and other outside salespersons are classified as exempt for overtime and meal and rest break requirements, Hirdman argued that they are not exempt for calculating sick leave pay under Section 246. Thus, outside salespersons should be paid for sick leave according to one of the methods established for nonexempt employees in section 246 (l)(1) or (l)(2), which would include commissions in the calculation.
To support his argument, Hirdman relied on a 2016 DLSE opinion letter that concluded employers must use the PSL calculation methods for nonexempt employees specified in section 246(l)(1) or (l)(2) when calculating PSL for exempt outside salespersons. This opinion letter was based on a 2015 bill analysis, or committee report, from the Senate Committee on Labor and Industrial Relations, which contains a parenthetical statement in one section suggesting that the term “exempt employees” in section 246(l)(3) was limited to administrative, executive or professional exempt employees.
However, the trial court ruled in favor of Charter, finding that section 246’s language was clear and, because there was no ambiguity, the court didn’t need to consider any outside materials, such as the DLSE’s opinion letter, to aid in its interpretation.
When interpreting statutes, courts generally try to limit their analysis to the law’s plain language to determine the precise meaning of its terms and provisions. In some cases, however, statutory language may be ambiguous and open to multiple interpretations. Then, courts may look at outside materials, such as agency guidance, committee reports and other legislative history, to help determine what the language means.
This isn’t one of those cases. Here, the Court of Appeal agreed with the trial court, concluding that the language is clear and means exactly what it says.
The Court of Appeal began its analysis with the presumption that if the Legislature wanted to limit the definition of “exempt employees” in section 246(l)(3) to only white-collar exemptions, it would have expressly done so. Notably, the Legislature did exactly that in another subdivision of section 246 — subdivision (b)(2) related to sick leave accrual, which refers to “[a]n employee who is exempt from overtime requirements as an administrative, executive, or professional employee under a wage order…”
In the court’s view, because the Legislature clearly knew how to single out the white-collar exemptions and chose not to in section 246(l)(3), it must have intended the two different descriptions of exempt employees to have different meanings.
Based on its analysis, the court concluded that the reference to “exempt employees” in section 256(l)(3) was intended to include all exempt employees, including exempt outside salespersons. As such, Charter used the correct method for calculating PSL for Hirdman and other exempt outside salespersons.
Like the trial court, the Court of Appeal came to its conclusion based on the statute’s plain language, so it didn’t need to consider outside materials. However, since the DLSE issued an opinion letter reaching a contrary conclusion, the court chose to address it.
The DLSE’s opinion letter did not persuade the court, which stated the committee report, upon which the DLSE’s opinion was based, is subject to conflicting interpretations. In one place, the report describes the calculation of sick leave for exempt employees using the exact language of the statute. In another section entitled “Remaining Concerns,” it includes a parenthetical statement suggesting that the calculation method was intended to be limited to employees exempt under the administrative, executive or professional exemptions. But the main point of that section, the court noted, was that outside salespersons could “game the system” under the 90-day lookback method for nonexempt employees and take sick leave during a period where their commissions were particularly high.
Additionally, no other committee reports nor the Legislative Counsel’s Digest description of the bill suggested that section 246(l)(3)’s exempt employees was limited to white-collar exemptions.
The court stated 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 DLSE’s reliance on a single parenthetical from a single committee report is not enough for the court.
This decision confirms that employers can calculate PSL 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, as Charter did, so long as that is how the employer calculates other forms of paid leave.
Employers that previously calculated exempt outside salespersons’ PSL using the nonexempt employee calculation methods based on the DLSE’s opinion letter should consult with legal counsel on how this decision will impact their policies and practices and what they should do moving forward.
Lastly, while it was not an issue in this case, it’s important that employers should always ensure that exempt employees are properly classified. Misclassification can create potential liability for unpaid wages, overtime, missed meal and rest breaks, and more. Remember that simply having an important title and/or being “salaried” is not enough to guarantee proper classification. To be exempt, employees must meet specific criteria depending on the exemption.
For example, administrative, executive and professional exemptions require employees to spend more than 50 percent of their time engaged in exempt duties and earn a minimum salary of no less than two times the statewide minimum wage for full-time employment. For outside salespersons such as Hirdman, employees must be 18 years or older and customarily and regularly work more than 50 percent of their working time away from your place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.
It’s a good idea for employers to periodically audit their employees and consult with legal counsel as necessary to ensure proper classification.