In a case of statutory interpretation, the California Court of Appeal in Hirdman v. Charter Communications, LLC recently affirmed a win for the employer, holding that outside sales employees can be paid as “exempt employees” under California’s sick leave statute.
Plaintiff Hirdman worked for Charter Communications (the “Company” or “Charter”) as a sales representative. After his employment with the Company ended, Plaintiff Hirdman sued the Company for civil penalties under PAGA for various alleged violations of the Labor Code, including the failure to properly calculate his sick time pay.
During his employment, the Company classified Hirdman as an outside salesperson, making him exempt from overtime. He alleged that the Company improperly classified him as “exempt” for purposes of his sick pay, and thus calculated his sick pay incorrectly by excluding his commissions.
Labor Code Section 246 provides multiple methods of calculations for sick time pay—depending on whether the employee is exempt or non-exempt. Under the statute, the employer is required to pay exempt employees in the same manner it pays them for all other paid leaves. In this instance, Charter paid Hirdman’s sick time at his base rate of pay and did not factor in commissions.
To resolve the issue, the California Court of Appeal analyzed the statutory language and its framework. The Court focused on the fact that the legislature chose not to limit the reach of “exempt employee” in the statute when it very well could have. This means that “exempt employees” extends to all employees exempt from overtime, including outside salespersons. The Court was not persuaded by Hirdman’s argument that the legislature chose to limit “exempt employees” in another subsection of the code and extend that reasoning here. In fact, the Court used Hirdman’s argument to support its conclusion that the legislature evidently did not intend to limit the “exempt employee” calculation to only those under the administrative, executive, or professional exemption—if it did, it would have said so. Therefore, the Court held that the exemption applies to outside salespersons like Hirdman and found that Charter legally calculated Hirdman’s sick pay using only his base rate, without factoring in his commission.
This win for Charter solidifies that employers can pay their properly classified exempt employees, including outside salespersons’ sick leave using the exempt calculation provided in the statute. The Hirdman decision underscores that employers should be sure to properly classify their employees as such classification affects the type of pay owed.
