n Hirdman v. Charter Communication (8/4/25) 113 Cal.App.5th 376, the Fourth Circuit Court of Appeals was faced with the sole issue of determining the meaning of the phrase “exempt employees” as used in California Labor Code section 246(l)(3).
Bradley Hirdman (“Hirdman”) previously worked as a sales representative and was classified as an exempt outside salesperson for purposes of overtime and minimum wages. He was paid an hourly rate of compensation plus commissions. Hirdman brought a Private Attorneys General Act (PAGA) action against his former employer Charter Communication (“Charter”) alleging violations of various Labor Code sections, including section 246(l) which governs how an employer calculates and pays sick leave to employees.
Under the Healthy Workplaces Healthy Families Act (“HWHF Act”), section 246(l) of the California Labor Code provides three methods by which employers may calculate paid sick leave. For “nonexempt employees,” employers must calculate paid sick time either “in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time” (§ 246, subd. (l)(1)) or “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.” (Id., subd. (l)(2)). For “exempt employees,” paid sick time “shall be calculated in the same manner as the employer calculates wages for other forms of paid leave time.” (Id., subd. (l)(3).)
During the relevant period, Charter calculated and paid sick leave to Hirdman and other outside salespersons per the method in section 246(l)(3) – at the same rate as other forms of paid time off. Charter thus paid sick leave for each outside salesperson at their hourly base rate of pay, which excluded commissions. Hirdman contended that employers cannot calculate paid sick leave using the method provided in Labor Code section 246(l)(3) for outside salespersons because the meaning of “exempt employees” includes only those employees who are exempt under the administrative, executive, or professional exemptions (“white collar” exemptions). He argued that although he and other outside salespersons are classified as “exempt” for purposes of overtime and minimum wages, they are not “exempt” for purposes of Labor Code section 246. In support of his claim, Hirdman relied on both an analysis report from the Senate Committee on Labor and Industrial Relations regarding the HWHF legislation which concluded that outside sales employees paid on commissions must be paid for sick leave per Labor Code section 246(l)(1) or (l)(2) , and an October 2016 DLSE opinion letter that relied on that report.
On the other hand, Charter argued that the statutory language in section 246(l)(3) was plain and unambiguous and the trial court should therefore end its inquiry there because the plain meaning of the word “exempt” controls. The trial court granted Charter’s motion for summary adjudication and Hirdman appealed.
In its review, the court of appeal said that it looks “first to the words of the statute, which are the most reliable indications of the Legislature’s intent.” It explained that the court does not construe those words in a vacuum but rather considers them in the context of the statutory framework as a whole and, if the statutory language is unambiguous, then its plain meaning controls. In applying this strict statutory construction review to the HWHF Act, the appeals court found that while the statute does not define the terms “exempt employees” and “nonexempt employees,” California courts have consistently used the phrase “exempt employees” in the private employment context to mean those not entitled to overtime wages under California wage and hour law.
The court of appeal also presumed that if the Legislature intended to limit the definition of “exempt employees” in section 246(l)(3) to only those persons under the “white collar” exemptions from overtime, it would have said so like it did in another section of the HWHF Act – Labor Code section 246(b)(2) which provides that “[a]n employee who is exempt from overtime requirements as an administrative, executive, or professional employee under a wage order of the Industrial Welfare Commission is deemed to work 40 hours per workweek for the purposes of this section, unless the employee’s normal workweek is less than 40 hours, in which case the employee shall accrue paid sick days based upon that normal workweek.” The court rejected Hirdman’s argument that this section read together with section 246(l)(3) evidences that the Legislature intended to limit the definition of “exempt employees” to only “white collar” exemptions. Instead the court held that “[W]hen different words are used in contemporaneously enacted, adjoining subdivisions of a statute, the inference is compelling that a difference in meaning was intended.”
Finally, the court found that Hirdman’s argument that the report from the Senate Committee on Labor and Industrial Relations and the October 2016 DLSE opinion letter evidence that the Legislature intended the term “exempt employees” in section 246(l)(3) to be limited to “white collar” exemptions, was unpersuasive. While the court acknowledged that committee reports can be relied upon as indicia of legislative intent, they are certainly not conclusive. Instead, as the court explained, it is well established that “‘[e]xtrinsic materials have a role in statutory interpretation only to the extent they shed a reliable light on the enacting Legislature’s understanding of otherwise ambiguous terms.’” Ultimately, because the court concluded that section 246(l)(3) was not ambiguous and the term “exempt employees” applies to more than just “white collar” exemptions, it affirmed the trial court’s summary judgment in favor of Charter.
