A recent California Court of Appeal decision provides clarity for employers with commissioned outside sales employees. In Hirdman v. Charter Communications, the court confirmed that employers may calculate paid sick leave for outside salespersons using their base hourly pay, excluding commissions, as long as that's how they calculate other forms of paid leave.
Bradley Hirdman, a former outside salesperson for Charter Communications, sued the company under California's Private Attorneys General Act (PAGA), claiming he was not paid correctly for sick leave. He argued that commissioned outside salespeople like him should be considered "nonexempt employees" when it comes to calculating sick leave, which would require factoring in commissions into the pay rate.
Charter disagreed, stating that Hirdman was an "exempt employee" under the Labor Code's outside salesperson exemption, and that it properly used his base hourly rate (excluding commissions) to calculate his sick pay, just as it did for vacation or other paid time off.
The trial court sided with Charter, and the Court of Appeal has now affirmed that decision.
The court found the law's language to be clear: "Exempt employees" includes all those exempt from overtime rules, including outside salespeople.
The court rejected the argument that the term "exempt" should be limited to executive, administrative, or professional employees. It also declined to rely on a non-binding opinion letter from the Labor Commissioner's office that supported Hirdman's view, noting that the letter did not reflect a long-standing or formal agency interpretation.
The Court of Appeal held that employers should use the paid sick leave calculation method described in Labor Code section 246(l)(3), pertaining to exempt employees. That method simply requires employers to calculate sick pay the same way they calculate other types of paid leave. The court's decision simplifies the payroll process for certain commissioned employees and helps ensure consistency.
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