If you’ve been misclassified as an exempt employee in California, you may be losing far more than just overtime pay. Your classification affects how your sick pay is calculated, whether you get meal and rest breaks, and how much leverage you have to recover unpaid wages. Employers across industries including retail, tech, finance, healthcare, and sales often get this wrong. Sometimes it’s an honest mistake. Other times, it’s a deliberate strategy to cut costs at your expense.
Here’s the reality: Under California law, exempt means you are excluded from overtime and certain wage protections. Nonexempt means you are entitled to them. If your employer slaps an “exempt” label on you without meeting the strict legal requirements, you could be missing out on thousands in lost pay each year.
The stakes are high, especially for commission-heavy earners like outside sales reps and mortgage brokers. California courts have confirmed that if you are classified as exempt, your sick pay can be calculated using only your base pay. In other words, commissions and bonuses may be left out entirely.
I’m Matt Ruggles, and I’ve been practicing employment law in California for more than 30 years. I’ve represented employees in wage disputes, misclassification cases, and wrongful termination claims, and I’ve seen employers use the “exempt” label as a shield to avoid paying overtime or to reduce what they owe when you take time off, sometimes costing employees tens of thousands of dollars. I’ve taken on cases involving everyone from retail managers mislabeled as executives to licensed professionals told they’re exempt when the law says otherwise.
A recent California Court of Appeal decision, Hirdman v. Charter Communications, underscores why this classification matters and how it can impact something as basic as your sick pay. This case didn’t change the law, but it clarified it in a way that should make every California worker think twice about their classification and paycheck.
The Hirdman Case: What It Really Means to Be “Exempt” in California
Bradley Hirdman worked for Charter Communications as a sales representative. Like many in field sales, he was labeled an “exempt outside salesperson” – a classification that removes overtime, meal, and rest break protections under California law if you spend more than half your time away from the employer’s place of business making sales or taking orders.
Hirdman’s pay included both a base hourly rate and commissions. When he took sick leave, Charter paid him only his base rate, ignoring the commissions that made up a large portion of his income. They relied on the Labor Code § 246(l)(3) sick leave formula for exempt employees, which allows employers to calculate sick pay “in the same manner” as other paid leave, often meaning salary or base rate only, with no commissions or bonuses.
Hirdman sued under the Private Attorneys General Act (PAGA), arguing he should have been treated as nonexempt for sick leave purposes. That would have triggered one of two formulas requiring commissions to be included, significantly increasing the value of each sick day.
The California Court of Appeal sided with Charter. It confirmed that “exempt” under § 246(l)(3) includes any employee exempt from overtime – administrative, executive, professional, outside sales, or other recognized exemptions. For Hirdman, that meant Charter could legally calculate his sick pay using only his base rate, leaving commissions out entirely.
What the Hirdman Decision Means for Your Sick Pay and Overtime Rights
The Hirdman case makes one thing clear: in California, the word “exempt” reaches far beyond executives in corner offices. If you are exempt from overtime for any reason, whether you’re an outside salesperson, a computer software professional, or a licensed worker in certain fields, you may also be exempt for sick pay purposes. That matters because sick pay for exempt employees is usually based only on salary or base hourly rate, with no commissions or bonuses factored in. For commission-heavy earners, that can slash the value of a sick day to a fraction of normal pay. The decision is a wake-up call: understanding your classification isn’t just about overtime, it’s about protecting every dollar you earn.
“Exempt” is broader than you might think.
The law doesn’t limit “exempt” to office-bound executives. If you’re exempt from overtime for any reason, whether you’re an outside salesperson, a computer software professional, or a certain type of licensed worker, you may also be exempt for sick leave pay purposes. Many employees wrongly assume “exempt” only applies to corporate managers, which leaves them blindsided when benefits are calculated differently.
Your sick pay formula depends entirely on your classification.
For nonexempt employees, sick pay is often calculated using your “regular rate of pay,” which can include commissions, bonuses, and other earnings. For exempt employees, it’s usually based on your salary or base hourly rate, with no commissions factored in. That can mean a huge difference if you rely heavily on incentive pay.
Commission-heavy earners may lose out the most from Misclassification.
Outside sales reps, mortgage brokers, and others who earn most of their income from commissions could see sick days valued at a fraction of their typical pay. If you’re in that category, this decision confirms that your employer can legally exclude those commissions from sick pay, unless your classification itself is wrong.
Misclassification is still a powerful legal claim.
This case doesn’t give employers a free pass to label everyone “exempt.” If you’ve been misclassified – say, you’re told you’re an outside salesperson but actually spend most of your time doing non-sales tasks – you may have claims for unpaid overtime, missed breaks, and additional sick pay. The key is challenging the classification itself.
Knowledge about Misclassification is Leverage.
Employers bank on the fact that most workers don’t know whether they’re correctly classified. By the time you figure it out, you may have lost years of wages. Understanding your classification, and the benefits and pay formulas tied to it, puts you in a stronger position to demand what you’re owed.
5 Red Flags You May Be Misclassified as an Exempt Employee in California
If you’re not sure about your classification, here’s a basic self-check. While every situation is unique, these are red flags that you may be nonexempt (and entitled to overtime and other protections) even if your employer says otherwise:
Red Flag #1: Duties Test for California Exempt Employees
Your main tasks are routine, production-based, or heavily supervised and the tasks are not independent, decision-making, or managerial.
Red Flag #2: Salary Basis and California Overtime Exemptions
You’re paid hourly or your pay varies depending on hours worked. True exempt employees are generally paid a fixed salary above a legal minimum.
Red Flag #3: Employer Control Over Your Time
Your employer sets strict schedules and tracks your hours like a nonexempt worker.
Red Flag #4: Industry Exceptions and California Labor Laws
Certain fields, like outside sales, have special exemptions. But if your actual work doesn’t match the legal definition, you may still be nonexempt.
Red Flag #5: Commission Earnings and California Overtime Rules
High commissions don’t automatically make you exempt. The exemption depends on your job duties and how your pay is structured.
If you answer “yes” to several of these red flags, it’s worth having an employment lawyer review your situation. Misclassification claims can lead to significant back pay for unpaid overtime, missed breaks, and other wage violations.
If you want a deeper understanding of what qualifies someone as an exempt employee in California and why that classification matters, read my blog, Misclassification of Employees as “Exempt” vs “Non-Exempt” from Overtime: Understanding the Important Differences.
What to Do if You’ve Been Misclassified as an Exempt Employee in California
If you suspect your “exempt” label is wrong, don’t rush into your manager’s office swinging accusations. The goal is to gather facts, confirm your legal position, and decide whether raising the issue internally makes sense or whether you’re better off speaking to a lawyer first.
Step #1: Gather evidence (job description, pay records, schedule controls).
Step #2: Compare your actual duties to California’s exemption tests.
Step #3: Consult a California employment lawyer before confronting your employer.
Step #4: Decide whether to raise the issue internally or take legal action.
Once you’ve reviewed your situation (and ideally spoken to a lawyer), you can decide whether to address it with your employer. If you do approach your employer, keep it professional and focused on facts, not accusations.
Here’s an example of how I might tell a client to approach it:
“I’ve been reviewing my role and pay structure, and I have some concerns about whether my classification as an exempt employee is correct under California law. I’d like to better understand the basis for my classification. Could you point me to the company’s policy or the exemption you believe applies? I want to make sure everything is in compliance with state wage and hour laws.”
This frames the issue as a compliance matter, not a personal grievance. It gives your employer a chance to respond, but it also creates a record that you raised the concern. If you later need to bring a claim, that paper trail can matter.
California’s misclassification laws are complex, and employers often get them wrong, sometimes by mistake, but sometimes on purpose. Either way, the sooner you get a legal opinion, the better your chances of recovering what you’re owed.
If you believe your employer owes you money but you’re worried about losing your job for speaking up, read my blog, How Do I Ask for Unpaid Wages Without Getting Fired?
FREQUENTLY ASKED QUESTIONS ABOUT MISCLASSIFICATION IN CALIFORNIA
What does it mean to be an exempt employee in California?
In California, an exempt employee is someone who is not entitled to overtime pay or certain wage-and-hour protections under state labor laws. Common exemptions include executive, administrative, professional, outside sales, and specific computer software positions.
How do I know if I’ve been misclassified as an exempt employee?
You may be misclassified if your job duties are routine or closely supervised, you are paid hourly, your employer controls your schedule, or your role does not meet the legal tests for an exemption under California law.
How is sick pay calculated for exempt employees in California?
Under California’s paid sick leave law, employers can pay exempt employees for sick time using the same method they use for other paid leave. This often means only your salary or base rate is included—commissions and bonuses may be excluded.
Can I challenge my exempt classification in California?
Yes. If your job duties and pay structure do not meet the legal criteria for exemption, you may be able to bring a misclassification claim. This can result in back pay for unpaid overtime, missed meal and rest breaks, and other benefits.
What should I do if I think I’m misclassified?
Gather your job description, pay records, and any documentation about your role. Consult with a California employment lawyer to review your classification and determine whether you have a claim for unpaid wages or benefits.
Final Thoughts on Employee Misclassification and Sick Pay in California
The Hirdman decision confirms that “exempt” in California’s sick leave law includes all overtime-exempt employees, not just executives or professionals. For workers, the message is clear: Know your classification, know your pay rights, and don’t assume your employer’s label is correct.
If you think you’ve been misclassified or your sick pay is being calculated unfairly, it’s worth getting a legal opinion. At the Ruggles Law Firm, we’ve spent decades helping California employees uncover wage violations and hold employers accountable. If you suspect your classification is costing you money, we can help you find out and take action.
Contact the Ruggles Law Firm at 916-758-8058 to Evaluate Your Potential Lawsuit
Matt Ruggles has a thorough understanding of California employment laws and decades of practical experience litigating employment law claims in California state and federal courts. Using all of his knowledge and experience, Matt and his team can quickly evaluate your potential claim and give you realistic advice on what you can expect if you sue your former employer.
Contact the Ruggles Law Firm at 916-758-8058 for a free, no-obligation evaluation.
Blog posts are not legal advice and are for information purposes only. Contact the Ruggles Law Firm for consideration of your individual circumstances.
