Law Firm With $2 Billion in Annual Revenue Takes Unprecedented Step To Cap Associate Pay

And yet another sure sign that the rules of the game have changed for the big law firms that have dominated the legal landscape over the past decades, Latham & Watkins has now capped associate salaries in 2009.  That means that associates will get the same pay next year as they received last year.  One legal recruiter notes that the move is unprecedented and that we should expect other large firms to now follow suit.

In the article titled "Law firms move to hold down pay for associates", San Francisco Business Times Reporter Eric Young reports on the recent moves law firms have taken during these challenging economic times.

Bryan Cave, LLP to freeze associate pay beginning 2009

“We are operating in an unusually turbulent economic environment,” firm management told associates in an email. The firm is taking other steps to conserve cash, including limiting travel, restricting staff hiring and renegotiating vendor agreements.

Reed Smith, LLP will be giving associate raises, though much lower than in previous years.

“As is prudent, we approached our annual salary review process fully aware that, going into 2009, it would not be ‘business as usual,’ and so, we have managed this process responsibly,” the firm wrote in an email.

The firm Orrick Herrington & Sutcliffe, LLP is considering moving from a lock-step associate pay system to a merit-based pay system.

“This downturn,” Whitescarver said, “has added to the urgency, and my sense is that in 2009 a number of firms will make the change from a lock-step to a merit-based system.”

Comments

[Big law; small law; different law; associate pay; law firm practice]

I remember interviewing with one of the firms named in the above post. I was interviewing with this firm because, more than anything else, of the lure of big law and big money. I had, and continue to have huge student loans. I ultimately decided big law was not for me because, among other things, I was turned off by the lock-step approach. I wanted to earn more if I produced, not just because I was there filling a seat.

What if I had decided to take the position with the understanding that I would steadily earn more money throughout the coming years? A cap was not heard of at big law. However, I believe it is now a reality that is here to stay. Will associates gravitate toward a different law now? Recent graduates who want big money may have to start thinking a bit differently.

I did, and it has worked thus far. I work for a small law with the reach of big law and am working toward big money. My first year earnings are the same as I would have made at big law. However, with some of my former fellow classmates capped at big law, I will have the opportunity to outearn in year two and beyond. I will keep you posted.

~B

[Bill E]

Big money now or bigger money later. Do you want a lawyer representing you who is so short-sighted? One more reason to favor smaller law firms and solos.