Is ‘Big Law’ Revamping Associates’ Pay Structure?

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Peter Zeughauser, consultant to law firms and former general counsel of the Irvine Company has suggested that ‘Big Law’ may need to rethink the pay structure for associates, according to the March 31 New York Times article.

The recession, a trend toward flat fees versus hourly billing and ever improving technology has forced many firms to trim the fat.

In the last two years, many law firms have laid off associates, deferred start dates for hires and altered base pay and bonus structures. This has included pay cuts and freezes, redistributing portions of base salaries, and eliminating lock-step pay increases.

  

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As an example of an alternative pay structure, Howrey LLP hires about 20 partner-track associates. Each receive reduced salaries in their first year ($125,000) and second year ($150,000) and have lower billable-hour requirements. Instead, training and partner mentorship are emphasized. In the early years, they are billed out at lower rates for the work they do. In essence, this transfers the costs of training to the firm and to the associates. Instead of meeting billable-hour quotas or merely marking time at the firm, advancement is based on the broadening of skill sets.

Howrey also hires a second tier of non-partner track lawyers to handle lower-level assignments and work fewer hours. These individuals begin at a salary of $80,000.

Orrick, Herrington & Sutcliffe employs a similar program. Mr. Zeughauser calls these programs “cutting edge.”