Law Firms Continue to Squeeze Associates with Salary and Bonuses

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Law firms across the country are starting to recover from the recession but plenty of them are not bringing their younger lawyers with them. Despite returning profits, partners are being cautious as they focus one of their eyes on damaged balance sheets and their other eye on stingy clients.

  

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Young legal associates fresh out of college in 2008 took on large law school loans as they ran into layoffs and stagnant pay since then. Those associates have had fewer chances to get into law firms on the ground floor while the idea of partnership has pretty much gone out the window.

“What happens if Greece falls apart again?” says Greg Nitzkowski, the managing partner at Paul Hastings LLP. The firm is internationally known and has reduced its hires by about one-third since 2008. “We just think it’s prudent to plan as if this coming year is going to be a relatively flat year.…We’re not planning for a big upsurge in demand.”

The legal industry shed roughly 41,900 positions since 2009, according to the United States Labor Department. In 2011, only 2,700 cuts were made, which is much more moderate of a number.

Since 2008, many elite law firms have lowered their numbers of entry level lawyers by at least half. The salaries and the bonuses for those lawyers remain very flat despite a law school degree at a top university will cost $100,000 or more.

While the recession was in full swing, many law firms lowered their associate ranks by using layoffs and by delaying the start dates of graduates fresh out of law school. Many law firms are now employing the use of contract attorneys and outsourcing firms to complete routine tasks.

“Law firms basically focused a lot of head-count reductions during the recession on associate ranks, says Dan DiPietro, the chairman of Citi Private Bank’s law-firm group. “They feel like the associate ranks are where they want them to be.”

An international law firm, White & Case LLP  is planning to hire 60 entry level attorneys this year. This number can be compared to the prerecession class hires that included 90 to 100 lawyers.

“The efficiency of law practice has just changed dramatically in the past five years,” says Bill Dantzler, a hiring partner and head of the firm’s tax practice. “We don’t have to have these armies of young associates. It’s good for the clients, it’s good for everybody.”

Reputable firms can now be much pickier when it comes to who they hire. Attorneys who are hired at big law firms will still work grueling hours. Associates at law firms with more than 700 lawyers billed an average of 1,859 hours in 2010. This comes out to more than seven hours per day, according to the National Association for Law Placement. As lawyer levels dropped, the average workload for associates grew by 2.3 percent since 2008, which is about 50 added hours per year.

Several law firms have said that they do not plan to raise the salaries of associates, which have not increased since 2007. The bonuses from December remained pretty much the same since 2010.

“Most firms are hesitant to lock themselves into something they can’t sustain,” says Paula Alvary from Hoffman Alvary. “While there is clear evidence that work levels are returning, they’re not at prerecession levels for most firms.”