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Thelen Reid Responds to Associate Raises With Two-Tier Pay Scale
The Recorder
June 25, 2007
The last domino has fallen.
That would be Thelen Reid Brown Raysman & Steiner, which on Friday become the last major California law firm to announce its response to the wave of associate salary increases.
But Thelen isn't precisely following the footsteps of the other firms that rushed to raise California first-years to the $160,000 mark over the last two months.
Instead, the firm has created a two-tier compensation structure that pays associates in most of its offices that work 2,000 hours a year on the $160,000 scale, while associates who work less will remain on a $145,000 scale similar to the old one.
"We wanted a compensation structure that would pay top-of-the-market compensation to top performers and that was flexible enough to account for the life-work balance that some associates are faced with," said Stephen O'Neal, Thelen co-chairman.
Fenwick & West went to a similar system when it raised salaries in May, letting associates choose between an 1,800-hour or 1,950-hour pay scale. But few other firms have elected to do so. Some observers say that's because it could have a deleterious effect on morale.
"I think it will lead to class distinctions within firms and, in a sense, will give some associates the ability to self-select to a lower status," said Richard Gary, a consultant with Gary Advisors in Tiburon, Calif. "I don't know if it'll be good for morale in the long run."
Under the new Thelen pay system, which goes into effect July 1, associates can move between the two tiers without getting off the partner track, O'Neal said. Twice a year associates can, based on their last 12 months of work, move into the 2,000-hour tier. Once a year, associates can move back into the less-than-2,000-hour option.
The two-tier scale will be put into effect in California, Washington, D.C., and New Jersey. Thelen's New York office was already at $160,000.
Anthony Barron, a Thelen partner who serves on the firm's professional development committee, said the plan helps to ease young lawyers' worries that the latest round of salary hikes would come at the expense of life-work balance.
"This increasingly has become a concern among associates and law students -- that increasing salaries tend to bring increasing demands with increasing hours," he said.
The hours requirements are based on creditable hours, which can include pro bono as well as the billable type, O'Neal said. He said the firm also raised bonuses while lifting pay for more senior associates staying on the $145,000 scale.
Thelen's announcement comes more than a month-and-a-half after Orrick, Herrington & Sutcliffe set the ball rolling in California with its raises. Since then, most of the firms in the Cal Law 25 -- the largest firms housing at least a fifth of their lawyers in California -- have matched.
O'Neal said Thelen took time to consult with associates, partners and law students before coming up with its new compensation structure.
Some observers were surprised that most of the Cal Law 25 firms fell in line after Orrick. Only three said no: litigation firm Sedgwick, Detert, Moran & Arnold; employment firm Littler Mendelson; and insurance defense shop Lewis Brisbois Bisgaard & Smith. A couple of others agreed to pay $160,000 -- but not until next year.
"I really thought that the move to 160 would separate the haves from the have-nots, but that didn't happen," said consultant Gary. He thought it would pressure less profitable firms, but "they chose to follow rather than accept the second-tier status that they might've got tagged with if they had remained at 145."
