Wolf Block confirmed Thursday that it instituted a 10 percent reduction in associate pay that legal blog "Above the Law" said would be effective in the next paycheck. Wolf Block recently completed its fiscal year Jan. 31, though the firm's financial performance hasn't yet been made public.
In a statement, a Wolf Block spokesperson said: "We can confirm that associates will have a 10 percent reduction in base compensation prospectively. However, we have significantly increased the bonus pool for associates to make their overall compensation more performance-based."
Chairman Mark Alderman was traveling and didn't immediately return a call for comment.
Altman Weil consultant Thomas Clay said he thought salary cuts were a "very viable and rational option" at a time when firms are looking to do anything they can to avoid layoffs. "To think that isn't part of your strategy I think is naïve," he said.
Clay said it is a very smart strategy that he hopes will gain followers. He said he would rather see salary cuts than layoffs. It should be noted that Wolf Block has made both attorney and staff cuts, confirming in December that 15 people were let go. The firm did not say how many were attorneys and how many were staff. Wolf Block also delayed the start date for incoming associates last year by two months.
The last time firms saw significant layoffs was in the recession of the early 1990s, Clay said, and it was a shock that firms would lay off attorneys or renege on offers to first-years. He said there were no widespread salary reductions at that time.
This year might be a different story. Clay said there is "every potential" for continued salary cuts.
Without knowing specifics of Wolf Block's program, Clay said his guess would be that the bonus pool increase is a way to pay the associates who are meeting hours and are still busy. As opposed to eliminating or lowering bonuses for everyone, this model might allow Wolf Block to reward those most deserving, he said. That is a continuation of the trend that sees firms unbundling attorneys and moving more toward a merit-based system.
Wolf Block looks to be the only U.S. firm that has moved to reduce salaries, though the idea has been mentioned as a possibility by firms in London.
Cozen O'Connor President Thomas A. "Tad" Decker, whose firm recently cut a total of 61 support staff and paralegals, said reducing salary isn't on the table at his firm because the firm doesn't have a need to do that at this point. He said the firm isn't freezing salaries either and doesn't expect to lay off any attorneys.
While Wolf Block may be the first firm to announce a base salary cut, Decker said firms have effectively been reducing compensation by freezing salaries and lowering or eliminating bonuses.