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Ruden McClosky Cuts Pay by 9 PercentFlorida-based Ruden McClosky has imposed a 9 percent pay cut on its associates and non-equity partners and informed its equity partners that they are not likely to receive the holdbacks of 18 percent of their pay. The pay cuts have caused many Ruden McClosky attorneys to look for new jobs, legal industry sources said. Ruden's overdependence on real estate transactional work has caused it to be hit particularly hard by the economic downturn. The firm cut about 20 jobs earlier this year, including two attorneys.
Daily Business Review2009-06-30 12:00:00 AM
Fort Lauderdale, Fla.-based Ruden McClosky has imposed a 9 percent pay cut on its associates and non-equity partners and informed its equity partners that they are not likely to receive the holdbacks of 18 percent of their pay.
The pay cuts have caused many Ruden McClosky attorneys to look for new jobs, legal industry sources said.
Firms of all sizes have turned to pay cuts and job cuts to help deal with the economic downturn. In Ruden's case, its overdependence on real estate transactional work has caused it to be hit particularly hard.
The pay cuts at Ruden McClosky come on the heels of roughly 20 jobs the firm cut earlier this year, including two attorneys. It was the second round of cuts since last fall, when the firm dismissed 15 secretaries and a real estate associate.
Ruden's president and managing director Carl Schuster declined to comment through a spokeswoman.
But in an interview with the Daily Business Review last month, he hinted at possible cuts.
"This is a very serious discussion that we have really on a continuing basis so we're looking at everything and anything where we feel it won't harm the quality of the practice we've always had," Schuster said. "If there are other cuts that can be made that will ultimately save money, but not harm the practice, we're looking. We're proceeding with caution."
The firm lost 3 percent of its attorneys and 7 percent of its 69 equity partners last year, leaving Ruden with 172 lawyers in 11 offices throughout Florida at year end. The law firm reported a 9 percent drop in gross revenue to $85.3 million, the worst showing of major Florida firms in the last fiscal year.
Other firms, including Holland & Knight and Squire Sanders & Dempsey, have cut jobs. And several, including Greenberg Traurig and Buchanan Ingersoll & Rooney, have cut pay. Greenberg recently handed its first-year associates a 10 percent pay cut. And last week, Buchanan Ingersoll cut its associates' pay by 5 percent to 10 percent.
A Ruden McClosky partner confirmed that attorneys were informed about the firm's pay cuts at a meeting last Monday. The partner said Ruden McClosky partners didn't receive their entire holdbacks last year, but this is the first time that they won't receive any of their holdbacks.
Law firms often hold back pay from partners to help with cash flow or when the firm misses its budget. Holdbacks are typically paid back as cash flow improves, but that is not the case at Ruden.
"Nobody knows for sure what will happen. We are halfway through the year and if things are going like they're going now economically in the firm and everywhere it's not reasonable to think we'd get our holdbacks," the partner said. "If the firm's financial fortunes turn around in the second half of the year, the firm's partners could receive some or all of their holdbacks and associates and non-equity partners could get the money cut from their pay returned."
A managing partner of a major South Florida law firm said he's seen resumes from several Ruden partners looking to jump ship.
But the Ruden McClosky partner said the cuts are not enough of a reason for them to leave the firm, as it remains financially stable. The firm, for example, is not borrowing money to pay salaries.
"I think what you have is responsible management that looks at the projections and looks at where they are and says, 'We don't want to go to a bad place or run up our lines of credit,'" the source said. "We don't have any significant outstanding debt unlike some firms. It's far from a dire situation."