Orrick, Herrington & Sutcliffe appears to be the first firm to announce it will delay its incoming first-year associate class until 2021 as a result of the economic impact of the coronavirus.
The firm confirmed the move along with several other cost-cutting measures aimed at combating the coronavirus’ impact on the firm’s 2020 financial performance. Those other measures include reducing pay for U.S. attorneys and staff firmwide and reducing some staff hours.
The salary cuts will begin Wednesday through the end of the year. Orrick will also reduce hours for many staff members and alter its 2020 summer associate program. The firm said it is not planning to furlough or lay off employees. The cuts were first reported by Above the Law on Wednesday.
In a statement, chairman Mitch Zuklie said, “We will postpone the start of our 2020 associate class to January 2021, or after postponed bar exams, and we intend to offer some pro bono fellowships.”
In the more immediate term, associates and staff will see pay cuts on a graduated scale: 5% for careers associates, 10% for associates and 15% for senior associates and many of counsel. Staff will see a scale of cuts ranging from 1% for the most junior members to 15% for senior staff members.
A “small percentage of staff” will also see reductions in hours starting May 1 until September. Secretaries will work on an 80%, four-day-a-week schedule, which translates to salary cuts between 7% and 17%—although the firm says the vast majority will see cuts of 15% or less.
Partners, of counsel and executive staff will see “deeper cuts.” The firm would not elaborate on what those reductions are.
The firm also said it will conduct its 2020 summer associate program virtually and shorten the program’s length to five weeks. It is giving permanent offers now to 2L law students to return to the firm as associates after graduation and is giving current 1Ls offers to return to the firm next summer.
Like many other firms that have recently announced cost-cutting measures, Orrick’s Zuklie said in a statement that the economic impact on Orrick is unclear and that the cuts were implemented now in order to save jobs in the future and ensure that employees still have access to company-sponsored health insurance. He also added that the new policy is flexible and can be changed at any time.
“As a demonstration that we are in this together as one team, our most senior team members will make the greatest sacrifices,” Zuklie said in a statement. “Of course, we sincerely hope that this global health crisis ends soon and the economy rebounds, and we will continue to monitor and adjust the program as necessary.”
Last year, as the financial markets continued to rally to new highs, Orrick reported stellar financial growth. Firm revenues grew by nearly 11% in the fiscal year 2019, from $1.05 billion to $1.16 billion and profits per equity partner (PEP) jumped 14%, from $1.99 million to $2.27 million, breaking the $2 million mark for the first time in firm history.
Zuklie attributed the stellar financial year to the firm’s large institutional clients, including Microsoft, Oracle, Johnson & Johnson and Ocwen, which entrusted the firm with more matters.
He also praised the firm’s technology and finance teams, which helped clients raise a collective $19 billion in venture capital financing in 2019, up 24% year over year, and guided several companies in their initial public offerings, including Beyond Meat’s $240.6 million offering last year.