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Gray Cary Ware & Freidenrich is pushing back decisions on associate raises by six months with the hope Silicon Valley’s economic picture is brighter next summer. In a memo circulated this week to the firm’s associates and partners, Gray Cary managers outlined how they plan to freeze salaries at current levels and delay new partner votes. The firm still plans to award year-end bonuses in January. The firm typically sets associate salaries and holds partnership elections in February, then makes the changes retroactive to Jan. 1. Next year, the effective date for salary and partnership changes will be July 1. There are still a few months left in 2001, but billables over the last three months signaled to firm managers that finances are likely to be tight. Also, Cooley Godward’s recent layoffs prompted Gray Cary to reveal its own cost-cutting plans. In the same memo, firm managers pledged there would be no layoffs this year. “We … are not considering layoffs or other across-the-board workforce reductions as a cost management move for the remainder of 2001,” the memo stated. “Our sense was the marketplace was in some turmoil after the Cooley announcement, and we wanted to reassure our staff and attorneys,” said J. Terence O’Malley, Gray Cary’s chairman, explaining the timing of the announcement. “At the same time,” he said, “there is so little visibility into what next year holds that we thought it was appropriate to defer making compensation decisions.” Some associates sniped at the move, calling it a six-month-long pay cut, but the overall mood among the troops was that it beats a layoff. One partner said associates had been asking for a pay cut if it meant a layoff could be averted. The firm currently pays at the high end of the San Francisco area market, with first-years making a base of $135,000. Gray Cary was one of three Bay Area firms to match the salary increase benchmark put into place this year by Brobeck, Phleger & Harrison. Even nonequity partners who were in line to be made full partners with a share of the profits accepted the move. “Given the options, this is the lightest touch you could hope for,” said Sean Cunningham, a nonequity partner in San Diego. While Cunningham is an intellectual property litigator with a busy practice, nonequity partners in less busy practices said the six months could buy them more time to build themselves up for partner. Firm managers are hoping the extra six months has the same kind of impact firmwide. “We’re hoping that by waiting until June, we’ll have the kind of visibility we need to make decisions,” said Margaret Kavalaris, a partner and member of the executive committee. One sticking point has emerged, however, regarding the salaries of the youngest associates. Existing first-year associates are critical of earning the same salary as the 55 new fall associates who will be arriving in November. Instead of drawing the same salary for just a month or two, the two classes will be paid the same for six additional months under the new scheme. The firm may have to revisit that, Kavalaris said.

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