X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
In 1999, during the height of the Internet boom, a San Francisco Bay area law firm named Gunderson Dettmer Stough Villeneuve Franklin & Hachigian did something extraordinary: The firm raised first-year associate salaries from around $100,000 a year to $125,000 a year with a guaranteed $20,000 bonus — a total compensation package of $145,000 a year. Gunderson was competing for top law students who were suddenly imagining other career tracks at the new crop of Internet startups, companies that could offer stock options and an exciting work environment along with the huge salaries. Other California law firms soon rushed to keep up — and before long, sky-high salaries at Internet startups and law firms had spread across the country. The salary wave hit Washington in early 2000. Mark Plotkin, the hiring partner at Covington & Burling (not the political commentator), remembers that his firm raised salaries about $30,000 that year to compete with other large D.C. firms. It was a fairly simple equation: “We raised our salaries because other law firms were doing it in response to law firms in California that had raised their salaries to respond to the dot-coms,” he says. In 2004, though, the landscape is drastically different. The Internet startups that lured law students with promises of riches are now mostly defunct. Many associates who left law firms for these seemingly lucrative jobs found themselves unemployed within months. And yet there is still one significant result left over from those heady days: the $125,000 annual salary for first-year associates at the city’s largest firms. A LOT OF MONEY How have those salaries affected the associates — and the firms themselves? The firms have had to figure out ways to come up with what can add up to a huge amount of money. On average, salaries across the board jumped about $40,000 in one year. Multiply that by all the associates at a firm (since all salaries are adjusted along with first-year salaries), and the bigger firms were paying out millions of dollars more per year. Firms mainly pursued three options to cover the increase: Take money from the partners’ share; increase billing rates for clients; or require more billable hours. Most firms chose a combination of the three options. The billable hours requirements rose at many firms. And some firms went for a fourth option: cutting back the size of their first-year class. Although most say the cuts are a result of the economic downturn more than the salary raise, it’s hard to separate the two. RAISING THE PRESSURE One thing is certain: Associate life has certainly changed as a result of the California shock wave. When Gihan Fernando, assistant dean for career services at Georgetown University Law Center, first heard about the salary raises back in 2000, he worried about their effect on new lawyers. “It immediately meant that there was far less room for new associates to make mistakes,” he says, “and it meant that billable hour expectations that were already high were looked at more closely.” Fernando feels that first-year associates need flexibility in learning the ropes. The absence of that flexibility, combined with the high billable hours requirements, translated into a lot more pressure for associates. Peter Pantaleo, the former managing partner of Verner, Liipfert, Bernhard, McPherson and Hand (now a part of Piper Rudnick), says the salary increases “put an absurd amount of pressure on associates [and fostered a] notion of shut up and produce.” Pantaleo remembers the old days when law firms focused on associate training and career development, and where every associate who was dedicated to the firm and worked hard could make partner. “That was the biggest trade-off,” he says of the new salaries. “Now it’s a job and you get paid a lot of money and no one wants to worry about your future.” Law firms now see associates much more as fungible units of production instead of potential future partners. Most of the first-year associates will burn out and leave after only a few years, so firms want to get as much work out of them in the time they are there, Pantaleo observes. At the same time, since most of the junior associates will leave, the firms don’t feel the same need to invest time or energy in training and grooming them as future partners. Besides the disposable-associate attitude, many firms that had “target” billable hours but no required amount changed their minds and started to require a certain number of billable hours. Reed Russell, an associate at Akin Gump Strauss Hauer & Feld, remembers that Akin Gump instituted a 2,000 billable hours requirement after the salary jump. And Plotkin says that Covington abandoned its no-billables requirement and instituted a “benchmark” of 1,950 hours in the wake of the salary increases. He stresses that the target is a soft one, not a requirement. JUST A JOB But while the increased pressure on associates may be a bad thing for some, other associates seem able to take a more sanguine attitude toward the system. To them, the big-firm job is merely a means to an end anyway. Many new associates have no intention of staying at the firms beyond a few years. “Turnover has always been extremely high,” says Akin Gump’s Russell, who serves on the firm’s associates committee. By letting them earn a lot of money in a short time — and thus pay off their student loans more quickly — the higher salaries give associates the chance to move sooner into the careers they are truly interested in, like government work, public interest law, or some other lower-paying path. NO MORE, PLEASE That calculation doesn’t mean, however, that all associates were excited about their new raises. Plotkin remembers that before the salary increases went into effect at Covington, a group of associates went to the firm’s management and said that they were already happy with what they were getting paid and were worried that the salary increase would change their relationship with the firm. The associates feared that it would put more pressure on them and create resentment among the partners that the associates were taking too much money. Plotkin says that these associates’ fears did not pan out and that most of them are still at the firm. The higher associate salaries did create some fallout among the higher-ups in some cases. Indeed, resentment from partners toward associates persists in some firms. The salary raises meant a “huge increase in overhead,” says Russell. “Some partners didn’t appreciate the fact that salaries were so high.” Aliya Wong, an attorney at the U.S. Chamber of Commerce and a former associate at Thelen, Reid & Priest, remembers that “expectations [for associates] were raised, particularly with older partners who felt like associates were overpaid.” But, she continues, “I also think that part of it was a misunderstanding [by older partners] about how expensive law school is now, and the cost of living in D.C.” Pantaleo concurs that associates may not be overpaid when you look at the cost of the legal training they have to pay for themselves. “When you finish at a private law school, you may easily have a six-figure debt,” Pantaleo says. And “associates bear that 100 percent.” Plotkin agrees that associates are being paid what the market demands, and that it may not be too much. “Our associates work very, very hard,” he says, “and attorneys in general make a lot of money, so is it wrong to be paying a first-year associate $125,000 when they work 2,000 hours?” It may be that the stringent billable hours requirements are starting to ease up a bit. Akin Gump, for instance, has backed off its post-salary-boom requirement. The firm is seeking to “de-emphasize” the number of hours an associate works, says Russell. The firm is trying to “take away the focus on just how many hours are you billing, in an effort to try to make it a better place to work.” It’s possible that the softer attitude toward billable hours might also be the result of a weaker economy. As the work load at law firms decreases, there is less for first-year associates to do. “After the salary increases, there was even more pressure on associates to bill more,” says Georgetown’s Fernando. “Of course, once the economy slowed, that placed associates in a difficult position — being expected to meet or exceed billables, when there might not have been enough work to go around.” SALARY INCREASE AGAIN? While the salary increase of 2000 was dramatic, D.C.-area firms have generally held the line for the past four years. Covington’s Plotkin thinks that another hike will happen soon. “Housing prices have gone up dramatically in D.C.,” he says, “and the huge pot of money of four years ago is going to look a lot less like a huge pot of money.” Firms also seem to be getting more creative in their pay scales. Many are using bonuses, rather than across-the-board raises, to keep associates happy. Bonus structures at many firms have become more complex as well as more lucrative, and bonuses are regularly in the tens of thousands. Pantaleo of Piper Rudnick sees increased associate pay as just part of legal business today. “Law firms pay [the salaries] because they are a reflection of the market,” he says. “And this is a professional service organization, so we are only as good as the lawyers we recruit.” Pantaleo adds that law firms also have to pay to maintain a “readily available pool of skilled labor” in order to meet the demands of clients. Top D.C. firms today must keep paying their associates the going rate or risk losing the best law students to competing firms. Higher salaries should continue to attract the best, even if only for a few years, until they pay off their loans. Susan Zentay is a freelance writer in Washington, D.C.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.