Susan Brewer of Steptoe & Johnson
Susan Brewer of Steptoe & Johnson ()

Associate hiring at the nation’s largest law firms grew by 3.6 percent in 2013 — the biggest year-over-year increase since 2008, before the recession decimated new lawyer hiring.

But don’t break out the bubbly. The legal industry isn’t returning to the go-go hiring days of the mid-2000s, when 5 percent annual associate increases were the norm.

The associate growth in 2013 stemmed from an influx of overseas associates acquired through a handful of mergers between large U.S. and international law firms.

Take the biggest ­mergers out of the equation, and associate growth was 0 percent in 2013, compared with an unremarkable 1 percent uptick in 2012.

The June 2013 merger of Houston-based Fulbright & Jaworski and London’s Norton Rose added about 1,600 associates to the overall NLJ 350 associate headcount. Put another way, the merger that formed Norton Rose Fulbright accounted for a full 68 percent of the additional associates reported in our survey. Altogether, NLJ 350 firms reported employing 67,390 associates.

Similarly, the March 2013 creation of Dentons — through a three-way merger of SNR Denton, Canadian firm Fraser Milner Casgrain and European firm Salans — added close to 600 new associates to the NLJ 350 headcount.

The merger of K&L Gates and Australian firm Middletons at the start of 2013 added about 150 associates.

“Last year was a huge year for mergers,” said James Jones, a senior fellow at the Center for the Study of the Legal Profession at Georgetown Law Center and a consultant with Legal Management Resources LLC. “We saw an awful lot of mergers, and we did have a few really huge combinations such as Fulbright and Norton Rose. Any growth in headcount was almost entirely attributable to those mergers.”

Some 60 percent of the law firms surveyed by consultancy Altman Weil for its 2014 Law Firms in Transition Report said smaller first-year associate classes would be the norm going forward. The median growth in associates at the surveyed firms was just 1 percent.

Moreover, any future growth may well come in the form of nonpartnership-track associates who are paid less but enjoy lower billable-hour demands, said Eric Seeger, a consultant at Altman Weil.

“Some firms may be hiring associates, but are they hiring associates with the expectation that they’ll become partners? Probably not,” he said. “Nonpartnership associates are cheaper and, when you look at all the other trends, it’s not cost-effective to pay high-priced associates if you can get the same caliber work from less expensive associates.”

Decreased need from clients also has kept associate hiring low, Jones noted. “The demand for law firm services is still not sufficient to pick up the slack left when firms reduced their incoming associate classes in 2009,” he said, adding, “By the numbers, we still have more lawyers in law firms than we need to do the work that’s there,” he said.

INCREASED COMPETITION

That lower demand comes, in part, from corporate legal departments moving more work in-house, and by nontraditional legal services providers taking a larger piece of the legal work that used to be handled by firm associates.

Even so, some firms bucked the trend and expanded their associate ranks. Steptoe & Johnson PLLC — the firm based in West Virginia, not the LLP Washington law firm of the same name — reported a 54 percent increase in associates, a gain of 44 individual lawyers.

The firm has been riding a wave of growth, partner and chief executive officer Susan Brewer said.

That increase is mainly attributable to the firm’s expansion outside its core mid-Atlantic footprint. It added a Houston office in 2012 and arrived in Denver in 2013.

“We wanted to expand our reach, particularly with our energy practice,” Brewer said. “Our energy practice has been booming. We followed that boom in the East, and now we’re following it out West.”

Not surprisingly, the Houston office is highly energy-focused, while attorneys in Denver handle energy matters as well as litigation and some corporate law.

The firm reached something of a milestone in 2013: It had slightly more female associates than male associates, unusual in the law firm world.

“That was a watershed moment for us,” Brewer said. “I think some of it has to do with the fact that we have a woman running the firm. Associates see that this is a place where women can succeed.”

Contact Karen Sloan at ksloan@alm.com.