The effects of the global economic crisis continue to trickle through all aspects of the legal industry. Many firms simply aren’t willing to share the profits with associates as has been done in years past.
While we tend to focus on the Biglaw view of this crisis, it’s important to remember that associates as smaller firms are getting hit just as hard or worse from a dollars-per-hour perspective.
Last year we brought you a series of posts on law firm life outside of the top teir. One of the firms we highlighted was Kaufman Borgeest Ryan, a boutique insurance coverage firm with offices in New York, New Jersey, and California. Starting salaries there are about $90K while senior associates make just under what Biglaw first-years pull down.
In the past, associates have been eligible to receive around a $10K bonus, if they meet the minimum billable hours requirement of 2100.
Imagine being a lawyer, living in New York City, billing over 2000 hours a year, and making less than six-figures. Calgon take me away.
This year, associates at Kaufman should still receive their bonus, but it’s complicated. More after the jump.
Bonus decisions at Kaufman are usually made after year-end associate evaluations and paid in December. But late Wednesday night, associates were informed that things would be a little different this year:
Based on these evaluations, we determine salary increases, and from time to time, bonuses. The bonuses typically have taken many factors into account. Billable hours have certainly been a significant consideration in bonus calculations, but other qualitative factors have been considered and taken into account as well. Not everyone gets a bonus. In the past, we have distributed bonus checks in December. This year, the bonus checks will be distributed in the first quarter of 2009.
The firm is bumping associate reviews into 2009 causing the bonus delay. Why? According to the firm:
The primary reason for this change is simply to reduce the number of important decisions and activities that typically take place in December. We will continue to evaluate new partners at year end, and will continue to evaluate staff performance at
Riiiiight. It’s just too darn busy in December. But hey, at least there are tax benefits:
An incidental benefit of this change in the scheduling of evaluations is that the taxes you may be obligated to pay on your bonus will not be due in the April immediately following your receipt of the bonus, but rather, a full year later (the taxes on a bonus received in December are due the following April; the taxes on a bonus received in March are not due for 13 months, the following April).
But remember Kaufman also makes salary decisions at the end of the year as well. That set up will hold for this year, so deserving associates will still get their 2009 raises on time (Latham brain trust, you still have time to reconsider your shocking decision). But in 2010 it gets complicated, and in 2011 it gets ugly:
So, after this year’s evaluations (which will take place over the next week), the next time we will evaluate associate attorneys will be in the first two months of 2010. Our plan is to make any raises awarded in that review retroactive to January 1, 2010. The following year, 2011, we will make raises effective when granted, in March.
The thing is, at least Kaufman is telling associates what they are going to do going forward, as opposed to retroactively taking away pay that people feel they’ve already earned. How is it that a 100-lawyer boutique like Kaufman can get down with the concept of “fair warning” but some of the most prestigious shops in the land are quite happy to pull the rug out from under their associates?
Nobody really knows where the economy is heading. But some firms seem to be treating their associates as part of the team, while others seem to be treating their associates as part of the problem. The former is better.