Salary Cuts

Salary Cuts.jpgLast week, we reported that DLA Piper cut associate salaries. But on Monday, we followed up that report with news that DLA had made salary cuts of up to 20% for associates who were not on pace to make their hours. Tipsters reported serious frustration with a 20% salary cut based on only a few months of accrued hours.
Well, last night there was a change in policy from DLA Piper. The firm is going to make a 10% cut across the board to all associates, regardless of hours:

We have had many conversations with partners and associates since making the adjustment, and it is clear that there are numerous anomalies in individual associate situations such that people who were typically strong performers would receive the additional compensation reduction. That is not the result we want to achieve, and we are therefore removing the additional adjustment based on year-to-date performance and maintaining a straight adjustment of 10% for all associates. We will continue to reward associates for exceptional performance in 2009 through our bonus program, taking into consideration both the associate’s performance and that of the firm.

It is an objectively good thing when a law firm responds to associate concerns. It seems that in this case, a wrong has been righted.
But, of course, not everyone is happy.
Additional complaints, after the jump.

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Salary Cuts.jpgOn Friday, we reported that DLA Piper cut associate salaries by ten percent across the board. But we now know that ten percent was just the starting line for associate salary cuts.
Friday, the firm memo included this language:

Adjustments to all associate salaries at other class levels will be determined and communicated on a case-by-case basis based on class year and performance levels.

It appears that the case-by-case consultation resulted in salary cuts of up to 20% for associates that were not on pace to make their hours. Many tipsters brought this to our attention, as well as some interesting commenters:

Elie/David – what I hope is not overlooked in DLA’s move is that they made a calculated move to mislead abovethelaw and its readers by saying that starting salaries were being lowered to 145. That’s not true. A number of first year attorneys salaries were lowered to 128k. There are 3rd years making 136k. Their efforts to cover for there salary reductions should be given more exposure.

Other commenters made the point that the decision was all about hours:

You could get great performance reviews/make in excess of your budget for years/ be well regarded/ do pro bono work etc, but still the ONLY thing that was taken into account when cutting salaries was whether you were on pace for the first 4 months of this year. The published memo does not disclose this. You could be a pretty average associate and happen to have been staffed on a doc review for the first 4 months or hoarded your work and hey suddenly you are getting paid more than other associates.

Tipsters emailed us, texted us, even called us on the phone to give us details about the 20% cut. We get into the extra news after the jump.

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Salary Cuts.jpgWe have a new leader in the clubhouse in terms of Vault Top 50 firms cutting associate salaries. DLA Piper is going down the salary cut road. The internal memo just went out:

We are making an adjustment of our base associate compensation in our major markets to $145,000. In those markets where the starting compensation has been $145,000, we are adjusting it to $130,000. Adjustments to all associate salaries at other class levels will be determined and communicated on a case-by-case basis based on class year and performance levels. We will continue to reward associates for exceptional performance in 2009 through our bonus program, taking into consideration both the associate’s performance and that of the firm. We also will not increase paralegal and staff compensation for this year. The timing and implementation of all of these actions will take effect June 8th and be reflected in the June 19 paycheck.

Until today, Baker & McKenzie was the most prestigious firm (according to Vault) that slashed salaries.
But DLA Piper wants people to know that its partners have already taken a hit to their earnings:

Our partners, including the three of us, have already accepted significant reductions in our projected 2009 compensation, and compensation levels for Of Counsel and Senior Counsel have also been reduced. We are now taking the further steps of bringing US associate salaries and staff salary increases into alignment with market realities.

We reported DLA’s decision to decrease partner compensation, back in March. Does sharing the pain make associates at DLA feel better about their reduced paycheck than associates at other firms?
One tipster isn’t too broken up about it:

On the bright side, at least we’re not fired. All the older associates are holding their breath awaiting the “case by case” reviews.

Read the full memo after the jump.

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Salary Cuts.jpgSorry to go all caps on you. But we finally have a firm that is using the crisis to seriously rethink the nature of the first year experience, instead of just firing them, deferring them, cutting their salaries, or generally acting like first years are solely responsible for ruining the Biglaw model with their entitled insistence on being employed after three years of legal education.
The Legal Intelligencer and AmLaw Daily reports that Drinker Biddle will actually allow first years to start in September:

Rather than immediately assign the incoming lawyers to client matters, the firm will enroll its hires in a new training program that will provide courses on taking depositions, writing briefs, and meeting client needs. The instructors will include Drinker attorneys, professional development staff, and firm clients. The 37 first years also will shadow partners’ client meetings and court appearances. The associates may handle some client work, but at significantly reduced rates.

There is a catch. For the first six months, first years will be paid on a scale of $105,000. That is a bigger reduction in salaries than we’ve seen at other firms. On the other hand, Drinker Biddle is also reducing the rates that clients are charged for first year work.
Anybody else notice that responding to client concerns about the value of first year attorneys by reducing billing rates makes intuitive sense? I think Drinker Biddle management would do very, very well on the LSAT.
After the jump, we see that Drinker is rethinking the entire first year experience.

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Nixon Peabody logo.JPGWhen we reported on the salary cuts at Nixon Peabody, we mentioned that the firm would allow associates to make up some of the money come bonus time. Here’s how the firm explained the opportunity:

With our new levels of base pay in place, we will be introducing a bonus program that offers the potential of up to 30% of base pay based on firm and individual performance. We believe this innovative pay structure will reward our highest performing associates while lowering total compensation for those who perform at lower levels.

We’ve gotten a look at Nixon’s proposed “up to 30%” bonus structure. This hasn’t been finalized, but here is what is going around the office:
Nixon Peabody proposed bonus structure.jpg
Let’s break this down, after the jump.

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Salary Cuts.jpgIn March, we reported on layoffs at the mid-sized Texas firm, Gardere Wynne Sewell. Since everything is quieter in Texas, the firm confirmed the layoffs but declined to mention how many people were let go.
Today, Above the Law has learned that Gardere Wynne has also cut associate salaries. And the firm is not shy about it. Managing partner Steve Good provided Above the Law with this statement about the salary cuts:

As most law firms are recognizing, starting salaries for new associates that begin at $160,000 just do not make sense in the current economic environment, and probably did not make sense even before the downturn. Many clients, both ours and those of other law firms, have been upset with these salary levels and as a result have asked law firms to not use first or even second-year lawyers on their matters. That reaction is not healthy for the law firm, the client or the associate and the associate’s future development. We think that the changes that we are implementing are necessary to bring some economic rationality back to our associate compensation program, particularly in a state like Texas, where there is no state income tax and the cost of housing is among the lowest in the nation. Notwithstanding that, large law firms in Texas have been paying first-year associates the same base compensation as an associate living in Manhattan, and $20,000 more than a first-year associate in Atlanta, where the cost of living is similar – it simply makes no sense and we decided to stop.

Effective May 1st, the Gardere will reduce first year salaries to $145,000 and second year salaries to $150,000.
Clients are upset about the high price of junior attorneys? That’s great, junior attorneys have long been upset at clients that dump work on people at 4:00 p.m. on Friday and expect it to be turned around by first thing Monday morning. Surely, a middle ground will soon be forged where clients pay less and attorneys enjoy the fruit of nights and weekends. I’m holding my breath.
But for a firm like Gardere, it is hard to argue with the raw economics of the situation. If clients want this, and there are no reasonable options for attorneys to lateral away, than firms will pay what the market will bear. Unless something really interesting happens when salary cutting firms go out to recruit this fall, more firms could look to cut salaries.
Read the full Gardere statement after the jump.

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Salary Cuts.jpgAccording to the just released AmLaw 100 numbers, Schulte Roth & Zabel ranks 10th in terms of profits per partner. The average take home for partners was $2,290,000 in 2008.
But that might not stop Schulte from cutting associate salaries.
There hasn’t been any official announcement. But according to multiple sources now, the memo is in the system. According to one of our sources:

If you search on the document system, there is a memo in there. It’s titled “Associate Salary Reduction” or something. … I haven’t clicked on it, but it seems self-explanatory.

Another tipster explained to us that nobody has clicked on the actual document. Schulte can see who opens which documents on the firm system, and nobody wants the firm to know that they looked at the internal memo.
More details after the jump.

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Nixon Peabody logo.JPGLast Monday, we reported that Nixon Peabody would be cutting salaries. We noted that the pay cuts would be reflected in the May 21st paycheck.
Over the weekend, a source sent us detailed salary information about all of Nixon’s offices. Is this the shape of things to come? According to our tipster, here’s the new first year pay scale:

* $145,000 in NYC, Boston, Chicago, DC and California; ($20k cut)
* $95,000 in Upstate NY, Manchester, Providence ($10k cut)
* $110,000 on Long Island ($10k cut)

These new salaries will also be applied to Nixon Peabody summer associates.
But after the jump, we check out the cuts further up the pay scale.

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Seyfarth Shaw logo.jpgSeyfarth Shaw just announced an extensive “hybrid tough love” package. The firm is laying off employees as well as cutting salaries. It is also reducing the length of the summer program and pushing back start dates.

According to a firm wide memo, 50 people will be let go:

Today, we have completed a reduction in attorneys and staff of approximately 50 people out of approximately 1,600 people nationwide. These reductions are spread across all offices and practice groups. We deeply regret the need to take these steps. The people affected are our friends and co-workers who have made contributions to the growth of the Firm. We have reached out to every affected person prior to the distribution of this e-mail.

We cannot predict the future but, as we said above, it is our goal by taking this step to avoid any further reductions in positions for the remainder of the year. We know that we will be asking each of you to take on additional responsibilities. We thank you in advance for your continued efforts on behalf of our clients and the Firm.

Seyfarth laid off 30 people back in December, and another 30 people in January. Hopefully, this is the last time layoff survivors will have to worry about their jobs. At least for this year.

After the jump, we get to the other news.

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Salary Cuts.jpgA month and a half ago, Husch Blackwell laid off a number of employees. At the time, Husch Blackwell’s chairman Dave Fenley refused to use the term “layoffs.” Instead, he said:

He said that Husch Blackwell was “going gangbusters” in certain areas and was meeting its numbers this year, “which is pleasantly surprising.”

Later, Fenley admitted that the gangbusters comment was “boneheaded,” but he also said:

These [layoffs] would’ve occurred “regardless of the economy” but the “economy reminded us” that it needed to be done.

But the latest news out of Husch is hard to reconcile with a firm doing well despite the difficult economy. Details after the jump.

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