Have you noticed that whenever there is a story about the long-term future of associate salaries, there is always a quote from somebody at Altman Weil, the law firm consultancy? And have you noticed that their quotes are often advocating deep cuts in associate pay?

The latest example of this curious phenomenon appears in the Fulton County Daily Report:

Altman Weil’s Oct. 27 program, called “Leverage, Lockstep and the Changing Associate Model,” was for law firm clients.

Altman’s James D. Cotterman, who advises firms on compensation, said associate pay did not drop enough in the recent round of cuts at the nation’s big law firms, which included Atlanta’s largest firms.

Cutting pay from $160,000 to $145,000 was only “about half of what was needed,” said Cotterman. The starting salary at big firms in New York, Washington and Los Angeles was $160,000 before the pay reductions that started last spring.

Cotterman said a $15,000 cut does not make a significant difference in “changing the value equation to clients.”

“They probably should have set pay back a decade, to 1998. That’s what I was expecting,” he said. “This story may not be over yet.”

I don’t see James D. Cotterman advocating that profits per partner go back to 1998 levels. I wonder why?

In July, Morgan Lewis & Bockius announced that it would be ending lockstep compensation for its associates in 2010. At the time, the firm furnished this statement to Above the Law:

“We’re running our own business and focusing relentlessly on client relationships,” said Francis M. Milone, Chair of the Firm. “Doing so responsibly means continuing to reduce expenses, committing to the people in whom we are already invested, and looking at compensation across the board to ensure our structure matches the reality the entire legal industry must face.”

The July announcement was the culmination of the effort made by MLB and its chairman, Francis Malone, to reform the Biglaw business model. Back in April, Milone gave an interesting interview to the Philadelphia Inquirer:

Question: Law firms are still very profitable. Why do they need to downsize?

Answer: You have to make a judgment about whether you can keep people busy going forward. It is not healthy for a lawyer to not be busy, to have free time on his or her hands. You don’t grow, you don’t develop, you’re not happy.

And from a cultural perspective, you don’t want to build a firm that culturally is populated by a lot of people, or too many people, who don’t have enough to do.

Q: Is that the only reason?

A: The other piece of it is the feedback we got from clients. Because they’re looking at the way they want law firms to act. They’re not going to be as willing to pay, frankly, to train new lawyers. So it’s going to be harder to find things for new lawyers to do. And when we’re paying new lawyers $160,000 and clients don’t want to pay for them, you’re putting them in a position where there may not be a lot of things for them to do.

Well, 2010 is almost upon us. But MLB is suddenly not so excited about ending lockstep compensation. Milone conducted a firm-wide video conference yesterday, and tipsters report his enthusiasm for ending lockstep compensation was noticeably lacking.

Details and a statement from the firm, after the jump.

Don’t you love it when a firm cares so much about associate development that it’s willing to cut associate salaries? That’s what Foley Hoag is doing; the firm announced today that it was slashing salaries, in part to help associate development and recruitment. Here’s a screen shot of the firm wide memo (click to enlarge):

How does cutting salaries help the firm recruit new associates and maintain current associates?

In any event, check out the rest of the memo and tipster reports on how deep the cuts actually are after the jump.

The Great Recession has been tough for many different types of firms — and that even includes intellectual property firms. During the past year, IP-focused shops have cut back on hiring, slashed salaries, and lost key partners to larger firms.

A few recent developments at Finnegan Henderson, the D.C.-based IP powerhouse, reflect the new realities. Multiple sources report the following:

1. Earlier this week, at an “all associates” meeting, the firm announced that it is freezing associate salaries.

2. At the same meeting, the firm announced that it is reducing first-year associate salaries from $160,000 to $145,000 (in all offices).

UPDATE: We understand that Finnegan has frozen support staff salaries as well.

Two additional items about Finnegan, after the jump.

There have been a number of firms that have cut associate salaries. But there have not been many firms that have needed to slash salaries twice this year. Allen Matkins associates appears to be in their own personal corner of sadness.

A tipster reports:

For the second time this year, Allen Matkins has laid off lawyers and cut salaries for those who still have a job. 2 lawyers were laid off in Los Angeles. I am not sure how many in other offices, but I know there were more. Salary cuts were also part of the package. Associates untouched by the last round of salary cuts were not so lucky this time. Cuts ranged between 15% and 30%. … This cut occurred Thursday October 15. Cuts are effective November 1, 2009. Nice holiday gift isn’t it.

Allen Matkins has not responded to our multiple requests for comment. In terms of layoffs, other tipsters have reported a few involuntary attorney departures. 2nd year associates seem to be the hardest hit.

Multiple tipsters are also reporting the salary cut news.

Following along with all of the Allen Matkins cuts is a little bit confusing; let me walk you through it after the jump.

Williams Mullen, the large and prominent Virginia-based law firm, announced yesterday that it will be cutting associate salaries by 7.5 percent, effective in January 2010. The new starting salary for associates will be $117,000 (in all offices other than D.C.).

A firm spokesperson described this as “a business decision,” made to remain competitive in a rapidly changing market. She added that the Williams Mullen cut was comparable to steps taken by similar firms, including Hunton & Williams and McGuire Woods (which cut starting salaries for associates by 10 percent). [FN1]

“Our clients are saying, ‘You better do this,’” the Williams Mullen spokesperson said. “This is a market adjustment just like any other adjustment, just like any other business adjusting the cost of its product.” If the firm were to keep associate salaries the same in this economic environment, “our clients would look at us and say, ‘You’re no longer competitive.” She added that equity partners would also see a decline in their incomes due to market realities.

As for whether this cut might be revisited at a later date, the spokesperson noted that matching the market goes both ways. “You can adjust down, and you can adjust up,” she said. “When things start to get better, we’ll look at ways to adjust accordingly.”

[FN1] UPDATE: A point of clarification about McGuireWoods: although the firm did cut starting salaries, incoming associates at the firm are still earning more than $117,000. New hires are making $144,000 in Northern Virginia, D.C., Los Angeles, Chicago, and New York, while new hires in Richmond, Charlotte and Atlanta are making $130,500.

Earlier: Prior coverage of associate pay cuts

If you live in California, you are surely aware of the state’s budgetary concerns. But if you work for Morrison & Foerster in California, you may now have some budgetary concerns of your very own.

MoFo decided to cut salaries today, but associates in New York and Asia will be spared the hardship. Here’s the official statement from the firm:

Starting salaries at Morrison & Foerster in New York and Asia will be $160,000, the same as last year, and starting salaries in other U.S. offices will be $145,000.

Note, however, that the market for first year salaries among national firms is undetermined at this time. Given that, we will continue to assess starting salaries, in light of market trends, and may elect to adjust as required based on larger market developments.

Parsing the statement, after the jump.

It’s time for a quick follow-up on yesterday’s “all associates” meeting at Winston & Strawn. Alas, it was a bit anticlimactic. “Just a way for the firm to ruin everyone’s weekend,” quipped a tipster.

According to our sources at the firm, this is what associates were told:

1. Compensation at Winston will remain competitive; no salary cut will be imposed at this time. (The firm froze salaries earlier this year.)

2. Layoffs were necessary, and they have been conducted, but hopefully they’re a thing in the past (although nothing is guaranteed on this score).

So, exactly how many people have been laid off by Winston?

Back in June, Dorsey & Whitney laid off 55 people and announced that it was cutting associate salaries by 10 percent. At the time, our sources reported that the decisions were made in reaction to the firm’s revenue numbers from May:

Management got May’s figures last night, and apparently, the situation was quite dire. The prognostications for the future months also did not hold to budget and they decided something relatively drastic needed to be done.

A tipster reports that Dorsey is cutting salaries again. And this time the cut is even more drastic:

Per an email from Marianne Short, the firm is slashing associate salaries firmwide. Could be up to 25-30% for midlevel / senior associates.

The firm contends that salary cuts will not get up to the levels reported by the tipster. But Dorsey is one of the firms that has decided to abandon lockstep compensation. Could that result in 25 percent reductions to base pay?

Additional details and a statement from the firm, after the jump.

The myth that IP boutiques would be immune from the recession has already been debunked. Today, a few more intellectual property lawyers came back down to earth with the rest of the legal industry.

Above the Law has obtained an internal memo from the IP firm Townsend and Townsend and Crew. The firm is cutting salaries:

All- After much deliberation and consideration of the various issues involved, including the thoughtful input of the associates, the Policy Committee has made the decision to restructure associate compensation for 2010 as follows:

1) The associate pay scale for 2010 will be adjusted so that starting salaries for first year associates will be $145,000.

2) The remaining scale will be:

Level 2: $ 160,000
Level 3: $ 170,000
Level 4: $ 185,000
Level 5: $ 210,000
Level 6: $ 225,000
Level 7: $ 240,000

But don’t get too attached to that lockstep system, Townsend associates. After the jump, we see that Townsend wants to join the cool kids hanging out behind the gym lighting lockstep on fire.

We’ve been doing a lot of coverage on Dorsey & Whitney. The firm canceled its 2010 summer program and only had a 56% offer rate to its 2009 summers.

But we don’t want to forget about another Minneapolis powerhouse firm, Faegre & Benson. Earlier this month, we learned that the firm had decided to cut the starting salaries for its new associates. Faegre & Benson has confirmed to Above the Law that the new starting salary for its Minneapolis associates will be $110,000. That’s down a little less than ten percent from the firm’s previous starting salary of $120K.

One upper Midwestern tipster had hoped Faegre was taking advantage of the troubles at Dorsey & Whitney to surge past them in the Minneapolis market:

Faegre is the largest law firm in Minneapolis, and the general vibe is that it has surpassed Dorsey & Whitney in this market in terms of prestige and quality. So it’s sad to see Faegre take a step back. Especially since Faegre claimed that its layoffs earlier this year solved all its financial troubles. Will other Minneapolis firms follow suit to $110K???

I’m not sure that Dorsey & Whitney people would agree with the tipster’s “general vibe.” Regardless, rolling back to $110K for 2010 is something no offered Dorsey & Whitney summers would take in a heartbeat.

Read the full Faegre & Benson memo about its salary cuts, after the jump.

I thought we were done with salary cuts. It’s almost September! Fashion week is on the horizon, but King & Spalding is coming out with an old style. I mean, it’s been multiple weeks since I used this picture.

Just before 5:00 p.m. yesterday, King & Spalding decided it was ready to cut associate salaries:

As you know, the past year has been a difficult one in all industries. The economic turmoil has led to a reduction in demand for legal services and increased pressure on firms to reduce costs. Although King & Spalding remains strong thanks to the quality of our people and our diverse portfolio of practices, clients, and offices, we are not immune to the broader economic environment. As a result, over the course of the past year, we, like other leading firms, have had to make a number of difficult but important changes to ensure our cost structure remains competitive and we are able to generate the opportunities that keep us all engaged.

Earlier this year, many firms “froze” salaries at 2008 levels or reduced them even lower. After closely monitoring those changes, we have decided to make commensurate adjustments to our salaries. Effective September 1, 2009, the annualized salary for U.S. partner-track associates will be equal to their 2008 salary. Partner-track associates in Atlanta and Charlotte will have an additional market-based reduction equal to $10,000 on an annualized basis. The salary for U.S. counsel, other lawyers, and consultants will be reduced by five percent. These salary changes will only apply going forward and will not be retroactive to the beginning of the year. Our plan is to announce 2010 salaries some time during the first quarter of next year, as some firms already do.

Ugh. Doesn’t K&S know that the cool thing isn’t just to cut salaries? All the popular kids are busy making fun of lockstep compensation. Oh wait, I guess K&S did get that message.

After the jump, another wedgie for lockstep.

A month and a half ago, Morgan Lewis announced that it was canceling its 2010 summer program and moving away from lockstep compensation. At the time, some people criticized me for looking at a move away from lockstep compensation as tantamount to a salary cut.

A firm could move away from lockstep to give its associates a larger share of the profits they generate. Is that what Morgan Lewis is thinking?

Morgan Lewis is in the process of holding a series of meetings with associates in various offices. The goal is to let the associates know what the firm is planning to do with salaries starting January 1, 2010.

According to a firm spokesperson, these meetings are preliminary in nature:

As our Chair announced earlier this year, we have decided to move away from lockstep to a performance-based evaluation and compensation model. We are still in the process of developing the new model and are meeting with associates around the firm to solicit their input. We have not yet determined or announced any specific terms of the model, so any reports regarding compensation cuts at this point are pure speculation and false rumor.

Associates who have been in these meetings have a different take on what’s going on.

Might this be the kindest cut of all? Perkins Coie just announced a salary cut for associates, but it’s rather small — and it was accompanied by good news.

Today a firm-wide voice mail from managing partner Robert Giles went out, announcing the following:

— an average 3.8 percent pay cut for Perkins Coie associates, effective September 1;

— deferred salary rollbacks in some offices — e.g., Menlo Park — until “our competitors in these markets rollback associate salaries” (hmm, sounds like an invitation to us); and

— an expression of confidence that there will be no more layoffs this year.

We reached out to Bob Giles, who confirmed the accuracy of the foregoing.

All in all, it’s on the mild side for bad news, sort of like the firm’s modest layoffs back in April (just 12 attorneys). No wonder Perkins employees seem to like the place so much.

P.S. Congratulations to Perkins Coie partner Harry Schneider, this year’s winner of the American Inns of Court’s Professionalism Award for the Ninth Circuit. We met Schneider at the Ninth Circuit Judicial Conference, where the honor was presented to him in person. Schneider successfully represented Guantanamo detainee Salim Hamdan in Hamdan v. Rumsfeld.

Earlier: Prior ATL coverage of Perkins Coie

Two weeks ago, Mintz Levin laid off 15 associates. But apparently those cuts were not deep enough. Above the Law has been able to confirm that Mintz Levin has cut associate salaries. A tipster explains it this way:

Salaries will be adjusted as follows (firm-wide, all departments) based on this 12-month period:

* Hours greater than 1635, salary reduced by 5%

* Hours between 1445-1635, salary reduced by 15%

* Hours between 1250-1444, salary reduced by 25%

* Hours less than 1250, salary reduced by 35%

Associates who were employed by the firm for the full fiscal years ended March 31, 2007 and 2008 and who met or exceeded target (i.e. 1925 hours) will have their salaries reduced by only 5%, regardless of their hours for the 12 month period (i.e. this safe harbor effectively only applies to 4th yr associates and above).

To make these cuts Mintz is looking at hours billed over the last 12 months. And we all know what has happened over the last 12 months:

[The cuts are] based on their utilization during the prior 12 months - August 1, 2008 through July 31, 2009. Why the arbitrary period? It’s a snapshot of the recession at its height.

But the firm will make people whole and return the money at the end of the fiscal year if their projections are wrong. For people on track to make their hours in FY 2009 who nonetheless fall below the threshold if you count the entire recession against them, they will have an opportunity to get some of their money back. So they should consider it simply loaning money to the firm right now at a 0% interest rate.

Feel better? More details, including a statement from Mintz Levin, after the jump.

There’s nothing quite like the burning smell of deflation on a Monday morning. NALP has released its associate salary survey. The good news is that the median starting salary for associates is $130,000. The bad news is that there is no way on God’s green earth that the median salary is going to stay that high. The ABA Journal reports this excerpt from the NALP survey:

Salary information for the survey by NALP, an association for legal career professionals, was collected as of April 1, before large law firms paying the prevailing beginning salary of $160,000 began to cut pay. “This year’s report reflects what is likely to be the apogee of large firm salaries for the foreseeable future,” according to a NALP press release.

A cursory glance at Above the Law’s salary cut page will reveal that New York will secede from the Union sooner than New York will go to $190K. But there are other factors in play that will push down future median salary numbers.

More details after the jump.

Earlier this week, we reported that the Troutman Sanders pay cut applied to associates’ entire 2009 salary. We were wrong about that. A Troutman Sanders spokesperson explained to us that the pay cut will only apply to associate compensation from August 1, 2009 through the end of the year.

Why the confusion? Let’s go back to the original Troutman Sanders announcement of its pay cut:

Responding to changing market conditions for associate compensation, Troutman Sanders today announced a 10-percent reduction in the total amount of associate pay that was budgeted for Aug. 1-Dec. 31, 2009.

These reductions will not be made across the board but will be based on each associate’s individual performance evaluation.

Don’t get blinded — as we and some of our tipsters did — by the 10% figure. That’s just the target amount that Troutman wants to save off of all associate compensation between August and the end of the year.

After the jump, the firm explains that individual pay cuts will vary greatly.

Last week, we brought you some salary cut news from the Sunshine State. Today we bring you more such news.

Holland & Knight, a large national law firm with a significant presence in Florida (the state it started in), announced pay cuts yesterday for associates, senior counsel, and senior professionals. The salary cut will be effective with the next paycheck (i.e., this Friday). The information was disseminated by voicemail — or, to be technical, a secure link to a Flash audio message — at approximately 7 p.m. Eastern time yesterday.

Our sources reported pay cuts averaging around 10 percent. But according to managing partner Steven Sonberg, the overall cuts are closer to 7 percent.

The explanation, including the firm’s full statement on the cuts, after the jump.

Morris Manning has decided to cut salaries. Given the decisions of other prominent firms with large offices in Atlanta, this news alone is not that surprising. Morris Manning had been paying $145,000 in Atlanta.

But the pay cuts at Morris Manning are not based on hours or “performance.” Instead, the firm is cutting salaries based on practice groups. As we understand it, Morris Manning is giving a 15% salary cut to associates in the real estate, commercial lending, and general corporate practice groups. Everybody else will receive a 10% pay cut.

Tipsters report that initially, associates in real estate, lending, and corporate were looking at a 20% pay cut. But it looks like the firm reversed course on Friday after they decided to spread the pain around by taking the 10% bite out of the rest of the associates.

Update (6:50): Morris Manning spokespeople got back to us and clarified the situation. Apparently, associates in the the slowest practices already received a 20% pay cut earlier this year. When the firm decided to make a 10% across the board pay up, the firm changed the pay cut on the slow practice groups to 10% (making for the average of 15% percent that many of our sources reported). So now, all the associates in every group are looking at a 10% cut in base pay going forward.

Behind the veil of ignorance, this plan is probably more fair than making a deeper cut in practice groups that have been hardest hit by the recession. But — assuming that the three practice groups taking the larger pay cut are indeed slower than the rest — is it fair for busy associates in other practice areas to shoulder part of the burden?

The firm did not respond to our request for comment. But you can weigh in with your thoughts in our reader poll, after the jump.

Last week, we reported that Troutman Sanders instituted a 10% associate pay cut based on performance. Those salary cuts were supposed to be temporary. The pay cuts apply from August through December — though we don’t know if that pay will automatically bumped up on January 1, 2010.

Notwithstanding the definition of “temporary,” it now appears that the Troutman cuts are retroactive. A tipster explains it this way:

What they’ve neglected to say is that the cuts are retroactive to January 1, 2009. They will be taking the entire ten percent (or in some cases higher percentages) out of the remaining paychecks for the rest of the year. So if Troutman Sanders cuts a first year associate’s salary by 10%, they will not be taking 10% off of each individual pay check, but rather taking out the entire $14,500 in just the last ten pay periods. This is the first firm I’ve heard of to do retroactive cuts like this, and it just seems very disingenuous to present these cuts as only 10%.

We can’t know for sure if Troutman is the first firm that has done its salary cuts this way. But we are sure that this is the first time that associates have squealed about this kind of retroactive pay cut.

Which is not to say that other firms haven’t been trying to creatively get at the same problem. More details after the jump.

This information has been updated and corrected. Please click here for continuing coverage.