Associate Bonus Watch: Fried Frank Announces A New Bonus Policy

Isn't it a bit early to be talking about 2016 bonuses?

We’re still waiting on the first Biglaw bonus announcement of the season, with “announcement” defined as a scale of the exact payments that associates of varying seniority will receive. And we probably still have a few weeks to go. Last year, Simpson Thacher announced its generous 2014 bonuses on November 21, which was already on the early side. (In 2013, Cravath bonuses didn’t drop until December 2.)

Even though 2015 year-end bonuses haven’t been announced yet, at least one firm is already looking ahead to the 2016 bonus cycle. Earlier today, Fried Frank announced its 2016 bonus policy, which will govern “any year-end discretionary bonus that may be paid by the Firm for the bonus period November 1, 2015 through October 31, 2016.”

It seems a bit early to be talking about 2016 bonuses, but give Fried Frank credit for transparency. It wants its associates to know, in advance of the start of this period on November 1, how hard they’ll need to work to get a “partial,” “full,” or “premium” bonus.

The full memo, from firm chairman David J. Greenwald, appears on the next page. This chart is the key portion:

This 2016 bonus policy is significantly more explicit than the firm’s approach to 2014 bonuses. Last year, Fried Frank paid bonuses “up to” the Davis Polk scale, with additional bonuses for top performers that could beat DPW by “up to $15,000.” But query whether all this “up to” language was hiding (1) some people getting less than DPW and (2) some top performers getting less than the extra $15,000.

The new bonus policy for 2016 seems to represent an effort to bring greater transparency and objectivity to the Fried Frank bonus system. Now, as long as associates hit their hours, they will receive bonuses “according to” the scale set forth in the memo. The only people relegated to “up to” land are people who miss 2000 hours, who are eligible for bonuses “up to” 25 percent of “full bonus.”

The chart for FFHSJ’s 2016 bonus policy doesn’t define what constitutes a “full bonus,” which will presumably determined by what’s “market” in 2016. But the caps of the “Premium 1” amounts, available to associates who hit 2200 qualifying hours, appear to assume bonuses on the 2014 Davis Polk scale (itself a very generous scale, and the scale that became the Biglaw measuring stick last year). The “Premium 2” amounts go even higher — but to hit that level, you need to exceed 2450 qualifying hours, no easy feat. (On the bright side, note that “qualifying hours” go beyond billable hours and include firm matter hours, pro bono hours (up to 300), and qualified non-billable hours (up to 125).)

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What does it mean for Fried Frank to be capping “Premium 1” bonus amounts based on the 2014 Davis Polk scale? One possibility: the firm is subtly “signaling” to its peer firms to not go above last year’s DPW scale (i.e, a scale topping out at $100,000).

Would Fried Frank associates be happy with 2014 Davis Polk bonuses at the end of 2016? That’s hard to say, given how far away we are from that time. If the U.S. economy tumbles into recession and law firm layoffs get even worse, then yes. But if the economy remains stable or even strengthens, and Biglaw associates get raises in base salaries for the first time in nine years, then God only knows what a fair bonus scale might look like.

What do FFHSJ associates think of the new bonus policy? So far, so good. As one tipster told us, “The reception amongst associates has been excellent so far. The fact that the firm is giving additional compensation to associates billing between 2200-2449 hours is a huge improvement that is in response to concerns that have been voiced by associates this past year.”

Kudos to Fried Frank for making its bonus scale more transparent — even if many blanks, just like Biglaw associate Christmas stockings for 2015, remain to be filled.

(Flip to the next page to read the full Fried Frank memo.)

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