Biglaw, Bonuses

UPDATE: Sheppard Mullin Doesn't Have New Bonuses, They Just Have A Weird Measure Of Time

So bonus season hasn't started, because Sheppard Mullin sets it up to get some free work out of associates first.

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On Friday, we reported a tip we’d received regarding Sheppard Mullin’s bonus “announcement” that showed up without fanfare on the firm’s intraweb. As we noted at the time, it was odd that the firm wouldn’t broadcast to the masses if it were making a bold move to lead on bonuses and that this probably was a placeholder memo that accidentally saw the light of day. Well, the truth is a little weirder still: Sheppard Mullin just uses a very curious — and kind of troubling — calendar.

Per the firm:

Our firm has made no new announcement regarding associate bonuses.

Our last bonus announcement appeared in a memo from Guy Halgren dated March 17, 2015. That memo announced the payment of supplemental bonuses with respect to the 2013-14 measuring period. The supplemental bonuses brought the total hours bonuses paid with respect to that measuring period up to amounts contained in a schedule that appeared in the memo (a portion of which schedule appears in today’s ATL article).

Well that explains it. That’s why the memo was so obviously labeled “2014 Bonuses,” right? Oh, wait… it was explicitly labeled “2015 Associate Bonus Structure.” What are these new car models? Even if you’re holding 2014 bonus payments until 2015 so your employees miss the primary lateral market feeding frenzy these bonuses are still — as the firm notes — for the 2013-14 year. The firm informs us that they even measure associate billing from October 1 through September 30, meaning there wasn’t a single part of this formula in 2015 except when they chose to hand out the money that associates earned months earlier.

And now, Sheppard Mullin has decided going forward to pay out its total bonuses in March while keeping the September 30 cutoff.

Incidentally, Sheppard Mullin explains that it uses this September 30 date because associates like not having the deadline fall during the holidays, which is fair, but this sounds like a case of associates just saying they want to stick with September, not that they’re actually excited that the Firm has simultaneously decided to hold their money — and their careers — in abeyance for half a year.

Firms that pay out end of year bonuses in March employ the excuse that they need to collect on bills for work through December 31 before they can appropriately pay up, but that’s not an issue for Sheppard Mullin who pays out based on bills through September. Since Sheppard Mullin doesn’t have to wait for December money to come in, I asked for clarification on why they now pay in March:

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Sheppard Mullin historically paid bonuses before 12/31. Last year, a number of large firms had not announced bonus policy as of 12/31/14.

That dog won’t hunt. Our bonus coverage is pretty extensive and even with the wrinkle of Davis Polk coming over the top, the “market” was set by mid-December. And the floor of the market (Simpson’s abortive attempt to lead) was established over Thanksgiving. There’s nothing in flux in January or February. If the Firm just wants to pay bonuses in the first quarter — a practice we think is patently detrimental to associates trying to lateral — then move the billable deadline to December. If they want to stay with the September 30 deadline then they really should be paying out in a more reasonable timeframe and perhaps be willing to supplement. But to say the reason for holding off is the unsettled bonus landscape strains credulity.

With this unorthodox creditable hours structure mixed with a March payout, Sheppard Mullin serves up the unfortunate cocktail of leaving associates hanging for 5 to 6 months — siphoning half a year of potentially “free” work out of associates that won’t be credited to the immediately upcoming bonus and will never be reflected in their future lateral destination’s bonus — just to make sure there’s no risk the Firm gives away a penny more than the peloton of elite Biglaw firms are willing to pay. Once again, if there were ever an anti-competitive culture of labor market price-fixing that still falls shy of requiring legal intervention it’s the Biglaw associate compensation market where we not only allow, but expect firms to wait until Cravath — and specifically Cravath — tells everyone else how to pay their employees. There’s not affirmative collusion… but we all know what’s going to happen 9 times out of 10 (and in that tenth time the market will just be matching Cravath’s decision to match Davis Polk).

So, sorry about the false alarm folks. But as it is, we got an even more interesting look at a curious model of pushing bonuses further and further into the new year while also having the credited time further and further into prior years sticking it to lawyers on both ends. These associates literally have to work 17-18 months to get a 12 month bonus. Is this that “Common Core” math that everyone complains about on Fox?

So good news Sheppard Mullin associates: none of the work you’re doing today will help your 2015 bonus! Or I guess it’s your “2016 Bonus for work you did in 2014 and 2015.”

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