UPDATE (12/29 11:57 a.m.): After much going back and forth, it appears that Bryan Cave issued bonuses in December last year and the info we had suggesting they didn’t may have been a unique situation impacting only some associates. But the analysis it makes about the perils of payout dates and the tax bill are still important if any other firms do change dates, so we’re keeping it up.
Generally speaking, we approve of firms that pay their bonuses before the end of the calendar year — making them true holiday bonuses — as opposed to those who screw around and distribute bonuses in January or beyond. It’s not just a dick move because it robs associates of an influx of cash around the holidays, but it’s also deliberately designed to disrupt the lateral market, keeping some associates artificially tied to their old firms lest they forego thousands of dollars to make the leap.
But tipsters at Bryan Cave, which recently announced bonuses that left a bit to be desired, say the firm has also irked associates by agreeing to pay out bonuses this calendar year. What’s the complaint?
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To add salt to the wound on BC bonuses — they were paid out today [December 22], but last year’s bonuses were paid out in January 2017. So two bonuses in one year.
UPDATE: Again, this doesn’t appear to apply to Bryan Cave as a whole, but consider this situation generally.
On the one hand, that’s just something associates have to suck up for the greater good. Any firm paying bonuses in the next calendar year that wanted to do right by associates would have to put their people through this once with a two-bonus transition year that people would have to report on their taxes. So if this is a permanent change designed to move the firm to awarding bonuses within the calendar year, then it’s worth it.
On the other hand, the timing is a bit… fishy. Just like those surprise AT&T bonuses. While the conservative media declared trickle-down economics definitively proven — and ignored that AT&T immediately followed these bonuses with layoff announcements — astute tax lawyers and accountants noted that AT&T’s bonuses were saving the company millions because they were rammed through to give the company a bigger deduction before its tax rate goes down (and, by extension, decreases the impact of a deduction). Now partnerships don’t have the hefty corporate tax coming that AT&T does, but they are about to see their individual tax rates reduced, so there’s more than a little reason to suspect this move had less to with giving associates a happy holiday as it did with giving the partners a bigger deduction before the more regressive tax rates kick in. Meanwhile, the associates will face the higher 2017 tax rate on both bonuses.
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Which may not be bad for everyone. If they’re working in one of the California offices, maybe they can use this bonus to pre-pay their state and local taxes. For others, family status, AMTs, the risk — especially for more senior associates — of potentially landing in a higher bracket next year could all make this early bonus better for some. Tax impacts vary, but there’s probably at least one unfortunate associate out there who is about to be out of a bigger chunk of this bonus than they otherwise might be.
So, on balance, it’s all well and good for firms to move up previously late bonuses. But if taking advantage of this one-time deduction advantage is the only motivation for this decision, then there’s nothing stopping a firm from reverting to its later payout date to award 2018 bonuses in 2019 and leaving lawyers with no bonuses at all during the next tax year.
Something to keep our eyes on.
Earlier: Firm’s Complex Bonus Structure Provides Most Associates With Less Than Their Peers
Joe Patrice is an editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news.