Midsize Firms / Regional Firms

Associate Salary Cuts, Decreased Partner Draws, And Staff Furloughs At This Am Law 200 Firm

But the partners are bearing the brunt of the firm's financial burdens.

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Unemployment is soaring thanks to the novel coronavirus, and in the first two weeks of March alone, the legal industry lost 1,700 jobs. As law firms proactively enact cost-cutting measures like salary reductions, furloughs, and layoffs to manage their finances over the difficult months to come, lawyers and legal professionals have been anxiously waiting for the next domino to fall. Will their firm be next?

We’ve been tracking how this has played out thus far, and now we’ve got news on Am Law 200 Sullivan & Worcester, a firm that sources tell us is conducting firmwide salary adjustments in light of the COVID-19 pandemic, along with some furloughs. Specifically, we were told that associates’ salaries would be reduced by 5 percent for the next 90 days, and at the end of the month, the firm would decide if any additional salary cuts were necessary. Further, sources said nonequity partners’ salaries would be reduced by 10 percent and equity partners’ salaries would be reduced by 20 percent. Finally, we heard that the firm had furloughed some of its employees.

We reached out to Sullivan for comment, and managing partner Joel Carpenter confirmed what was going on and also offered some corrections on the firm’s plans.

[W]e are managing through a situation in which the short term impact of the virus on the firm’s revenue is largely unpredictable, so our Management Committee has created an expense reduction plan to deal with the most adverse impacts we think we are likely to experience.

That plan does not at present involve any layoffs, but it is true that a small number of employees who cannot perform their functions remotely have been furloughed for 90 days with full benefits. They will be rehired as soon as we can return to the office, which we hope will be sooner than that. The 5 percent salary reductions you were told about apply to all employees who make more than $66,000 a year, not just associates, and are not expressly limited to 90 days. The partner reductions you were told about are accurate in the percentages but the reductions are to monthly draws, not total compensation. The impact on actual compensation levels will not be known until we get through these difficulties and see how our overall year will work out. And lastly, I told everyone that the Management Committee will revisit our plan monthly to test our experience against the assumptions of our plan and will make appropriate adjustments, positive or negative, as the impact on us becomes clearer.

These are by far the most gentle salary cuts we’ve seen for associates and staff, while partners are taking the brunt of the financial impact. “As always, our priority is the well-being of our own people and our clients,” Carpenter said. “We expect that taking these difficult steps now will allow Sullivan to more easily return to business as usual when this crisis passes.”

Best of luck to those who were temporarily furloughed at Sullivan. We hope you’ll be able to find the security and support you need during these tough times.

If your firm or organization is slashing salaries, closing its doors, or reducing the ranks of its lawyers or staff, whether through open layoffs, stealth layoffs, or voluntary buyouts, please don’t hesitate to let us know. Our vast network of tipsters is part of what makes Above the Law thrive. You can email us or text us (646-820-8477).

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Staci ZaretskyStaci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.

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