Biglaw Firm Announces Even Deeper Austerity Cuts

Bigger and longer salary cuts are on the horizon for these Biglaw associates.

(Image via Getty)

A billion-dollar Biglaw firm has announced even more COVID-19 austerity measures. Reed Smith, which already announced salary cuts, told associates today that their salary cuts would be extended through the end of the year and that they’d be deeper than before.

Back in March, the firm announced that they were slowing partner cash distributions, emphasizing that business is good, but made the move as a “precaution” and “bracing for the short-term and potential long-term economic impacts of COVID-19” before even more partner compensation cuts were announced. Then in April, they announced associate pay will be cut by 15 percent for May through the end of August.

Now we hear that the salary cuts will continue through the end of the year, and they’re getting bigger. According to sources at the firm:

Reed Smith held an all associates call today. The previously announced 15% salary cuts for associates will continue until August, and from August to December it will increase to 20%. Associates are pissed, especially those who have remained extremely busy and are billing hours normally throughout this time.

Sandy Thomas, Reed Smith’s global managing partner, provided the following statement outlining the austerity measures, which contextualizes the pay cuts on an annualized basis (which reflects a smaller number than the 20 percent cuts to their paycheck that associates can expect from August to December):

Since the beginning of the COVID-19 pandemic, our priorities have always been to protect the health and wellbeing of our people, to safeguard jobs wherever possible, to provide the highest quality service to our clients, and to manage the firm prudently. As a result of the prolonged economic uncertainty caused by COVID-19, we have made the difficult decision to take further actions to ensure our business emerges from the pandemic in a position of strength.

Reed Smith’s owners, rightly, continue to bear the largest share of the financial burden of the firm’s actions. As we continue to manage the challenges created by the crisis, today we are taking further actions that affect the firm’s lawyers and professional staff across the United States, Europe and the Middle East. They include:

· The previously implemented lawyer compensation reductions will be extended through the end of the year. On an annualized basis, compensation reductions will be 14% for Fixed Share Partners, 12.5% for Counsel, and 12% for Associates.

· Most professional assistants and other select professional staff will move to a four-day week, with corresponding compensation reductions, and a small number of employees will be furloughed on a temporary basis.

· The salaries of professional staff annually earning more than $100,000 (or equivalent), who are not subject to other employment actions, will be reduced nearly 6% on an annualized basis.

· In London, the firm’s largest office, we are initiating a targeted redundancy process that will impact a small number of lawyers and staff.

The firm expects most of these measures to be temporary, and during this time, healthcare and other benefits will remain intact for all lawyers and staff.

In Asia, similar actions affecting a small percentage of lawyers and professional staff were already undertaken earlier this year.

Like all well-run businesses, during the normal course of managing the firm we continually evaluate the size and shape of our global organization to ensure that it matches the needs of our clients. This practice is as important as ever during the pandemic.

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headshotKathryn Rubino is a Senior Editor at Above the Law, and host of The Jabot podcast. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).

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