Business of law

Law Firms with 2 Tiers of Associates Pay 2nd Ranks Up to 50% Less

For years, a number of law firms have had two tiers of partners, often differentiating between equity and non-equity holders of the same job title.

Now, in a new trend that is taking hold among some California law firms, there may be two ranks of associates. Paid as much as 50 percent less than their traditional partnership-track counterparts, those in the second tier are billed out to clients at perhaps 25 or 30 percent less, creating a financial incentive to staff matters with those in the lower ranks, says attorney Justin Miller of the Union Bank in a Recorder article reprinted in New York Lawyer (reg. req.).

“In other words, if a non-partnership track associate bills 1,800 hours, the firm makes a larger profit and the clients pay less money than if a traditional associate were to bill the same number of hours,” he writes.

By contrast with contract attorneys hired for temporary assignments, who may spend only limited time with—have have limited loyalty to—the firm’s partners and traditional associates, second-tier associates are a more stable work force and may even see certain aspects of their jobs, such as reduced billable-hour quotas, as a plus. Meanwhile, because they are better-integrated into the firm, their work quality likely is higher, reducing hidden costs of contract attorneys, including but not limited to a significant error rate, according to Miller.

The lengthy article offers a number of suggestions for making such two-tier associate tracks work. Among them: The arrangement should be a win-win for all concerned. Hence, it is likely to operate best in firms with plenty of assignments for first-tier associates, who would then welcome help rather than see the second tier as competition for scarce billable time.

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