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Law Practice Management

Some Law Firms End Lockstep Pay for Associates, as Economy Plummets

Posted Mar 16, 2009 11:28 AM CST
By Martha Neil

A dismal economy is driving some law firms to take cost-cutting measures that will likely reap big benefits for them in the long run.

And eliminating the "medieval" lockstep associate compensation structure, in which all individuals who graduated from law school in the same year are paid the same salary, year after year, is one of the most rewarding moves they can make, says legal consultant Joel Henning of Hildebrandt International Inc.

Among the law firms that are shifting to merit-based associate pay are Howrey and Orrick, Herrington & Sutcliffe, reports Bloomberg.

“One of the best things firms are doing is breaking the ridiculous lockstep structure of associate compensation,” says Henning. “There is no other profession that operates that way.”

Hat tip: Above the Law.

Related coverage:

ABAJournal.com: "Hildebrandt: Cut Associate Salaries Now"

ABAJournal.com: "How Some Big Law Firms Erred in the Boom Years"

ABAJournal.com: "Silver Lining in Law Firm Layoffs News: Many Partnerships are Better-Managed"

Comments

1.

B. McLeod
Mar 16, 2009 12:28 PM CST

Firms who don’t take this step may be affording “escalator” rights to “associates” who elect to shelter through the recession via military deployment.  Looks like DOJ is already starting to target some firms for USERRA issues.

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2.

Debra Veoli
Mar 20, 2009 5:07 AM CST

Wha da Fa?  USERRA?  McLeod?  What is this guy talking about?  This is the guy that sits in the front of the class always raising his hand.

This is NOT the time to play smart.  To many people are looking for work.

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3.

Jan Grossman
Mar 20, 2009 10:39 AM CST

Does your publication deal at all with the experiences of the small law firms and solo practitioners in response to the effects of our current economy upon their law practices?  If so, where may I find such articles, etc.?

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4.

Molly McDonough
Mar 20, 2009 10:46 AM CST

You can often find these stories under this topic:

http://www.abajournal.com/topics/solossmall+firms

We categorize related blogs under this heading in our Blawg Directory:

http://www.abajournal.com/blawgs/solossmall+firms

That said, we are always on the hunt for news from the solo, small firm and mid-sized firm realm. If you see that we’ve missed something or if you have an idea for a story, please send a note to tips@abajournal.com.

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5.

Reality Check
Mar 20, 2009 5:40 PM CST

Wow..yet another novel “new” idea for law firms. In the real world, salary (starting and annual increases) are based on qualifications, contribution to the organization, and results from each individual. Where is the incentive to work harder than the other guy if everyone is paid the same at the start and then every year thereafter?
Law firms remind me of artist..who live in their own little world and have no idea how to manage a business or their money. But at least artists are creative and a lot more fun to be around.

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6.

Tim Taylor
Mar 21, 2009 10:43 AM CST

USERRA is the Uniformed Services Employment and Reemployment Rights Act.  In a nutshell, the escalator principle he is referring to means that a second-year associate at a firm who is also an Army Reserve officer can take three years of military duty somewhre and then return three years later and demand to be paid as a fifth-year associate.  The firm cannot fire him/her during the three-year period or for the 12-month period following return from military duty.  Effectively, he/she is no longer an at-will employee.  It’s not a bad strategy—banking on the assumption that the economy will be better in three years.  It’s a way to weather the storm and come back to the firm at a higher rate of pay—without all of the hours and stress in-between.  You can take up to five years of military leave under the law—even longer if any of that time is tied to the Iraq, Afganistan, or other Global War on Terror missions.  But you can also just take a cushy office job in the Pentagon for three years.

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