The first quarter of the year has ended and the Bay Area market is looking more vibrant and growth-focused than it has been since the recession. After the down year of 2017, it is refreshing to see Am-Law 200 firms focused on hiring not only to replace lost associates but also on strategic growth within hot practice areas. Some key insights to note:
Last year was a slow year in associate hiring. After the 2016 compensation increases that caused a cascade of law firms to match as well as the instability in the political and international markets, it took last year for most to adjust to the unexpected revenue hit and uncertainty that occurred. That said, as PPP numbers continue to roll out, it appears that law firm revenues are trending upward. This trend seems to have rejuvenated associate hiring as practices are growing and firms are more willing to invest in talent. The second quarter is already showing a continuation of this development.
The majority of movement tends to happens in the first quarter because associates hold out until after they receive their bonuses to leave their firms for new opportunities. This once again was a powerful driver in much of the movement that took place in the first quarter of 2018. As we begin the second quarter, law firm clients have already seen a decrease in candidate submissions as many of the associates that wanted to move have done so.
Corporate and IP focused positions continue to have the most opportunities available in the Bay Area market. Litigation opportunities have also seen a slight uptick but remain fairly steady. While not “hot” practice areas, there remain several positions in labor & employment, real estate, data privacy, fund formation and employee benefits that are difficult to fill as the local talent pool is fairly limited. Overall, there are a tremendous number of associate opportunities in the market with no indication that this will change any time soon.
We are seeing an uptick in firms open to relocating candidates that are not California barred. In the past, the California offices of firms have consistently been cautious in hiring attorneys that are not barred as it is a significant investment and potential risk, given the cost and difficulty of the bar exam. However, we have seen firms willing to overlook the bar issue for attorneys who are well-credentialed, coming from sophisticated Am-Law 100 practices from key markets, including New York, Washington DC and Chicago. As the California bar shifted from three to two days this past February, it remains to be seen as to whether this will make it easier or more difficult for out of state attorneys to pass the bar, which may adjust law firm’s willingness to invest.
Law firms continue to be willing to relocate attorneys whose practices focus on corporate, emerging growth, technology transactions, real estate, fund formation and IP prosecution/litigation. Relocating employment law and litigation associates that have not handled California-specific cases and are not California barred continues to be a challenge. But, similar to the California bar hurdle, we have seen law firms willing to overlook practice area challenges for well-credentialed attorneys coming from large firms.
In the past, signing bonuses were only offered by law firms in the latter half of the year. For many firms, this has become a standard practice as they know late in the year moves for associates usually means foregoing a large bonus. That said, we saw this trend continue through the first quarter for a very different reason - competition among firms for top tier associates. For the first time in several years, we saw an uptick in associates obtaining multiple offers, which resulted in firms offering signing bonuses and other perks to stand apart from competing firms. It is not clear whether this development will continue or if it is contained to the first quarter because of the mass post-bonus exodus and law firms reporting solid 2017 revenue numbers. The coming months will tell, but associates should be cautious in thinking that this has become the new normal.
The level of talent within the market continues to be the best of the best. It is increasingly challenging for associates to transition into the Bay Area without top of the market credentials. However, this trend may be loosening as firms have already commented that there has been a slight decline in the number of well-credentialed attorney submissions. The next few months will be telling as to whether firms are willing to be flexible or hold out for associates with the credentials they have become accustomed to.
The interview process of Bay Area firms is moving increasingly fast, with an increase in candidates getting offers within days of final rounds. The musical chairs that happened after law firm bonuses were paid is partially responsible for this trend, but competition among firms has also made it impossible to secure top talent without moving quickly. When firms approach candidates weeks or even months after a submission, they are finding more and more often that those associates have already accepted an offer with another firm. As the second quarter begins, we will see whether more firms accept this trend and are willing to be more efficient in their hiring processes.
As we begin the second quarter, it is energizing to see that the market is far more vibrant than it has been in years past. As 2018 progresses, we anticipate continuing to see an abundance of Am-Law 200 law firm opportunities targeting exceptionally credentialed attorneys coming from large firms. Overall, the state of the market looks promising and seems to only be getting better.