Why Some Firms Are Refusing to Raise Associate Pay

Source: Law360

By Aebra Coe

Despite the fact that a large swath of BigLaw followed suit after Cravath Swaine & Moore LLP raised associate pay earlier this month, at least 17 major firms are bucking the trend, a move experts say brings sanity to an industry caught up in a dangerous domino effect.

Cravath's move to raise starting salaries for its associates to $180,000 on June 6 has set off a chain reaction in the legal industry, as the largest law firms in the country strive to keep up with the Joneses — or, in this case, the Wachtells and Simpson Thachers — despite the fact that many of those firms fail to attain the same profitability as the New York transactional heavyweights, leading experts to decry the injudiciousness of the game of follow-the-leader that appears to have erupted.

Beth Woods, managing director of Major, Lindsey & Africa LLC's Chicago office, says that law firms in Chicago have taken advantage of the freedom of charging lower fees and providing associates with fewer work hours and more work-life balance, which she says allows them to compete laterally for some of the nation's top talent without matching Cravath.

"In Chicago, over the past several years, a healthy number of BigLaw partners and their work have migrated away from the larger firms like Kirkland and Mayer Brown to [regional firms], for both rate and conflict relief," Woods said.

Companies have come to rely on the regional Chicago firms and the partners who have left the big firms to join them for higher-volume, midlevel work at lower rates, she said.

"In terms of baseball, these firms are happy hitting the singles and doubles. They're not looking for big bet-the-company-type cases — those cases are still going to the Kirklands and Skaddens and Mayer Browns of the world," she said. "It's a different range of work that these firms are handling."

They have found their niche, and found an opportunity to serve a need in the marketplace that may not have been met before.

"Increasing associate salaries would significantly cut into profits for these firms, and that's not something they can pass along to the client," Woods said.

And she says it's not likely the lower salaries will affect those firms' ability to attract top-tier associates.

"What we see in some cases is a migration of talent from big firms to middle-market firms for associates wanting to get hands-on experience or to have more work-life balance. As a result, these firms are still getting top talent on a lateral basis," she said.

Read more of this feature at Law360.

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