By VANESSA O'CONNELL And NATHAN KOPPEL
Junior attorneys at many top law firms worked harder in 2010 as the firms relied on leaner staffing, but their year-end bonuses are unlikely to budge much from last year's.
Bonus payments to associates are among the most tangible indicators of the legal industry's health. Many elite law firms are keeping those payments largely unchanged this year, at least partly because business hasn't improved much, say partners at several big firms.
The trend also reflects a reluctance to risk offending clients who worry that increasing pay to associates could translate into higher legal costs, says a partner at one major New York firm.
Regulatory practices at big New York law firms are generally strong this year, say partners and consultants. But the financial crisis slowed the pace of the mergers, acquisitions and private-equity transactions on which the elite firms thrive. Litigation revenue also has lagged as many corporate clients have grown less willing to engage in protracted lawsuits and more apt to prod law firms to charge less for handling court cases.
Bonuses at many top Wall Street law firms have ranged up to $35,000 this year, about the same as in 2009. That's substantially less than just a few years ago. Base pay for an associate at a leading firm typically starts at around $160,000, as it has since 2007, the firms say. But bonuses at many firms have fallen from as much as $65,000 since then. In addition, some firms occasionally paid "special bonuses" of as much as $50,000.
Meanwhile, average hours billed by associates at the nation's top 50 law firms by revenue rose 7% in 2010, according to Citi Private Bank Law Firm Group. The higher average, which it said was still below the peaks seen in some previous years, was largely the result of staff reductions; the number of associates at the top 50 firms fell by 6.7% through Sept. 30, after declining 1.5% in 2009.
At New York-based Milbank, Tweed, Hadley & McCloy LLP, where bonuses were only slightly above last year's payouts, hours billed by associates were up about 6%, but from "one of the lowest bases we've had in the last decade," says Mel M. Immergut, the firm's chairman. "The actual number of hours is still low compared to what it has historically been," he adds.
Revenue at Milbank Tweed will be up by about 3%, on flat expenses, Mr. Immergut says, adding that profit per partner will be up by 8% to 10%, depending on the firm's year-end collections.
Associates have long been known to grouse about long hours. Their jobs put them at the beck and call of their firm's partners, and they are often saddled with mundane legal tasks. But, after a period of years, their reward can be a partnership that entitles them to share in the firm's business. At top firms, partners can reap more than $2 million a year.
Even so, junior lawyers are increasingly discontented. A recent survey of more than 5,000 third-, fourth- and fifth-year associates by American Lawyer magazine found that job satisfaction has slipped to its lowest point in the past six years. Satisfaction ratings fell at 109 of the 124 firms participating this year and last.
"You're working your rear end off every year," says Danette Lilja, who left Morrison & Foerster LLP's Washington office in April to relocate to Colorado. "You can convince yourself that it's worth it only if there's some payback, and the payback in the law-firm world is more money," she adds..
Keith Wetmore, Morrison & Foerster's chair, says the firm's "goal is to pay competitive compensation."
"The work that used to be done by 10 associates is now being done by six," says T.J. Duane, a New York recruiter who specializes in helping associates find new jobs. Some associates are "very frustrated," he says, and are "thinking, 'The partners are doing well, and I busted my butt for them all year.'"
Few partners, however, are likely to enjoy a banner year. Partners don't get bonuses, but instead get a cut of their firm's profits. At the top 50 firms, profits are likely to show only "modest improvement," according to Citi Private Bank Law Firm Group, and will fall short of pre-recession levels at many firms.
Late last month, New York-based Cravath, Swaine & Moore LLP set the standard for other big firms by being the first to announce bonuses for the year. They ranged from $7,500 for first-years to $35,000 for senior associates. The bulk of those bonuses, which it paid Dec. 10, were little changed from last year, though senior associates got a $5,000 increase.
Willkie Farr & Gallagher LLP; Dewey & LeBoeuf LLP; Akin Gump Strauss Hauer & Feld LLP and Morrison & Foerster, among others, all matched Cravath's bonuses within weeks, and a few exceeded them. Business-litigation specialist Quinn Emanuel Urquhart & Sullivan LLP, for instance, said it would essentially pay 150% of the Cravath standard to associates who billed at least 2,100 hours, though part of the bonus won't be paid until June.
At Akin Gump, associates were counting on bigger bonuses, according to Chad Vance, who left Akin earlier this year for a Detroit firm, which he said offered a better lifestyle. "Bonuses can have a big impact on your yearly savings and how much you can apply to student loans," he said, adding: "If you get $7,500 as a first year [associate bonus], versus $15,000, that is a big chunk of money."
Despite their complaints, however, many associates are likely to stay put at their top law firms, weary of testing a tenuous job market merely because of bonus frustrations, attorneys and recruiters said.
"It is like this throughout the entire economy, where employees are working harder and devoting more hours to their work than previously, but they are fortunate to have jobs," says Joel A. Rose, a law firm consultant in Cherry Hill, N.J.
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