Firms That Keep Pay Cuts in Place May Lose Ground in Hiring Market
The list of firms that imposed austerity measures in the spring and have rolled them back fully or partially in the last two months is growing. California-based Loeb & Loeb, Atlanta firm Kilpatrick Townsend & Stockton, Florida-founded Holland & Knight and Oregon-based Stoel Rives joined the group in the past week.
And, according to a report on Above the Law, Husch Blackwell paid a client development bonus to eligible associates in August, even though it was supposed to be deferred until January 2021 under austerity measures imposed earlier this year. A spokesman for the firm did not immediately respond to questions.
Marcie Borgal Shunk, founder and president of legal consulting firm The Tilt Institute, said over the long haul, it will be more challenging for firms that maintain pay cuts to retain associates, staff and administrators.
“There will be increased competition for talent. It’s true. Other firms that either never had furloughs [and pay cuts, or firms that have rolled back those cuts] will be in a good position to come after those firms that are maintaining that conservative position,” Shunk said.
Texas recruiter Lee Allbritton of Amicus Search Group said austerity measures have already had an impact on the lateral hiring market for the last two months.
He puts firms in three categories—about a third of U.S. firms avoided any pandemic-related austerity measures, another third rolled back some of the pay cuts or called back furloughed employees, and the remaining third has not lifted anything. The category matters, he said.
He said he is currently working on a placement in Texas with a practice group that is considering two firms—one that has rolled back some austerity measures and another that hasn’t. That difference is material, he said.
“You can admire some of these law firms that have the fiscal discipline to implement and maintain the financial austerity, but … it is an enormous obstacle,” he said.
For the same reason, Allbritton expects considerable activity in the midlevel associate market for the rest of the year. He said associates taking 10% or 20% pay cuts may jump to a firm that hasn’t temporarily reduced pay, noting that student loan payments haven’t gone down.
On the other side of the equation, Shunk said because of the pandemic and its uncertainties, firms may make also some decisions on staffing and talent that they probably should have made before the pandemic. She said the pandemic will cause some firms to “streamline.”
She said in the spring, firms viewed the effect of the pandemic on operations and financials as temporary, but now there’s a new normal.
“Because of that, there is a need for getting back to business and that means addressing some of the issues we are talking about … and also the need for growth and the need for planning,” she said.
Back in April, Kilpatrick Townsend temporarily cut partner draws by an average of 10%, and reduced pay by 5% for other lawyers and staff. Secretaries, who are hourly employees, had their work time reduced by 20%.
But the firm announced Friday that it would reinstate partner draws to pre-pandemic levels, along with professional and attorney compensation, and secretaries would return to FTE levels.
“On a case-by-case basis, the firm will determine if a limited number of attorneys, other timekeepers, and professional staff who have FTE reductions will return to full FTE status,” Kilpatrick Townsend said in a written statement. And on Tuesday, Loeb & Loeb announced it would partially roll back temporary pay reductions imposed in April, because the economic effect of the coronavirus pandemic has not been as damaging as the firm feared. The firm had temporarily reduced partner draws by 20%, reduced pay for income partners, senior counsel, of counsel, associates and senior staff by 15% and paralegals and other staff by 10%. But, as of Sept. 1, the salary reductions would be decreased by 60%, Loeb & Loeb chairman Kenneth Florin wrote in an email to the firm. He also wrote that year-end bonuses would be awarded, “consistent with the practice and criteria of prior years,” but reductions to capital partner draws would remain in place at their current level. At both Holland & Knight and Stoel Rives, pay restoration was partial as well. A number of other Am Law 200 firms have fully or partially restored pay cuts. They include Lowenstein Sandler; Cozen O’Connor; Bryan Cave Leighton Paisner; Baker Botts; Cadwalader, Wickersham & Taft; Sheppard, Mullin, Richter & Hampton; Katten Muchin Rosenman; Reed Smith; and Fox Rothschild.