Troutman Sanders and Pepper Hamilton signs. (Photos: ALM and courtesy photo)

Troutman Sanders confirmed it is cutting pay firmwide for lawyers and staff, effective June 1, following an announcement of similar compensation cuts by its merger partner, Pepper Hamilton, earlier this month.

Both firms also said on Friday that they will defer the start date of their combined first-year associate class from the fall to next January.

The moves represent the latest internal adjustments and preparations just ahead of the July 1 merger, which will form Troutman Pepper. The merger, initially scheduled for April 1, was announced last year to much fanfare, as it may create a new Am Law 50 firm. But, due to the novel coronavirus pandemic, Atlanta-based Troutman and Philadelphia-based Pepper pushed it back to July.

The merger is still on track, Troutman said in a Friday statement.

Troutman is implementing the firmwide pay cuts because of the uncertain economic environment amid the coronavirus pandemic, it said in the statement. The pay reductions for lawyers and staff will range from 2% to 18.5% on an annualized basis, and the duration depends  "on the overall global economy and firm performance," it said.

"Troutman Sanders is in a strong financial position, with record financial performance through year-to-date 2020," the statement said. But it is reducing expenses because "the extent of the COVID-19 pandemic's impact on our clients, and, therefore on our business, remains impossible to predict."

According to Above the Law, which first reported the pay reductions, equity partners are taking the deepest cuts. On an annualized basis, equity partners will take an 18.5% cut, non-equity partners will take a 14% cut and associates will take an 11.7% cut.

If the salary reductions continue through the end of the year, then, going forward, that works out to a 32% cut for equity partners, a 24% cut for nonequity partners and a 20% cut for associates from their pay for the remaining seven months of the year.

Pepper Hamilton said May 8 that it was cutting pay for attorneys and staff. At that time, Pepper said it was reducing distributions for partners by an unspecified amount and reducing salaries for all other attorneys by what would amount to under 12% on an annualized basis. It also reduced salaries for staff making $60,000 or more, ranging from 9% to 3% on an annualized basis.

In deferring their combined first-year associate class, Pepper and Troutman said they will provide financial assistance to defray living expenses and the cost of preparing for the bar exam. The incoming associates also will be able to enroll in the health insurance plan.

The firms had already announced April 10 that they were suspending their summer associate programs and that they would instead make job offers to the rising 3Ls to join the combined firm, Troutman Pepper, as associates in the fall of 2021. They gave rising 2Ls offers to return as summer associates next year.

Troutman had also announced in mid-April that it was offering some staff the option of a voluntary leave of absence, starting May 1. The firm offered those who participated full coverage of health insurance premiums and a weekly stipend in addition to state and federal unemployment benefits.

Troutman reported healthy gains in revenue and profits last year. In 2019, Troutman's revenue increased 5.4% to $549.6 million and net income increased 6.2% to $207.7 million. Profits per equity partner jumped 8.4% to $1.164 million.

Meanwhile, Pepper saw gross revenue grow 4.5% in 2019 to $349.4 million, after three years of declines. Revenue per lawyer was up 3.7%, at $818,000. The firm saw a 13.6% jump in profits per equity partner to $943,000.