Boies Schiller Flexner is changing its associate bonus structure from a formula system to a "market-rate" system that pays associates based on seniority instead of billable hours, according to several sources close to the firm.

The changes were announced this month, according to two people familiar with the decision.

In a statement, co-managing partner Nick Gravante confirmed that Boies Schiller is adopting a new associate compensation system, although he did not provide further details about the previous formula system or that the new system would be market-based. He said the compensation changes are a "positive step in the firm's ongoing restructuring, which ensure that associate compensation is aligned with the firm's strategic goals."

Gravante also confirmed that current Boies Schiller associates may choose which bonus structure to be compensated with. "We believe associates are substantially benefited by having the option of staying with our current system or choosing the new system," he added.

The change aligns the firm more closely with peers such as Cravath, Swaine & Moore and its so-called "Cravath Scale," which pays associates based on class year, three sources with knowledge of the changes at Boies Schiller said.

A source close to the firm said the new system pays associates bonuses on a scale slightly higher than the market rate set by Milbank in late 2019, which started at $15,000 for first-year associates and progressed up to $100,000 for senior associates. Some details of the new system still need to be worked out before the changes are fully implemented, other sources said. 

The new bonus system has been in the works for months, with those who favored the market bonus scale advocating that it is more transparent and fair. Co-managing partner Natasha Harrison is a fierce advocate for this change, sources said, while Gravante favored the formula system.

The discussion over whether to change the system was divided on several fault lines. New York associates, who bill on high-volume matters for banks and other financial institutions, liked the formula system—as did newer associates who were bringing in bonuses higher than the market rate, one source said.

Those who favored the formula system felt it was in line with the Boies Schiller's "eat-what-you-kill," entrepreneurial culture where those who worked more were rewarded with bonuses that could climb into the hundreds of thousands.

Associates who take contingency cases, mid- and senior-level associates and California attorneys, whose clients often held them to more stringent billing standards than their East Coast peers, mostly preferred the market system, according to two sources.

While the previous system allowed first-, second- and third-year associates to take home bonuses much larger than their peers at other firms, mid-level and senior-level associates were paid out less than their peers for comparable hours, sources close to Boies Schiller said.

Critics of the formula system also said it was opaque and disincentivized careful billing. Associates who did not hit their minimum hours would be put "in the red," meaning that they had to make up the money and hours the following year. One former Boies Schiller attorney equated this rollover to a "debtor's prison."

The new compensation system is an effort to bring more transparency to the firm, where office managing partners and executive committee members are left in the dark regarding equity and compensation, sources close to the firm said. This lack of transparency in pay, in addition to Boies' work for controversial clients and his near-total control of the firm, were major contributors to a recent exodus of partners, as Law.com reported late last month.

More than 30 partners have left the firm since Gravante and Harrison took over for David Boies and Jonathan Schiller in December, including almost all off the firm's West Coast partners.

Boies Schiller leadership has maintained that the transition is simply a retrenchment and firmwide transformation. Still, many of the partners who left were office managing partners, executive committee members and productive attorneys who had relationships with clients such as Uber, Facebook and Goldman Sachs.

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