The New York firms fired the first shot at the tail end of January, hiking starting rates to $160K. Most California firms held the line in-state at $145K … until Orrick made its surprise move in May. Follow every twist of the saga in our Hot Topic roundup.
Some firms level the field with year-end bonuses. Morrison & Foerster, for example, matches what Wetmore called “the New York model” of bonuses for its associates there. In 2006, big New York firms gave year-end bonuses of up to $65,000 to senior associates. But other firms, including Orrick, use a uniform, firmwide bonus standard.
Law firms are much less likely to account for differences in costs of living now then they were a few years ago, said Richard Gary, chairman of the firm now known as Thelen Reid Brown Raysman & Steiner from 1992 to 2003 and currently the principal of Gary Advisors, a law firm consultancy in Tiburon.
Firms today operate more cohesively, which has prompted unified pay scales, he said. For those that tout themselves as truly national firms, it is difficult to justify different pay rates. When Gary practiced at Thelen Reid, New York lawyers received about 20 percent more than attorneys in other offices. Those kinds of “New York uplifts” have become less common, he said.
“If a lawyer in branch office A is working at the same level as a lawyer in branch office B � regardless of whether B is in New York, Dallas or San Francisco � if it’s in a major market, they expect to be treated the same,” Gary said.
He added that the volley in pay between the coasts is speeding up, meaning that West Coast firms are quicker to match moves by East Coast firms. He points to the associate salary increases by Silicon Valley’s Gunderson Dettmer Stough Villeneuve Franklin Hachigian in 2000 as the beginning of the homogenization in pay, he said. For the first time in recent history, a West Coast firm had triggered a pay raise. After that series of increases, pay on the both coasts became increasingly similar, he said.
Whether the recent raises on the West Coast and in Chicago will spark a brush fire in New York before the year’s end is uncertain. Just last week, one popular legal industry blog reported whispers of increases in New York to $190,000 for first-year associates. Some large New York firms contacted for this story said that they were not considering increases at this time.
But whenever it happens, New York will likely lead the way, observers said, and any associate raises in the near future likely will serve at law firms’ peril.
“I fear it,” said Joel Henning, a consultant with Hildebrandt International.
Raises in first-year associate pay generally require law firms to increase pay for all associates across the board, which can end up costing several million dollars. Such raises also put “enormous pressures” on associates, already billing huge numbers of hours, to bill more. They also raise the ire of clients who have their own budgets to worry about.
Some firms can handle the financial hit that raises bring, especially the 10 or so firms that reported gross revenues of more than $1 billion in 2006, according to The American Lawyer, an affiliate of The National Law Journal. But raises based on reactions to other firms, as opposed to those that are carefully planned and timed, can create budget problems for most firms, Henning said.
The multitude of law firms outside of the “charmed circle” of New York will begin to feel a pinch in trying to match New York increases, he predicts. “A whole lot of excellent law firms may need to rethink their whole recruiting strategy,” he said. “That may not be such a bad thing.”
Leigh Jones is a reporter with The National Law Journal, a Recorder affiliate based in New York City.
