New Year Begins with Raises for First-Year Associates
By Anne O'Dell
In an effort to attract the best legal talent and remain competitive in their markets, several major U.S. law firms have been raising first-year associates’ salaries to unprecedented heights in recent months.
This flurry of raises marks the first noteworthy increase in U.S. associate salaries in several years.
According to a NALP study on salaries described by firms in early 2005, "Figures reported for the prior five years reveals that first-year salaries have remained stable in firms of 251 or more lawyers during this period, with a median of about $110,000. This is in sharp contrast to a 30-percent increase in the median from April 1999 to April 2000."
"I think the NALP survey is partly what started the movement," said Claudia Spielman, a recruiter for BCG Attorney Search.
"In my opinion, there didn't seem to be a need to raise salaries; but I can only assume the firms that first raised their salaries may have been having a harder time recruiting top law students, compared to other years.
"In some major cities, such as Los Angeles and New York City, as well as the Silicon Valley area, the prevailing salary of $125,000 for first-year associates in large firms has remained unchanged since April 2000."
The latest spate of salary hikes began in September 2005, when Los Angeles firm Irell & Manella announced that it would raise first-year associates' base pay to $135,000 in 2006.
The $5,000 raise immediately caused a reaction in the Southern California legal community. Quinn Emanuel Urquhart Oliver & Hedges quickly followed Irell & Manella's lead, matching its first-year salaries.
"We'd have to be brain-dead not to consider what a primary competitor is doing," Quinn Emanuel Urquhart Oliver & Hedges partner William Urquhart said to the Recorder.
Irell & Manella managing partner David Siegel stated, "We have a commitment to share our financial success with associates, and this is a modest effort to do this."
Spielman notes, "In law, as soon as one firm does something, almost always the competitors follow suit. The mini salary war started in L.A. and then moved east. The Southeast as always had much lower salaries, and I think this extra bump made them realize they are going to have an even tougher time recruiting top talent unless they raise salaries. In this case, it was a significant increase."
Other L.A. firms Gibson, Dunn & Crutcher; O'Melveny & Myers; and Paul, Hastings, Janofsky & Walker also recently announced raising first-year associates' base salaries to $135,000.
Previously, Paul, Hastings, Janofsky & Walker managing partner Greg Nitzkowski had indicated to the Recorder that his firm would not be considering across-the-board raises in 2006.
"For a global firm," he said, "the decision on the market for compensation is more complex than what happens in one law firm in one city."
Now, Nitzkowski said, ""We're committed to paying top-tier compensation in all of our markets. It's clear that the market is moving up."
The $10,000 raise announced by Paul, Hastings, Janofsky & Walker will apply to associates at the firm's California and Washington, DC, offices.
Atlanta-based firm Alston & Bird also announced on December 20, 2005, that it would raise associate pay to $115,000, a figure that was quickly matched by other Georgia firms Sutherland Asbill & Brennan, Greenberg Traurig, and Gambrell & Russell.
Other firms in the Atlanta market, such as King & Spalding; Kilpatrick Stockton; Powell Goldstein; Troutman Sanders; Bondurant, Mixson & Elmore; and Morris, Manning & Martin also announced increased salaries for all associates.
Morris, Manning & Martin partner Robert E. Saudek told the Recorder, "We felt it was crucial to be at the market or, in our case, a little ahead of the market."
Morris, Manning & Martin is giving $15,000 raises to first-, second-, and third-year associates and $20,000 to all other associates.
Smith, Gambrell & Russell managing partner Stephen M. Forte noted in the report, "When a major firm has moved and several others are giving indications that they're going to move, the market reacts—and we reacted with it."
Sutherland Asbill & Brennan managing partner Mark D. Wasserman stated that his firm will also offer increased salaries to third-year associates and above in its Washington, DC, and New York offices.
Greenberg Traurig co-leader Allen D. Altman told the Recorder, "Our firm is going to be participating in the salary bump-up for years one to seven, similar to Alston & Bird and King & Spalding."
Kilpatrick Stockton managing partner William H. Brewster said in the same report, "As we have been in the past, we will be extremely competitive with respect to associate compensation, including matching entry-level salary and providing opportunities for above-market compensation for superior performance"
Of the Atlanta market, Forte said, "We've been hearing noise in the marketplace for the last few months—not just in Atlanta. When you see what's happening in other markets, you see that it's eventually going to get here."
"The economy is much better than it was three and two years ago," said Spielman.
"I believe many firms did well in 2005, and now they are able to share that with the associates. However, I also believe the firm clients will be sharing in this as well. Whenever there is an increase in associate salaries, there will be increase in billing fees. The increase in salary will also mean more pressure for associates to bill and to be efficient with their time."
On the West Coast, Joseph Coyne, Jr., a member of Sheppard, Mullin, Richter & Hampton's executive committee, said in the Recorder, "Once three to four other Los Angeles firms do it, we have to. It's the law of supply and demand: If the market goes up, we go up.
"We will not allow ourselves to be outbid for the best legal talent."
San Francisco firms are also paying close attention to the changes in the national market, especially in nearby Los Angeles.
"This is the time of year when we watch to see what other firms do," said Morrison & Foerster chairman Keith Wetmore in a recent Recorder article.
"We've historically moved to where we perceive market to be."
Spielman believes that the increases will have the greatest effect in the Atlanta market.
"They have to compete with New York and D.C. for candidates," she said, "and I believe this increase will make it much easier to attract the top law students.
"This will likely mean that law schools will see an increase in applications as well, so the classes of 2009 and 2010 will have candidates with better GPAs and LSAT scores than in the past."
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