Extra! Extra! Law Firms Battle For Top Pay Hike As Giddy Associates Cheer Them On

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As law firms held their collective breath and hoped that these increases would satiate associates hawkishly watching their every move, many firms had outstanding fiscal years in 2006 and it quickly became apparent that there was still room in their deep pockets for a second wave of pay hikes. The early battle cries of firms locking horns to best each other in the quest to offer top dollar flamed into full-on war this week as several prominent New York firms announced plans to once again raise first-year associate pay.

New York-based Simpson Thacher & Bartlett announced Jan. 22 that it was raising first-year associate salaries to $160,000. Before the memo even hit associate inboxes, a contingency of top New York firms followed suit, including Paul, Weiss, Rifkind, Wharton & Garrison; Sullivan & Cromwell; and Cadwalader, Wickersham & Taft. Today, Skadden, Arps, Slate, Meagher & Flom said it would also increase salaries to $160,000.

With New York firms leading the charge, D.C. and West Coast firms have had their hand forced-either hike pay or risk losing prestige and the ability to attract top talent. The market standard in Washington for first-years has been $135,000, up from $125,000 in 2005, with some firms such as Skadden and Jones Day topping out salaries at $140,000, with bonuses reaching $15,000. With Skadden's move to raise salaries in its D.C. office to $160,000 to match its New York rates, salary hikes in the District are as likely as political spats on the Hill. D.C.-based Hogan & Hartson announced that will raise associate salaries in its New York office to $160,000, but has not yet confirmed whether the increase will be extended to its Washington office.

California firms are watching the pay hikes closely. Quinn Emanuel Urquhart Oliver & Hedges is one of the few California firms that had raised associate salaries to $145,000 to match New York rates. So far, it has not announced plans to raise rates again to reflect the most recent salary increases. Simpson Thacher & Bartlett's salary increase, however, applied to all its offices, including its Palo Alto and Los Angeles locations. Most major California-based firms, though, have held rates at $135,000.

With the current salary increases steaming up and firms in hot pursuit of salary leaders, industry insiders say that profitable California-based firms will almost certainly match the pay hikes, at least in their New York offices. Regional West Coast firms will have to make tough decisions as they weigh the benefits of boosting pay against their bottom lines. Firms that decide against raising salaries risk becoming merely regional players as they slip away from being able to compete at the national level.

The pay wars have just begun. Check back frequently for the latest news, as we bring you ringside updates on the battle for pay dirt!

According to an internal memo, White & Case will increase base salaries for New York associates in the following classes as follows:

Class / 2007 Base Salary

2006 $160,000
2005 $170,000
2004 $185,000
2003 $210,000
2002 $230,000
2001 $250,000
2000 $265,000
1999 $280,000

Increases for associates in the class of 1998 and senior will be determined on an individual basis.

Simpson Thacher & Bartlett LLP.

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