Two-Tier Partnership Model on the Rise in Law Firms

WilmerHale Joins the Two-Tier Trend


The legal industry continues to see a significant shift towards the two-tier partnership model, with WilmerHale being the latest major firm to adopt this structure. This move aligns WilmerHale with a growing number of prominent law firms that are transitioning from the traditional single-tier model in response to competitive market pressures.

Benefits of the Two-Tier Model

The two-tier partnership model offers several advantages, particularly in attracting, promoting, and retaining top legal talent. Key benefits include increased flexibility in talent management, enhanced competitiveness in lateral hiring, and advanced career pathways for emerging legal stars. These factors make the two-tier model an appealing option for many law firms looking to stay competitive in a dynamic industry.

WilmerHale's Assurance to Equity Partners

WilmerHale has reassured its 253 current equity partners that they will not be affected by this structural change, addressing a common concern associated with such transitions. This assurance aims to maintain stability and confidence among existing partners while embracing the new model.

A Growing Trend in Major Law Firms

WilmerHale's transition follows similar moves by firms like Cravath, Swaine & Moore, and Paul, Weiss, Rifkind, Wharton & Garrison. According to a 2023 report, an impressive 86 percent of the nation's top 200 firms now operate with at least two partnership tiers. 

The Role of Non-Equity Partners

In the two-tier system, non-equity partners occupy an intermediate position between associates and full equity partners in terms of compensation, responsibilities, and benefits. While specific arrangements vary between firms, non-equity partners generally do not have a share in firm equity or profits and usually lack voting rights. However, they are also not required to make capital contributions or share in the firm's liabilities, offering a distinct set of advantages.

The Last Bastions of Single-Tier Partnerships

Despite the widespread adoption of the two-tier model, a few notable firms remain committed to the traditional single-tier structure. Firms like Wachtell, Lipton, Rosen & Katz; Covington & Burling; Skadden, Arps, Slate, Meagher & Flom; Davis Polk & Wardwell; and Debevoise & Plimpton continue to uphold the single-tier, lockstep compensation system. These firms argue that this model aligns better with their firm culture and client service philosophy, underscoring the ongoing debate within the legal industry about the best partnership structure.

Conclusion

As the legal profession evolves, the trend towards the two-tier partnership model shows no signs of slowing down. Firms like WilmerHale are at the forefront of this shift, seeking to leverage the benefits of this structure to attract and retain top talent while remaining competitive in a challenging market. Meanwhile, the few remaining single-tier firms continue to stand by their traditional models, highlighting the diversity of approaches within the industry.