News of the salary hike announced last week by Cravath Swaine & Moore LLP has already spread. First-year associate compensation is set to be increased from $160,000 to $180,000. Some law firms have matched, some have pushed back.
I like to keep up-to-date on the latest news regarding salary hikes, layoffs, business development, and associate life/work balance at these robust law firms. After all, my career started as a Litigation Associate at NYC Biglaw way back in 2000, when many Biglaw firms made a large salary adjustment to $125,000.
At that time, I was more than thrilled at the prospect of making that sort of money. I had just graduated from law school and was broke. As a law student at Duquesne University, I had been living in a dilapidated, poorly furnished apartment in the Mt. Washington section of Pittsburgh, Pennsylvania, paying $225/month in rent. As a Biglaw Associate, I could now afford to upgrade my lifestyle by moving into a “cozy” dingy one-bedroom on East 83rd Street and even purchase my first new couch. If I had a few bucks left over after rent and loan payments, maybe even a new television with some DVDs.
Little did I know that the salary hike my Biglaw first year class was about to receive would come with a PRICE. Not just in terms of longer hours, but with a change in firm culture, people, and an “expectation” that 3:00 am phone calls were now the norm. Maybe the salary hike was the right move for the Davis Polks or Cravaths of the world, but I still don’t believe it was the right move for my old law firm.
With that said, here are my three reasons for Biglaw to resist across the board salary increases to $180,000:
It’s Not the Right Move for Everyone
Biglaw is a business. Partners think in terms of margins, profits, and return on investments—something I have become more proficient in understanding after hanging up my own shingle. Trying to keep up with a certain firm located at Worldwide Plaza is simply a recipe for disaster if you are not competing for the same clients, cases, legal matters, etc. I get it, all of the law firms in NYC want to compete for the best legal talent from NYU, Columbia, Harvard, and maybe even a few non-first tier schools (like where I came from, hopefully). We are now recovering from a recent recession, one that saw a record number of law school graduates end up with crippling amounts of debt and underemployed (and, incidentally, many of them working at these same Biglaw firms as temporary project staff). If firms need to start shrinking budgets and cutting permanent staff to save money, then these firms should definitely not be raising salaries.
In any manner, paying the $180,000 won’t put you at the same level as Cravath for recruits. Cravath has the prestige, sexier clients, prettier office, and secondary opportunities. It wins the salary tie-breaker. And by a long margin.
The Clients Won’t Pay For It
David Leitch, Bank of America’s global general counsel, wrote in an e-mail reviewed by the Wall Street Journal,
“[w]hile we respect the firms’ judgment about what best serves their long-term competitive interests, we are aware of no market-driven basis for such an increase and do not expect to bear the cost of the firms’ decisions.”
The e-mail makes it clear that the bank would not absorb the cost of their clients free-spending habits. According to the article in the Wall Street Journal, Bank of America has previously hired a number of Biglaw firms as outside counsel in the past. Skadden Arps, Paul Weiss, and Clearly Gottlieb were all identified in the article.
Other Chief Executive Officers have also opined that $180,000 for a first-year associate simply is not justified. They simply point to other lawyers within their own in-house departments with more than 10-20 years of experience that do not make that kind of money. Many of these clients additionally refuse to pay the hourly rates charged for first-year associates.
It is obvious, then, that Biglaw clients simply will not bridge the salary gap.
Technology Will Change the Biglaw Associate Workload
I can still remember the days as a first-year associate. My Friday nights were spent sitting in a cramped room reviewing box after box of esoteric IP documents that no one could understand. It was my responsibility to manually mark each one “responsive,” “non-responsive,” or “hot.” Partners would walk by the conference room and laugh, but laugh knowing each hour I was there was an extra hour to add to the bill.
Those days are over.
The advances in e-discovery since 2000 have all but obliterated that kind billable work, once a staple of associate billing at Biglaw. So far technology has only affected the jobs of junior attorneys, but those times will be changing.
According to Ted Dyer, one of Australia’s foremost legal sector consultants, “many [law firms] are underestimating the rapid pace of advancing in artificial intelligence. Some law firms are sleepwalking towards a disaster. Particularly those with growth strategies premised on increasing head counts.”
Mr. Dyer’s statement comes on the heels of DLA Piper’s announcement that it has adopted Kira Systems to implement an “artificial intelligence tool” for document reviews relating to mergers and acquisitions. Corporate lawyers including those in mergers and acquisitions could be among many whose responsibilities would be replaced by this artificial technology.
More attorney jobs at Biglaw are likely to shrink in response to other advances in artificial technology as well, such as IBM’s legal reboot “Ross” and machine-learning systems such as Google Brain and Google DeepMind.
Many of the Biglaw firms bank on the simple business mantra that more heads mean more profits. The advances in technology, however, may turn that business motto on its head.
My Conclusion—Biglaw Don’t Do It
My two cents as a former Biglaw associate—a job paying a six figure salary is better than no job at all.
Technology in the legal industry is rapidly evolving, with new technology solutions emerging on a daily basis. The landscape for Biglaw will be changing drastically in the near future, especially as costs continue to rise.
Biglaw, please do not ignore these issues. Do what is right for your firm and your associates. Even if it will not be the most popular short-term decision.
