How Biglaw’s Associate Salary Raises Impacts Legal Employment

Posted: Jun 16  |  By: Nadia Jones

For the last nine years or so, it has been understood, if not outright assumed, that a first-year associate in Biglaw would work for a $160,000 salary. The National Association for Law Placement (NALP)’s 2015 Associate Salary Survey noted that the $160K figure had stood as the industry benchmark since 2008 and showed little signs of budging.

That all changed in early June when Cravath, Swaine & Moore announced a substantial increase in base salaries. Effective July 1, Cravath’s first-year associates will earn $180,000, with eighth-years bumping up to $315,000. In doing so, Cravath established the new industry compensation benchmark:

1st year – $180,000

2nd year – $190,000

3rd year – $210,000

4th year – $235,000

5th year – $260,000

6th year – $280,000

7th year – $300,000

8th year – $315,000

Biglaw is a competitive field and news travels fast, so the increase quickly percolated through the rest of the industry. Above the Law, which broke the news of the Cravath pay raise, has been tracking Biglaw firms which have followed suit. To date, dozens have matched the basic framework of the Cravath scale, and even exceeded it in a few cases. This means the salary precedents are now in force in most major US markets, including New York, Los Angeles, Chicago, Washington DC, Boston, Miami, San Francisco, and Dallas.

Why now, after nearly a decade of Biglaw salary stability? There are number of reasons for the Biglaw associate salary increases. Above the Law, who has been reporting on this topic at length, suggested that inflation in markets where most Biglaw firms are located is a factor. Other factors include a steady rise in the average fee increase charged to clients, and the profits per partner that also been steadily rising.

The market for entry-level associates at Biglaw firms may also provide a clue. According to NALP, 95.3% of 2016 graduates in Biglaw firms received offers after their 2015 summer associate program. That’s a 1.9 percentage point uptick from the previous year. The low-water mark was a mere 69 percent during the financial crisis in 2009. And acceptance rates are falling slightly as well. With Biglaw having to work harder to locate and retain talent, an across-the-board salary hike may have been a factor that led to the increase.

It’s clear that Biglaw is quickly lining up behind the new salary reality. What is less clear is how they will pay for the new salaries. For one firm, just a few days after announcing raises, support staff layoffs were announced. Paying for the increases with higher billing rates is another matter. Some top clients already pay less, or not at all, for first-year associate work. In an interview with Bloomberg Law, Verizon general counsel Craig Silliman shrugged off the Biglaw move as “about their internal business model” but emphasized that in-house counsel has options and will not simply roll over if faced with a fee increase.

The pay bump is also a reminder that Biglaw salaries are firmly entrenched in the industry’s upper tier. According to US Bureau of Labor Statistics data as of May 2015, the median annual salary for a working lawyer is just under $116,000. Put simply, year one at Biglaw represents a 50 percent boost over the typical salary for all attorneys, not just those at the entry level.

How the salary increases will affect in-house compensation and smaller firms remains unclear, because most of the early responses have been at the Biglaw and major market level. In 2015, NALP salary survey data showed a compensation gap of about $25,000 between Biglaw and firms of all sizes. Early indications show that the $25,000 bogey could stick around. Above the Law reports that Locke Lord’s pay increase was not in line with Cravath’s, and sets first-year compensation in “small markets” such as Atlanta, Miami, Providence, and Sacramento at $155,000.

List of Cities and Firms that Have Announced Associate Raises

  1. Abu Dhabi, UAE – Akin Gump
  2. Albany, NY – Boies Schiller, & Flexner L.L.P
  3. Armonk, NY -Boies Schiller, & Flexner L.L.P
  4. Atlanta, GA – Locke Lord, Paul Hastings
  5. Austin, TX – Akin Gump, Baker Botts, Bracewell, Dechert, Locke Lord, McKool Smith, Vinson & Elkins, Wilson Sonsini
  6. Baltimore, MD – Hogan Lovells
  7. Beijing, China – Davis Polk, Latham & Watkins
  8. Boston, MA – Cooley, Dechert, Goodwin Procter, Gunderson Dettmer, Latham & Watkins, Locke Lord, McDermott Will, Proskauer Rose, Ropes & Gray, Sidley Austin, Skadden Arps, Weil Gotshal, White & Case, Wilson Sonsini
  9. Broomfield, CO – Cooley
  10. Century City, CA – Gibson Dunn, Latham & Watkins, O’Melveny & Myers, Sidley Austin
  11. Charlotte, NC – Cadwalader, Dechert, Mayer Brown, Winston & Strawn
  12. Chicago, IL – Baker & McKenzie, Dechert, DLA Piper, Jenner & Block, Kirkland & Ellis, Latham & Watkins, Locke Lord, Mayer Brown, McDermott Will, Paul Hastings, Proskauer Rose, Quinn Emanuel, Ropes & Gray, Sidley Austin, Skadden Arps, Winston & Strawn
  13. Cincinnati, OH – Locke Lord
  14. Costa Mesa, CA – Greenberg Gross
  15. Dallas, TX – Akin Gump, Baker Botts, Baker & McKenzie, Bracewell, Gibson Dunn, Locke Lord, McDermott Will, McKool Smith, Sidley Austin, Vinson & Elkins, Weil Gotshal
  16. Denver, CO – Arnold & Porter, Gibson Dunn, Hogan Lovells, Morrison & Foerster
  17. Dubai, UAE – Akin Gump
  18. East Palo Alto, CA – DLA Piper, Ropes & Gray
  19. Fort Lauderdale, FL -Boies Schiller, & Flexner L.L.P
  20. Fort Worth, TX – Akin Gump
  21. Hanover, NH -Boies Schiller, & Flexner L.L.P
  22. Hartford, CT – Bracewell, Dechert, Locke Lord
  23. Hollywood, FL -Boies Schiller, & Flexner L.L.P
  24. Hong Kong, China – Akin Gump, Cleary Gottlieb, Davis Polk, Latham & Watkins
  25. Houston, TX – Akin Gump, Arnold & Porter, Baker Botts, Baker & McKenzie, Bracewell, Cadwalader, Hogan Lovells, Kirkland & Ellis, Latham & Watkins, Locke Lord, Mayer Brown, McDermott Will, McKool Smith, Orrick, Paul Hastings, Quinn Emanuel, Sidley Austin, Simpson Thacher, Skadden Arps, Susman Godfrey, Vinson & Elkins, Weil Gotshal, Willkie Farr, Winston & Strawn, Yetter Coleman
  26. Irvine, CA – Akin Gump, Dechert, McDermott Will, Orrick
  27. Jersey City, NJ – Hughes Hubbard
  28. Kansas City, MO – Hughes Hubbard
  29. Las Vegas, NV -Boies Schiller, & Flexner L.L.P
  30. London, UK – Akin Gump, Cadwalader, Davis Polk, Latham & Watkins, Simpson Thacher
  31. Longview, TX – Akin Gump
  32. Los Angeles, CA – Akin Gump, Cooley, Covington & Burling, Dechert, Gibson Dunn, Goodwin Procter, Gunderson Dettmer, Hogan Lovells, Hueston Hennigan, Hughes Hubbard, Irell & Manella, Kirkland & Ellis, Latham & Watkins, Locke Lord, Mayer Brown, McDermott Will, McKool Smith, Milbank Tweed, Morrison & Foerster, Munger Tolles, O’Melveny & Myers, Orrick, Paul Hastings, Proskauer Rose, Quinn Emanuel, Sidley Austin, Simpson Thacher, Skadden Arps, Sullivan & Cromwell, Susman Godfrey, White & Case, Wilson Sonsini, Winston & Strawn
  33. Madrid, Spain – Davis Polk
  34. Marshall, TX – McKool Smith
  35. McLean, VA – Morrison & Foerster
  36. Miami, FL – Baker & McKenzie,Boies Schiller, & Flexner L.L.P, Hughes Hubbard, Locke Lord, McDermott Will, Weil Gotshal
  37. Menlo Park, CA – Davis Polk, Goodwin Procter, Hogan Lovells, Kramer Levin, Latham & Watkins, McDermott Will, O’Melveny & Myers, Orrick, Shearman & Sterling, Winston & Strawn
  38. Morristown, NJ – Locke Lord
  39. Mountain View, CA – Dechert, Fenwick & West
  40. New Orleans, LA – Locke Lord
  41. New York City, NY – Akin Gump, Arnold & Porter, Baker Botts, Baker & McKenzie,Boies Schiller, & Flexner L.L.P, Bracewell, Brown Rudnick, Cadwalader, Cahill Gordon, Cleary Gottlieb, Clifford Chance, Cooley, Covington & Burling, Cravath, Davis Polk, Debevoise & Plimpton, Dechert, Desmarais LLP, DLA Piper, Freshfields, Fried Frank, Gibson Dunn, Goodwin Procter, Gunderson Dettmer, Hogan Lovells, Holwell Shuster, Hughes Hubbard, Kirkland & Ellis, Kramer Levin, Latham & Watkins, Locke Lord, Mayer Brown, McDermott Will, McKool Smith, Milbank Tweed, Morrison & Foerster, O’Melveny & Myers, Orrick, Paul Hastings, Paul Weiss, Proskauer Rose, Quinn Emanuel, Ropes & Gray, Schulte Roth, Shearman & Sterling, Sidley Austin, Simpson Thacher, Skadden Arps, Sullivan & Cromwell, Susman Godfrey, Vinson & Elkins, Weil Gotshal, White & Case, Willkie Farr, Wilson Sonsini, Winston & Strawn
  42. Newark, NJ – Latham & Watkins, Winston & Strawn
  43. Newport Beach, CA – Hueston Hennigan, Irell & Manella, O’Melveny & Myers
  44. Oakland, CA -Boies Schiller, & Flexner L.L.P
  45. Orange County, CA – Gibson Dunn, Latham & Watkins, Paul Hastings
  46. Orlando, FL -Boies Schiller, & Flexner L.L.P
  47. Palo Alto, CA – Arnold & Porter, Baker Botts, Baker & McKenzie,Boies Schiller, & Flexner L.L.P, Cooley, Gibson Dunn, Kirkland & Ellis, Mayer Brown, Morrison & Foerster, Paul Hastings, Sidley Austin, Simpson Thacher, Skadden Arps, Sullivan & Cromwell, White & Case, Wilson Sonsini, Vinson & Elkins
  48. Paris, France – Davis Polk
  49. Philadelphia, PA – Akin Gump, Dechert, Hogan Lovells
  50. Portland, OR – Orrick
  51. Princeton, NJ – Dechert, Weil Gotshal
  52. Providence, RI – Locke Lord, Weil Gotshal
  53. Redwood City, CA – Gunderson Dettmer
  54. Redwood Shores, CA – Covington & Burling, McKool Smith, Quinn Emanuel, Weil Gotshal
  55. Reston, VA – Cooley, DLA Piper
  56. Richmond, VA – Vinson & Elkins
  57. Riyadh, Dubai – Latham & Watkins
  58. Sacramento, CA – Locke Lord, Morrison & Foerster, Orrick
  59. San Antonia, TX – Akin Gump, Bracewell
  60. San Diego, CA – Cooley, DLA Piper, Gunderson Dettmer, Latham & Watkins, Morrison & Foerster, Paul Hastings, Wilson Sonsini
  61. San Francisco, CA – Akin Gump, Arnold & Porter, Baker Botts, Baker & McKenzie, Cooley, Covington & Burling, Dechert, DLA Piper, Fenwick & West, Gibson Dunn, Goodwin Procter, Gunderson Dettmer, Hogan Lovells, Keker & Van Nest, Kirkland & Ellis, Latham & Watkins, Locke Lord, Morrison & Foerster, Munger Tolles, O’Melveny & Myers, Orrick , Paul Hastings, Quinn Emanuel, Ropes & Gray, Shearman & Sterling, Sidley Austin, Vinson & Elkins, Wilson Sonsini, Winston & Strawn
  62. San Francisco/SOMA, CA – Wilson Sonsini
  63. Sao Paulo, Brazil – Davis Polk
  64. Seattle, WA – Bracewell, Cooley, Fenwick & West, Orrick, Quinn Emanuel, Susman Godfrey, Wilson Sonsini
  65. Shanghai, China – Fenwick & West, Latham & Watkins
  66. Stamford, CT – Locke Lord
  67. Tokyo, Japan – Davis Polk, Latham & Watkins
  68. Tysons Corner, VA – Hogan Lovells
  69. Washington, D.C. – Akin Gump, Arnold & Porter, Baker Botts, Baker & McKenzie,Boies Schiller, & Flexner L.L.P, Bracewell, Cadwalader, Cahill Gordon, Cleary Gottlieb, Clifford Chance, Cooley Davis Polk, Covington & Burling, Debevoise & Plimpton, Dechert, DLA Piper, Freshfields, Fried Frank, Gibson Dunn, Goodwin Procter, Hogan Lovells, Hughes Hubbard, Kirkland & Ellis, Latham & Watkins, Locke Lord, Mayer Brown, McDermott Will, McKool Smith, Milbank Tweed, Morrison & Foerster, O’Melveny & Myers, Orrick, Paul Hastings, Paul Weiss, Proskauer Rose, Quinn Emanuel, Robbins Russell, Ropes & Gray, Schulte Roth, Shearman & Sterling, Sidley Austin, Simpson Thacher, Skadden Arps, Sullivan & Cromwell, Vinson & Elkins, White & Case, Willkie Farr, Wilson Sonsini, Winston & Strawn, Weil Gotshal
  70. West Palm Beach, FL – Locke Lord
  71. Wilmington, DE – Paul Weiss, Skadden Arps, Wilson Sonsini

A 12.5 percent salary increase for some of the most highly compensated professionals in the industry certainly qualifies as a market disruption, and it will take time to sift through the long-term impact at all levels of legal staffing.

For more industry insights and a comprehensive resource for salaries in the legal industry, get your free copy of the Parker+Lynch 2016 Salary Guide.

 

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