Finance

At least 6 law firms are undoing their pay cuts after avoiding their nightmare scenarios

  • Holland & Knight, Katten, Cadwalader and other firms that reduced pay for partners, associates or staff have fully or partly undone the freezes.
  • The news comes after months of smaller paychecks, with many law firm leaders realizing that revenues haven’t taken the hit they feared.
  • Visit Business Insider’s homepage for more stories.

As the new coronavirus spread across the US earlier this year,pay cuts spread quickly through Big Law. But with many firms finding that revenue and demand for their services didn’t undergo the crippling blow they had feared, several have partly or fully rolled back the reductions.

Compensation is by far the greatest outlay for law firms, far ahead of leases, travel, and other expenses like legal databases. Many firms — more than 100, according to the legal blog Above The Law — pared back in that category, either by reducing or delaying normal draws and profit distributions for partners or by shrinking paychecks for associates, counsel and staff, or both.

At the start of July, Cozen O’Connor began paying partners their normal distributions after having initially cut them by 10% to 20%. The firm, known for its big group of lawyers who work on insurance coverage disputes, will also make partners whole for the earlier reductions on Aug. 15 rather than waiting until year’s end, as initially planned, a firm representative said in an email.

At Cadwalader, Wickersham & Taft, known for serving financial institutions and investment firms, the pay cuts that went into effect for salary earners in March were rolled back earlier this month, according to an email from managing partner Patrick Quinn. The firm also expects partner draws to return to normal, a spokesman said.

“I am pleased to announce that, effective August 1, we will reverse the temporary 25% and 10% compensation reductions for associates, special counsel, counsel, senior attorneys, staff attorneys, paralegals and administrative staff going forward,” Quinn wrote. “The return to full compensation levels will begin with your first August paycheck.”

A spokesman for Lowenstein Sandler, which halted certain profit distributions to equity partners for February, March and April, said the firm made bigger-than-usual payments in May, June and July after it appeared the impact of the pandemic on the firm’s business wasn’t as bad as initially feared.

And at least three other firms have reduced the pay cuts they imposed. A representative of Holland & Knight, which reportedly cut compensation by 10% to 17.5% earlier this year, said the firm reduced pay cuts for associates and staff by 30% to 50% at the end of June and would review the reductions again in August.

At Katten Muchin Rosenman, the compensation reduction for certain lawyers and business professionals was dropped from 20% to 10%, and at Bryan Cave Leighton Paisner, a global law firm that trimmed paychecks for salaried employees making over $40,000 by 15% earlier this year, the cut has been reduced to 7.5% starting on Aug 1.

In mid-May, Hugh Simons, a former chief operating officer at Ropes & Gray, wrote that 69 firms had cut lawyer salaries. His analysis showed that firms with lower profit margins — in the 20% to 30% range — were far more likely to have cut pay than those with higher margins, which in the legal industry translates to 40% to 50% or even higher.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

one × three =

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Most Popular

To Top