40% of Firms Cut Starting Associate Pay, While 44% Consider 2010 Cut

Leaders of American’s top 200 law firms are more optimistic than they were a year ago. But associates may not be sharing that enthusiasm.

An American Lawyer survey of law firm leaders found that 40 percent of the firms had reduced starting pay for their associates, and 44 percent are considering cuts next year. Venable managing partner Karl Racine sees permanent change afoot. “With associate salaries, there is no doubt there is a correction taking place," he told the American Lawyer (sub. req.).
Pay hits weren’t the only way associates suffered. Sixty percent of the firms had deferred associate start dates in 2009, and 43 percent expected to do so next year. The practice could become the norm, according to Davis Wright Tremaine managing partner Dave Baca. "It is my prediction that the industry is moving to a January start date, which makes a lot more sense," since it would come after year-end collections, Baca told the American Lawyer.
Cost-cutting also spurred associate layoffs and delayed the implementation of technology upgrades, the story says. It’s also producing smaller associate classes. Seventy-two percent of law firm managers said they expect their 2010 first-year associate class to be smaller.
The emphasis on reducing costs is helping the law firms’ bottom lines—and managers’ optimism.

Sixty percent of law firm leaders responding to the survey said they were somewhat optimistic about 2010, and 6 percent said they were very optimistic. Only 24 percent said they were uncertain about the year ahead, compared to 53 percent who were uncertain last year.
The optimism translates to increased expectations about profits per partner. Sixty-eight percent of the respondents expect profits per partner to increase in 2010, although only 21 percent expected the increase to be greater than 5 percent.

"A lot of expenses have been wrung out of the system," Morrison & Foerster chairman Keith Wetmore tells the American Lawyer. "We will see the benefit of that in 2010."
There is some good news for associates, though. Eighty-one percent of the respondents said it was unlikely that their firms would lay off associates or staff in 2010.