Sometimes dollars donÂ’t make sense
While local law firms are staying competitive, it doesnÂ’t always pay to follow the nationwide trend to raise salaries for first-year associate lawyers.
A Texas pay raise explosion was sparked in mid-July when Houston-based Vinson & Elkins raised its first-year associate pay from $135,000 to $160,000, part of a nationwide move to match New York salaries. The firmÂ’s pay hike prompted fellow Houston firm Andrews Kurth to raise salaries the next day, followed by a host of other big Texas law firms, including Dallas firms Haynes Boone and Thompson & Knight.
Kelly Hart & Hallman Managing Partner Dee Kelly Jr., who declined to disclose first-year associate salaries, said the firm has “acted appropriately” in the wake of the nationwide salary adjustments, adding that national firms with regional offices are more likely to match salaries than Fort Worth-based firms.
“To remain competitive we have to always look at salaries being paid by other firms in the state and in the country,” Kelly said.
The move to match New York salaries is a matter of reputation, said David Lat, editor in chief of abovethelaw.com, a Web site that has been tracking the nationwide pay raise. But that reputation to “play ball with the big boys,” he said, isn’t always economically sound.
“It’s one thing for big New York law firms with large profits and mergers and acquisition practices,” Lat said, “but it’s another thing for a firm in Fort Worth to pay that kind of money.”
Fort Worth-based Cantey Hanger, with more than 80 attorneys in three Texas locations, does not pay its first-year associates the new standard, said partner Michael Appleman, who would not disclose the firmÂ’s salaries.
“We’ve made a decision on what we pay our first-year associates,” he said. “We hope that it’s competitive in conjunction with all the other things we have to offer, in the form of salary bonuses, benefits and quality of life.”
Like any other business, Appleman said, the firm balances the books to ensure the salaries it pays are appropriate and cost-efficient.
“We don’t manufacture or sell widgets, but the product that we have is a function of the cost of the people we employ and their abilities,” he said. “As far as firms are concerned, you have to pay (associates) less than your bringing in to keep the doors open.”
As salaries go up, Lat explained, so do the billable hours associate lawyers must work to balance income and expenses.
“With this kind of overhead … the firms have to stay busy enough to justify those salaries,” Lat said, “and if the work dries up, they may even have to lay off people,” which he described as a public relations nightmare.
Some firms, such as Dallas-based Jackson Walker, have moved begrudgingly toward the $160,000 level. A
first-year Jackson Walker associate earns $140,000 base salary, according to
its Web site, but a guaranteed $20,000 bonus puts the firm on par with
competitors.
Although Cantey Hanger does not write the $160,000 checks many other larger firms do, Appleman said the firm has not ruled out an eventual increase.
“(Associates) would have to bill a lot of hours at a higher rate to justify that salary,” he said, “but on the other hand, the argument you get from the firms that are paying it is they need to pay that in order to attract and retain the lawyers they want to hire.
“It’s not just competition from other law firms but competition from the tech industry, the business industry and other areas of business where smart people are being recruited,” he said.
At the end of the day, Lat said, the problem is really “supply and demand.”
“They want the best people,” he said, “and they have to pay for them.”
Contact Tronche at jtronche@bizpress.net
