Schnader Harrison, Alston & Bird Announce Pay Cuts

By Anne Urda

Law360, New York (July 01, 2009) -- With law firm pay cuts becoming a near-daily occurrence, Schnader Harrison Segal & Lewis LLP revealed Wednesday that it would be slashing salaries across the board for all associates and partners, while Alston & Bird LLP opted to trim $5,000 from associates' pay.

On Wednesday, Philadelphia-based Schnader confirmed that it would be cutting $10,000 dollars from associate salaries — while partners have volunteered to take a 5 percent pay cut — citing an industry shift on the compensation issue.

"It is because the industry has been adjusting associate compensation and making it more performance-based, which is sensible," said firm chairman Ralph Wellington, according to the Philadelphia Inquirer.

A firm representative pointed out that because the cuts were done on an annualized basis, associates will face a $5,000 cut this year, while partners will face a 2.5 percent cut this year.

Staff members that are earning more than $60,000 annually will also see their paychecks lightened by 3 to 5 percent, according to the firm.

The announcement coincided with Alston & Bird reportedly instituting a $5,000 pay cut for all associates for the remainder of the year, according to legal tabloid Above The Law.

The firm has claimed that the decrease will be temporary, leaving the door open for salary levels to return to their normal rates in 2010.

A press contact for Alston & Bird could not be reached for comment on Wednesday.

The news comes on the heels of Florida powerhouse Ruden McClosky reportedly cutting the pay of associates and nonequity partners by 9 percent, with equity partners unlikely to be reimbursed the 18 percent of their pay previously held back.

The Daily Business Review reported Tuesday that the firm had decided to impose the salary reductions after taking a serious hit in the realm of real estate transactional work.

Ruden was hardly alone in embracing cutbacks, with Venable LLP also enacting sweeping pay cuts earlier this week.

Dozens of other firms have announced similar measures, while some have opted for salary cuts with a twist.

Starting in July, Kaye Scholer LLP intends to cut the salaries of junior associates who are not on track to hit their billable-hour targets for 2009, opting for a surgical strike rather than an across-the-board cut.

For the rest of the year, the New York-based firm will reduce by 20 percent the salaries of first- and second-year associates who failed to hit their June 1 billable targets, suggesting that they will not clock 1,600 hours by year's end, according to a source familiar with the matter.

Third-year associates and those more senior who failed to hit the same marks will also see their wallets lightened by 15 percent for the latter half of the year, the source said.

The change will be reflected in the attorneys' July 1 paychecks, but the firm will retroactively reimburse anyone who does meet the 1,600-hour target, according to the source.

Kaye Scholer's move mimics that of Pillsbury Winthrop Shaw Pittman LLP, which just instituted a plan to base salary reductions of up to 20 percent on an attorney's productivity.

Not all associates will see their salaries reduced, and the most productive attorneys will be exempted from the cuts, firm spokeswoman Sandi Sonnenfeld said in mid-June.

Firms are continuing to mull the right way to survive the economic downturn, with Drinker Biddle & Reath LLP opting to slash associate salaries in mid-May to $105,000 and insisting that the young attorneys enter a six-month intensive training program.

The multipronged training program is meant to make associates more valuable to clients and educate young lawyers in traditional legal skills and clients' backgrounds, firm representatives said at the time.

Other firms, including Latham & Watkins LLP, Orrick Herrington & Sutcliffe LLP and Sheppard Mullin Richter & Hampton LLP, have frozen salaries firmwide.

--Additional reporting by Jacqueline Bell, Erin Marie Daly and Ryan Davis