Bingham Announces New 'Merit Lockstep' Pay System

By Elaine Meyer

Law360, New York (October 06, 2009) -- Bingham McCutchen LLP plans to usher in a hybrid “merit lockstep” compensation system by the end of 2009, slightly defying the current trend of law firms that have implemented full-on merit-based pay systems or made across-the-board salary cuts in response to economic pressures.

Under the new approach, the firm will retain a salary class level system for associates and counsel but will decide bonuses based on merit factors other than just billable hours, according to an internal memo that was posted on the legal blog Above the Law Monday.

The memo's accuracy was confirmed to Law360 by a law firm representative Tuesday.

The new compensation system responded to firm employees' "desire to maintain the gradualism and relative predictability of an overall lockstep approach," the memo said.

"We are nevertheless keenly aware of current marketplace conditions and believe that to maintain our continued success, we need to incorporate a merit component into our overall lockstep structure," the memo said.

Practice area and group leaders will now have a part in determining compensation, and attorneys' financial contributions will also be a factor, the firm said.

“It is thus expected that bonuses will be more heavily weighted toward midlevel associates and counsel, as an attorney’s profitability — and corresponding value that he/she provides to our clients — generally increases with his/her years of experience and expertise gained,” the lockstep merit memo said.

“[O]ur new merit bonus system will recognize critical though less tangible performance measures, including commitment, teamwork and overall firm citizenship as important factors in determining bonus eligibility at all class levels and in all economic cycles,” the memo said.

The announcement of the merit lockstep approach came after months of discussion between senior staff and firm and practice area leadership, according to the memo.

Bingham McCutchen's pay restructuring is the latest instance of a law firm changing its compensation system in response to the global economic downturn, though it diverges somewhat from what a number of firms have done.

Many have eliminated lockstep compensation altogether in favor of merit compensation or implemented across-the-board salary cuts.

Intellectual property law firm Townsend and Townsend and Crew LLP told associates that it plans to cut salaries in 2010 — starting first-years at $145,000 — and that by 2011, it will launch a merit-based pay scheme, according to an internal memo posted by Above the Law on Sept. 25.

Earlier in September, Fulbright & Jaworski LLP reportedly did away with a lockstep advancement program for associates in favor of competency-based programs, according to an internal e-mail cited by Above the Law.

In July, Morgan Lewis & Bockius LLP said it was eliminating lockstep compensation in favor of a system that was more closely linked to performance, experience and competency.

It was one of several moves the firm made as it continued adjusting staffing and compensation models to address client demands, a spokesman told Law360 at the time.

And, on the salary-cutting front, King & Spalding LLP reportedly said in its own internal memo that it planned to slash employees' salaries — targeting associates, of counsel and staff members — effective Sept. 1.

Changes and reductions made to associate pay will likely outlast the recession as law firms increasingly move toward merit-based systems of compensation, legal experts have said.

When the downturn ends, large law firms will likely not return to the $160,000 benchmark for first-year associates, consultants have said.

“There is no longer any pressure for law firms to pay the salaries that the top-tier law firms are paying,” Jerry Kowalski, founder of legal consulting firm Kowalski & Associates, has told Law360.

--Additional reporting by Erin Fuchs, Hilary Russ and Shannon Henson