Baker Botts, Sheppard Mullin Are Latest To Cut Associate Pay

By Aebra Coe
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Law360 (April 27, 2020, 2:41 PM EDT) -- Baker Botts LLP and Sheppard Mullin Richter & Hampton LLP are among the latest firms to cut lawyer and staff pay in response to the economic crisis sparked by the coronavirus pandemic, with 20% and 12% salary reductions for associates at the two law firms, respectively.

In an internal firmwide letter obtained by Law360, Baker Botts chairman John Martin announced the cuts, which he said are meant to "protect the financial health of the firm and protect our people," even as the economy falters amid efforts to slow the spread of COVID-19.

The firm's partners are "absorb[ing] the bulk of the financial impact" through undisclosed reductions in their compensation, the letter said.

The plan includes 20% to 30% reductions in pay for counsel, 20% reductions for associates, and 0% to 25% reductions for staff, based on their salaries, with those making less than $70,000 escaping the cuts, the letter said.

Martin said in a public statement Monday, "The unprecedented financial stress on clients and the global economy due to the pandemic has prompted us to make the difficult but necessary decision to reduce salaries temporarily, with greater reductions at higher levels, to protect our firm, retain our extraordinarily talented team, and preserve the income of our most vulnerable employees."

In addition to pay cuts, the law firm is delaying its new associate start dates until 2021, and it will potentially award interim bonuses to associates and counsel who are found to be "exceptional contributors," Martin said in the internal letter.

The cost-cutting provisions will remain in place from May 1 through July 31, when the law firm will reevaluate how to proceed, the letter said.

At Sheppard Mullin, pay cuts include a 12% reduction for associates, special counsel and staff attorneys through the end of the year; 5% reductions for staff members earning between $70,000 and $90,000 a year; and 10% reductions for staff earning more than $90,000, the firm said in a statement Monday.

According to the firm, partners will also see reduced compensation and will "shoulder more of the compensation decreases than anyone else in the firm."

"At the end of the year, we will measure the percentage reduction in compensation caused by the pandemic for each group and make sure the partners have contributed a meaningfully greater percentage," the firm's statement said. "As always, our goal is to treat all of the Sheppard Mullin family fairly and with consideration, while making sure we remain a strong firm."

The firm is also furloughing an additional 17 staff members after furloughing 33 two weeks ago, with the expectation they will return to work in two to three months. Those furloughed employees have access to assistance grants funded by partners if there is a gap in time while they wait to receive unemployment checks, the statement said.

In addition to the news from Baker Botts and Sheppard Mullin, midsize New York City law firm Davis & Gilbert LLP said Monday it is "substantially" reducing partner draws and temporarily limiting partner distributions; reducing associate, senior attorney and counsel salaries by 15%; and reducing salaries for staff earning more than $70,000 a year by between 10% and 15%.

Dentons' Australia arm announced it was cutting staff pay by 20% and partner pay by half, according to a Monday report by Legal Week.

Other firms implementing similar measures in recent days include Akerman LLP, Husch Blackwell LLP, Travers Smith LLP, Orrick Herrington & Sutcliffe LLP's U.K. branch, Dinsmore & Shohl LLP, McDermott Will & Emery LLP, Clifford Chance LLP, Venable LLP and Ogletree Deakins Nash Smoak & Stewart PC.

--Additional reporting by Kevin Penton. Editing by Marygrace Murphy.

Update: This story has been updated to include the announcement of pay cuts at Sheppard Mullin Richter & Hampton LLP.

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