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DLA Piper imposes salary cuts, may eliminate lockstep

DLA Piper imposes salary cuts, may eliminate lockstep

In what appears to be a major overhaul of its business, DLA Piper has joined the growing number of firms reducing associate salaries, while also hinting at eliminating its lockstep structure.

In what appears to be a major overhaul of its business, DLA Piper has joined the growing number of firms reducing associate salaries, while also hinting at eliminating its lockstep structure. 

The US firm has started to impose salary cuts on senior associates and moving away from a traditional payment scheme, in which all attorneys who graduated from law school in the same year get the same salary, reports ABAJournal. 

Under the changes, the starting salary for first-years will be reduced to $145,000 (AUD$195,00)  in "major markets" and reduced to US$130,000 (AUD$170,000) in areas where it is already US$145,000 (AUD$195,00), a memo to staff, and obtained by Above The Law, a legal blog, stated. The firm has more than 20 offices in key US markets and another 45 offices in 27 countries. 

Additionally, the memo stated that "adjustments to all associate salaries at other class levels will be determined and communicated on a case-by-case basis based on class year and performance levels."

In case this language is not understood as a potential death knell for lockstep compensation, the memo clarifies the point: "We intend to accelerate our consideration of potential alternative structures for associate advancement and compensation beyond basing them primarily on time out of law school."

DLA Piper's associate pay cuts follow partner cuts and capital calls, first announced late last year.

The associate pay cuts allow the firm to reward top performers while at the same time meet client expectations of value and extraordinary service, the memo stated. 

In November last year the firm invited 275 non-equity income partners to make capital contributions, in exchange for them becoming full partners. The potential security in a tumultuous economic environment and job market apparently appealed to those partners. Nearly all the firm's non-equity partners committed to the offer. 

By raising funds from a new crop of equity partners and compensating them with a share of the profits, DLA Piper would eliminate income partner salaries and trim payroll costs and borrowing needs. 

However it would also likely put more pressure on the new equity partners to bring in business, and put associates into an "up or out" model that requires them to generate clients or find another job as they become seasoned attorneys. 

Meanwhile, one New York analyst claimed that the East Coast firms are less willing than their West Coast counterparts to drop salaries in the global financial crisis. 

Legal industry's strategists Peter Zeughauser said California-based law firms are more willing to reduce associate salaries than New York firms, while in Washington D.C. firms are focusing on cutting the salaries of low billers, reports the National Law Journal


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