Big Law’s Extra Bonuses Hard to Come By as Demand, Hours Slide

Big Law’s corporate associates likely will have a harder time qualifying for the extra cash several firms are doling out to top performers this year, thanks to dwindling demand.

An unexpected boom in capital markets and merger and acquisition work over the last two years has now cooled, leaving junior lawyers with less work in 2022.

“Many associates this year had a significant decrease in their billable hours,” said Katherine Loanzon, New York-based managing director of Kinney Recruiting. “There has been a slowdown in work and in many cases it was at no fault of their own.”

Most firms are matching last year’s bonus scale—topping out at $215,000—a sign that the industry is returning to pre-pandemic consistency after a stretch of swirling demand that boosted firm profits. But extra bonuses—often tied to billable hour totals—on top of the standard year-end payments will be more difficult to attain, according to industry observers.

Washington, D.C. heavyweight Covington & Burling will increase its bonus scale by 10% for associates who exceed 2,200 billable hours, for example, and will add 10% for those who go beyond 2,400 billable hours, according to a report by Above the Law. Hogan Lovells said it will give out bonuses to associates who exceed minimum hours expectations, but the firm didn’t provide a specific threshold.

Other major firms similarly pledged to hand out extra bonus cash to certain high performers—often measured by billable hours—without specifying hours requirements in internal memos viewed by Bloomberg Law.

Several firms declined to comment or didn’t respond when asked how many associates are likely qualify for the additional bonus money.

“If you’re a litigation associate or in restructuring, that may be more applicable to you this year,” Tim MacKay, a New York City-based legal recruiter, said of the extra bonus money. “But in most cases for M&A associates and a lot of other corporate associates, that extraordinary number is just not going to be within reach because the market has not been particularly busy for the second half of 2022.”

Some litigation-focused firms and others with significant trial practices have seen work rise as courts slog through cases following Covid-19 stoppages. Bankruptcy work is expected to spike into 2023 as economic strain continues.

The slowdown in other areas has cost some associates more than just additional bonus money.

Silicon Valley-based Cooley and Kirkland & Ellis earlier this year laid off junior lawyers in an effort to correct overhiring during the spike in demand. The moves have prompted questions about the financial health of other major law firms.

‘Sky Isn’t Falling’

The decision by several major firms to match the same annual bonus scale that they used last year is a good sign for associates concerned about job security, recruiters said.

“The message I’m hearing from a lot of firms is that the sky isn’t falling,” said Summer Eberhard, a California-based recruiter at Major, Lindsey & Africa. “They’re not all positioned to potentially have to make tough decisions like layoffs.”

Some firms sat out last year’s talent war or simply couldn’t compete with the most aggressive hirers, Eberhard said.

“In some respects, they are better positioned because they’re either perfectly staffed or slightly understaffed,” she said.

Work levels at many firms are simply returning to where they were before the boom, said Michelle Fivel, a recruiter at Major, Lindsey & Africa.

“For most of the associates, we’re not seeing the crazy numbers that we saw last year, and I don’t think anybody going into this year anticipated that we would,” Fivel said.

Record levels of demand for associates largely working remotely during the pandemic sparked some concerns about burnout and mental health. A few smaller firms trimmed billable hour requirements last year, even as demand soared, in a work-life balance play.

“On paper it’s great that firms are rewarding associates for their hard work at the end of the year,” Loanzon said. “But when it’s attached to a higher billable hours, you do wonder how many associates will actually focus on whether it was a realistic goal.”