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13 April 2020

A question of timing: the different responses of US and UK elite law firms to Covid-19

Looming decisions over associate pay and bonuses are a factor in the timing of UK law firm Coronavirus measures

By John Malpas

New York and London

Timing is a factor in the US and UK elite law firm responses to Covid-19 Shutterstock

The trickle of news about the measures law firms in the US and UK are taking in the face of coronavirus became a flood last week.

At least among elite firms on both sides of the Atlantic, lay-offs are being avoided and the message being delivered to anxious associates is a soothing one.

In the UK, the leading firms are typically suspending partner distributions, delaying associate bonus payments and freezing pay with some also furloughing a handful of non-fee earning staff as part of a package of cost cutting measures. 

Across the Atlantic, Above the Law went into overdrive last week with news of lay offs, furloughs and pay cuts. 

However, the top US firms have remained conspicuous by their absence from its Law Firm Layoff Tracker.

By the end of Friday, the tracker had updates on nearly 40 law firms — but none of the top 20 had revealed their hands, and only a handful from the top 100.

Compare that with the UK, where The Law Society Gazette had elicited updates from 30 of the UK top-60 law firms.

This is likely to be largely a factor of timing. 

In the UK, the top law firms are approaching their year-ends and needed to update their associates on their plans for annual pay reviews and bonus payments that typically take place in May or June.

And it makes sense when dolling out the bad news to also reveal that partners are taking the brunt of the financial pain with the suspension or cutting of their distributions.

It is a different story in the US. 

While all the top firms are grappling with the challenge of how to deliver on their summer associate programmes (see Bloomberg Law for a recent update on this), they have more wiggle room when it comes to associate pay and bonuses.

Year-end bonuses were paid out before Christmas — when news of the Covid-19 outbreak in Wuhan was yet to reach the public domain — and associate pay reviews aren’t usually announced until the start of June.

At the end of last week, of the top 100 US firms, a handful are known to have announced associate pay cuts — namely Orrick, Bryan Cave Leighton Paisner, Venable, Womble Bond Dickinson, Blank Rome, Mintz Levin, Cadwalader and Baker Donelson — with just two implementing associate lay offs: Womble Bond Dickinson and Nixon Peabody. 

Two top 50 firms — Reed Smith and Winston & Strawn — have confirmed that partner distributions are being delayed, in Winston’s case by 50% over the next three months.

It would be surprising if many other leading firms weren’t doing the same behind the scenes. 

But when it comes to the impact of the pandemic on associate pay and bonuses, the top US firms can afford to keep their powder dry.

Further reading on the Covid-19 pandemic

Above all, this crisis too will pass — Rob Millard foresees large law firm mergers and accelerated digitisation in the wake of Covid-19

'It is about being proactive and decisive' — Norton Rose Fulbright EMEA managing partner Peter Scott on the thinking behind the firm's flexible working scheme

General counsel braced for six-month shock to their businesses, survey finds — MoFo poll of 110 GCs finds them making unprecedented decisions as HR issues dominate

'Now is the time for law firms to deliver on their stated values' - Consultant Tony Williams advises law firm leaders to avoid knee jerk decisions and go into communication overdrive during the Covid-19 crisis

Cadwalader suspends partner distributions and cuts salaries as Covid-19 impact grows

Allen & Overy boosts partner capital and freezes salaries, Reed Smith slows distributions

Listed top 30 UK firm DWF issues profit warning as impact of Coronavirus bites

Unprecedented response to Covid-19 is 'testament to legal profession's resilience

US businesses 'clamouring' for guidance on fast-moving Covid-19 crisis, survey finds

Staff welfare, supply chain and privacy: the coronavirus-related issues keeping GCs awake at night

'I have realised how powerful technology now is': an Italian lawyer's take on Covid-19

Coronavirus risk may be unprecedented, but the fundamental principles of crisis response still apply

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