Large U.S. law firms are already rushing to match the new salary range for mid-level and senior associates set by Davis Polk & Wardwell on Tuesday.
Cleary Gottlieb Steen & Hamilton, McDermott Will & Emery, Paul, Weiss, Rifkind, Wharton & Garrison, Simpson Thacher & Bartlett, as well as Dechert, have said in internal memos they are matching Davis Polk. The firms are paying their most senior attorneys, those in the associate class of 2014 or above, $396,500 in salary.
Debevoise also said in an internal memo it would match Davis Polk's scale, and added a tier of $406,500 salaries for the associate class of 2013 and senior.
Large firms have been offering increasingly competitive salaries and bonuses to associates in an effort to both attract and retain lawyers as the industry contends with a surge in deal work.
Mid-level and senior associates are incredibly valuable to law firms, said Bruce MacEwen of law firm consultancy Adam Smith Esq, in an email. They're the "lieutenants" who are running deals on a "day-to-day basis."
Milbank in January set off the latest round of raises when the firm said it would hike salaries for associates by up to $20,000 a year, depending on seniority.
Davis Polk matched that scale this week for its junior associates, but gave seasoned associates more cash than Milbank, whose scale topped out at $385,000.
Salaries at Davis Polk, as well as the other firms that have so far matched, are retroactive to Jan. 1.
McDermott is making its second salary adjustment of 2022. The firm matched Milbank's scale set in January before aligning with Davis Polk's pay this week.
There is high pressure on law firms to keep lawyers happy, and senior and mid-level associates are going to cash in, said Marcie Borgal Shunk, a law firm consultant at The Tilt Institute.
"Senior and mid-level associates are in a solid bargaining position right now – and they're using it," she said in an email.
But Borgal Shunk warned that salary matches are just "Band-Aids" to the real issues firms need to work on, like improving their culture, leadership and billable-hour requirements.
Law firms will not be in "too much" financial pain in the short-term with these raises, Borgal Shunk said, noting that many are announcing high profit margins and projecting high growth.
Revenue for U.S. law firms grew by an average of 14% last year, according to a year-end report from Wells Fargo Private Bank's Legal Specialty Group.
But if the legal industry's fortunes begin to sour, associates might find that their raises are part of a "Faustian bargain," MacEwen said.
"Once demand from clients comes down, some of the less productive associates may find they're too expensive and they will need to start looking around," he said.
(Updated to include information from Debevoise, Simpson Thacher and Dechert)