Nationwide Pay Raise Watch: It's Never Too Late
When it comes to pay raises (and coverage thereof), better late than never.
When it comes to picking a law firm to work for, money isn’t everything (as we’ve said before). Here at Above the Law, we cover compensation closely because it’s a transparent and trackable metric — but when choosing an employer, you should view pay as just one of many considerations. Lawyers trade compensation for other values all the time (e.g., when attorneys forsake Biglaw to go in-house, join government, or move to a boutique).
This brings us to Manatt, Phelps & Phillips. The firm has many things going for it, including its strong position in buzz-generating practice areas like entertainment, advertising, and healthcare law; its track record on diversity; and even its fun holiday cards.
But the firm has historically paid a bit below the Biglaw market, despite flirting with the Vault 100 (some years it’s in, other years it’s out). And last year, as the Cravath pay raise spread from firm to firm, we heard from some disgruntled readers at Manatt. For example:
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Just spoke with one of the top equity partners… who said that the firm does not expect to raise salaries. There seems to be some tension in the partnership, but overall it is not looking good. Any pressure you can put on them would be appreciated!
From a second source:
Manatt continues to refuse to raise salaries…. despite the party line, hours expectations are not below those of many market paying firms — just comp. Likewise with bonus. We all work just as much as people I know at other firms, at least in L.A. headquarters.
Now we bring you good news about associate compensation at Manatt: the firm has raised salaries, effective January 1, 2017. The details are spelled out in documents we’ve posted in full on the next page.
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(The firm actually announced raises in late August of last year and issued an explanatory memo on January 31 of this year, but we received the documents only now, in the wake of our Wilson Sonsini compensation coverage. Moral of the story: if you want ATL to cover your comp news, please send us your memos.)
Manatt employs an individualized, merit-based comp model based on “levels,” comparable to the systems used by McDermott Will and WilmerHale (before those firms moved back towards more lockstep models). Effective January 1, Manatt uses this pay scale:
If the first five amounts for “Top Base Salary” look familiar, it’s because they track the Cravath scale that’s now widely employed throughout Biglaw. (The remaining amounts are a tad below market, but at that point, associates are getting close to partnership consideration.)
And wait, there’s more. In addition to paying its associates additional money to make the raise retroactive to January 1, Manatt paid bonuses that were better than usual:
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[W]hen the firm announced its new base salary compensation structure last year and made it effective January 1, 2017, it said that it would take into account when making bonus determinations the fact that some peer firms implemented their new salary structures in mid-2016. In accordance with that, for this year only, the Firm included in the bonuses an amount related to the ‘market differential’ for those Associates whose qualitative performance and productivity it believes warrant this consideration.
So while it was frustrating for Manatt associates to not get raises at the same time as most of their peers, hopefully those who remained at Manatt through January 31 got compensation that made it worth the wait. (Associates who left the firm before that point, or associates whose “performance and productivity” were deemed inadequate, were out of luck.)
In addition, the firm reduced total billable hours from 2100 to 1950 — compare page 3 of the January 31 memo, posted on the next page, with page 3 of Exhibit 1, the firm’s policy on “Associate Compensation & Advancement.” But one source cautioned us not to read too much into that reduction, noting that the powers that be at Manatt will sometimes strike Investment Hours or Pro Bono Hours that it views as non-qualifying.
This brings us to what sources view as the main downsides of the Manatt compensation system: its complexity and lack of transparency. Some representative reactions:
- “Our system is so complex and so secretive that it is hard to get a straight answer from anyone [about pay issues].”
- “The complex tiered, individualized system makes it hard to know how many will actually be making market.”
There’s certainly some truth to these critiques. It takes 21 pages for Manatt to explain how its complicated compensation system works; many of its peer firms can explain their pay scheme in a page or two (e.g., a table of base salaries and a table of bonuses). And as you can see from those 21 pages of documentation, posted on the next page, the firm reserves a huge amount of discretion unto itself to pay associates less than what they might expect.
Will Manatt at some point move to simplify its system, making it more transparent and less subject to firm discretion? One can certainly hope. As one can see from its reaction to the Biglaw pay raises — a delayed reaction, announced in August and implemented in January, but a reaction nonetheless — the firm does listen and respond to associate concerns.
Are there other announcements that we’ve missed? Please text us (646-820-8477) or email us (subject line: “[Firm Name] Raises Salaries”). Please include the memo if available. You can take a photo of the memo and send it via text or email if you don’t want to forward the original PDF or Word file. Thanks.
Earlier: Another Biglaw Firm Raises Billing Requirements In The Wake Of The Pay Raise
David Lat is the founder and managing editor of Above the Law and the author of Supreme Ambitions: A Novel. He previously worked as a federal prosecutor in Newark, New Jersey; a litigation associate at Wachtell, Lipton, Rosen & Katz; and a law clerk to Judge Diarmuid F. O’Scannlain of the U.S. Court of Appeals for the Ninth Circuit. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at dlat@preprod-atl.staging.breakingmedia.com.
