Return to Office Policies; Bank Legal Spend; Partner Comp Disparities

Return to Office Policies
Based on anecdotal evidence, hybrid appears to be the prevailing model. And that observation is supported by a recent national survey by consulting group Withum, in which 73% of law firm leaders described their return to office policy for lawyers as hybrid or part-time (“Clear Disparity” Remains Between Attorney and Staff Hybrid Work Policies, Andrew Maloney, 10/26/22, American Lawyer) (citing Withum’s 2022 Law Firm Leadership Survey, conducted in August & September). For those firms whose lawyers had returned part-time, 49% reported “no specific requirement regarding number of days” in the office, while 25% reported 3 days, 7% reported 4 days, 2% reported 2 days, and 2% reported 1 day (Clear Disparity).

At a recent conference, recruiters from across the U.S. noted that firms that mandated a full return (or that mandated which days to be in the office) could expect to lose associate talent following bonus season (based on conversations with associates at those firms). Recent survey data supports this anecdotal evidence as well. According to an ABA survey released in September, 44% of lawyers with 10 years or less in practice would leave their current firm for one that would offer greater ability to work remotely (Office Return Mandates Heighten “Stand-Off” Between Law Firms and Workers,” Andrew Maloney, 9/28/22, The American Lawyer) (citing the ABA’s 2022 Practice Forward Report, surveying nearly 2,000 members between May-June 2022).

90% of respondents of all experience levels noted that hybrid/remote work either did not affect the quality of their work or improved it. 78% reported their productivity increased or stayed constant; and 56% reported no adverse impact on hours, while 31% reported an increase.

All of which begs the question as to whether law firms could avoid the thicket of mandates by leveraging the investments in technology and intentional collaboration necessitated by the pandemic to continue to connect and train remotely (Taking Lessons From Pandemic, Law Firms Emphasize Cross-Office Collaboration, Jacob Palocheck, 10/7/22, Daily Report Online).

Bank Legal Spend
Banks were able to limit outside counsel spend and rate increases in 2021, according to a report by Wolters Kluwer’s ELM Solutions analyzing over $155 billion of legal invoice data (LegalVIEW Insights Volume 5, finance edition: Trends in Vendor Mix and Total Outside Spend, Nathan Cemenska, 10/6/2022, Wolters Kluwer ELM Solutions). Outside counsel spend basically remained flat in 2021 for banks and other financial services companies, while large companies in other industries saw a 21% increase on average over 2020 expenditures. Wolters Kluwer credits both the pandemic-induced hold on litigation and greater investment in legal pricing experts by financial institutions; law firm rates to banks increased only 2.8%, while other sectors like basic materials and industrials saw 8.9% and 10.8% increases, respectively.

The report also noted that banks and other financial services companies “direct about 10% of total outside spend to the Am Law 10, 10% to the Am Law 11-20, 10% to the Am Law 21-50, and about 15% to the Am Law 51-100. Am Law 101-150 and 151-200 utilization ... stands at about 4% and 1% of spend, respectively.” 48% of their legal spend goes to firms and entities outside of the AmLaw 200, including alternative legal service providers, the Big Four, and large Asian and European law firms.

Partner Comp Disparities
Average partner compensation increased 15% in 2021 over 2020, according to MLA’s Partner Compensation Survey released last month (2022 Partner Compensation Survey, Jeffrey Lowe, 10/18/22, Major Lindsey & Africa). The survey included data from 1,815 U.S. based partners at large law firms. Although equity partners averaged more than three times the total compensation of non-equity partners ($1.47M vs. $460K), both groups saw similar % increases (15% for equity partners and 16% for non-equity). Corporate partners led the way both in absolute pay ($1.48M on average) and in relative increase over 2020 (26%); other practices with gains included litigation ($1.05M, 17% increase), real estate ($953K, 12% increase), and labor & employment ($653K, 6%). IP partners registered no gain ($1M) and tax/ERISA partners saw a 9% decline ($1.11M).

Male partners’ average compensation was 34% higher than the average for female partners ($1.21M vs. $905K). Female partners saw a greater increase over 2020 comp (26% vs. 17%), and the gender gap continues to narrow from MLA’s recent surveys (53% in 2018 and 44% in 2020). The gap between White and non-White partners was 10% ($1.13M vs. $1.03M).

Putting 2021 compensation figures aside, it will be interesting to see whether smaller profit pools at 2022 year-end add fuel to an already hot lateral partner market, which has seen 4,050 lateral partner moves through Q3 2022, up from 2021’s 3,729 moves over the same time period and 40% more than the 5-yr average of 2,902 moves (Lateral Partner Moves Have Accelerated, as Big Law Pursues Growing Market Share, Andrew Maloney, 10/31/2022, American Lawyer) (citing data from investigative intelligence firm Decipher).