It seemed it was relatively quiet on the Biglaw COVID-19 austerity measures front for the last week or so. But it turns out at least one firm was busy making announcements about their cuts.
The latest firm to enact cost-cutting measures in the wake of COVID-19 is Stroock, Stroock, and Lavan. The firm, which made $258,000,000 gross revenue in 2019 making it 122nd on the Am Law 200, announced last week that they were slashing salaries.
So, what’s exactly going on at Stroock? Effective June 1, monthly draws for equity partners will be reduced by 20 percent and monthly draws for contract partners will be reduced by 15 percent. All non-partner lawyers will see a salary cut of 15 percent, and staff making $75,000+ will also see a 15 percent cut.
But there is good news for busy associates — they’ll have the opportunity to make back that cut with their billable hours:
However, those attorneys annualizing at 1,800 or more client billable hours on any of June 30, September 30 or December 31 will have any prior compensation reductions repaid within thirty days after the applicable quarter-end date.
One note a tipster had about the firm’s austerity plans (which also applies to partners at other firms deferring or cutting partner draws):
Will be interesting to see what PPP is like at all of these firms come year end. Cutting partner draws is not the same thing as cutting partner pay. If PPP doesn’t drop at least 15%-20% when all is said and done, then it will become clear that these salary cuts are just a cash grab to cushion the blow for highly paid partners at the expense of associates and staff.
We reached out to the firm for comment, but have yet to hear back.
The full version of the internal email is available on the next page.
If your firm or organization is slashing salaries, closing its doors, or reducing the ranks of its lawyers or staff, whether through open layoffs, stealth layoffs, or voluntary buyouts, please don’t hesitate to let us know. Our vast network of tipsters is part of what makes Above the Law thrive. You can email us or text us (646-820-8477).
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From: Alan Klinger and Jeff Keitelman
Sent: Thursday, May 21, 2020 4:19 PM
To: All Personnel
Subject: COVID-19 Announcement
Stroock is a special place. We have a strong culture made up of intelligent and caring people who are committed to our collective success. Remaining strong in times of human and economic crisis is critical to our primary job as stewards of the firm – one that takes into account the needs and interests of our attorneys, staff and clients. At the outset of the pandemic, we took immediate steps to keep people safe, reduce expenses and rationalize operations, and continue to deliver outstanding legal service. However, we are not immune from the effects of the continued economic disruption to our clients and the broader economy.
As a result, we have made the difficult decision to further reduce expenses in order to ensure that we are better able to navigate an uncertain future. Being proactive is prudent, but not easy. Our decision was made with the best interest of the collective in mind and on the basis that each part of the firm would share in the temporary sacrifices that will allow us to better manage the ongoing effects of the COVID-19 crisis.
Effective June 1, 2020, the following changes will be put in place for the balance of the year. We will assess developments at year-end to see if any steps taken should be re-evaluated.
- Monthly draws for equity partners will be reduced by 20% and monthly draws for contract partners will be reduced by 15%. The June partner tax draw will also be reduced by 20% and, consistent with current IRS filing guidelines, the April and June partner tax draws will be paid in July.
- Base compensation for all non-partner lawyers will be reduced by 15%. However, those attorneys annualizing at 1,800 or more client billable hours on any of June 30, September 30 or December 31 will have any prior compensation reductions repaid within thirty days after the applicable quarter-end date.
- Base compensation for all staff will be reduced by 15%. Raises and promotions for staff will be frozen.
- The above 15% reductions will not apply to any employee whose full-time salary is $75,000 or below (and we will ensure that any reduction will not result in a full-time salary going below that level).
Discretionary year-end bonuses will continue to be awarded based on current eligibility criteria. Performance reviews will continue in the ordinary course.
We recognize that people have been affected by the pandemic in different ways, and some may want to explore alternative work arrangements. Accordingly, we are willing to discuss voluntary buyouts or reductions in workload for staff, and reductions in workload for lawyers, dependent of course on the needs of our practice groups and the firm generally.
Please know that we will make it through this crisis and that Stroock will emerge poised to continue its growth trajectory and ready to handle new challenges, just as it has for the last 144 years. Know also that we are available to discuss any of your concerns and questions. We appreciate your continued understanding as we navigate these unprecedented times.
— The Executive Committee