โAs the legal market continues to grow and become increasingly competitive, we are seeing that there is a surplus of extremely talented lawyers with strong academic credentials that are juggling multiple offers and are competing against each other for opportunities on both the in-house and private practice side. There has been a lot of movement in the market as attorneys in law firms are itching to go in-house, and we are seeing that the best and most common time for attorneys to make this transition in-house is after they have gotten at least 4-5 years of law firm experience under their belt. In-house employers like to see that these lawyers have put in the time and have mastered their expertise, which has lead to a high demand for attorneys who specialize in certain practice areas rather than generalist attorneys. Not only are we seeing needs for specialist attorneys on the in-house side, but also law firms need lawyers with specific skill sets as well as making certain practice areas hot and competitive in the industry. Our legal update explores the movement in the market and how we are seeing different areas of the business thrive and grow such as IP, cyber security, and licensing, and other areas starting to dwindle down. In addition to these changes, it will be very interesting to see how law firms and in-house employers will remain competitive amongst each other in the market as law firms are starting to raise the bar and increase associateโs compensation ranges, and in-house employers will have to react to this as they are looking to increase headcount.
In-House or Law Firm: The Great Debate
To be or not to be? To go in-house or go to a law firm seem to be questions ever present. Traditionally, going in-house meant taking a pay cut but attaining work-life balance and this was generally meant for more seasoned attorneys. On the other end of the spectrum, going to a law firm reminded all who do this why they should go in-house. But although the hours in most peoples opinions are crazy in law firms, the experience of working with battle-tested attorneys and the promise of financial security still attracts the best and brightest minds available in the market and sets them up well for a lucrative future.
But with the economy booming and litigation ingratiating itself into the core of all businesses, corporations are seriously competing with law firms to find the best talent. In house law departments are developing and growing their platform year after year, whilst heavily investing in developing reputable internship opportunities that would rival any clerkship in the country, all while promising work-life balance.
In most cases, first years no longer have to work 18 hour days and associates career progression is becoming clearer with an attainable path to move forward. To make Partner can be an arduous process for many resulting in many associates looking for in-house options to advance their careers and get to an equivalent leadership position faster. Major corporations are aware of this and are taking advantage of this unsettled talent by offering attorneys an opportunity most associates will not see in law firms.
We have found that In-house law departments are now not just competing, but actually winning a lot of battles against law firms for the best associate talent, as well as partner level talent. Law firms have to fight back in one of the only ways they can, which is to pay more. They are fighting back with money. Cravath, Swaine & Moore held the title of the highest paying firm for what seemed like ages. They set the standard for all other law firmโs compensation packages; the starting salary for a first year law school graduate employed by Cravath, Swaine, & Moore was $180,000 and became known as the โCravath Standardโ. The compensation that law firms can offer first year law students continues to be a huge selling point to newly added members of the work force, but the promise of a more enjoyable life in todayโs market still seems to be a key decision maker and in many cases can overpower the desire for financial gains. With the prospect of losing candidates to other law firms and to the largest corporations, Milbank, Tweed, Hadley & McCloy have made the first move. Milbank raised the starting salary of a first year associate to $190,000 as mentioned above and all other associate level salaries by $10,000 along with a bonus to attract a shrinking pool of candidates. In response, Cravath and other major firms affirmed shortly thereafter with promises to raise their starting salaries as well, but Desmairis has gone above and beyond to promise first year associates a starting salary of $210,000.
However, the question still remains as to whether one should go in house or to a law firm. If work-life balance is a priority then a strong preference will be towards going in house, but if financial gain is your priority then a law firm will be the better choice.
Let the Salary Wars Begin
โIf we didnโt do this at some point, another law firm would have done it firstโ -Milbank chairman Scott Edelman
With Milbank raising the bar and increasing their new associate salary levels across the board by $10,000 and $15,000, there have already been a numerous amount of other law firms who have reacted quickly and hopped on board due to the ratcheting market pressure amongst the industry. Here is the new Milbank scale that everyone in the legal industry is talking about.
1st year โ $190,00
2nd year โ $200,000
3rd year โ $220,000
4th year โ $250,000
5th year โ $275,000
6th year โ $295,000
7th year โ $315,000
8th year โ $330,000
Not only will all associates see a raise in pay, but summer associates of the firm will also see a massive uptick in their compensation. Other big law firms such as Simpson Thacher, Proskauer Rose, and Winston & Strawn have reacted and matched Milbankโs scale, and Cravath Swaine & Moore not only matched this new scale, but increased their midlevel and senior associates (classes of 2014-2010) pay by $5,000 and $10,000 more than Milbankโs. Even smaller boutique law firms have replied to this compensation uptick and have matched this new scale.
How will this affect the legal world and other law firms? There will be massive changes on the horizon as the legal industry is and has always been extremely competitive, and with there only being a band of top tier lawyers and law school graduates, firms will need to stay relative and competitive to obtain the best and the brightest talent. This is only the beginning of the new law firm associate pay increase as we will see many other firms dragging their heels to increase their compensation scales as well to stay competitive.
โThe market for the best and the brightest is extremely competitive. There are lots of law firms out there, and weโre all competing for some really talented people.โ-Milbank chairman Scott Edelman
Practice Areas- Whatโs Hot and Whatโs Not
Throughout the year and also looking ahead into 2019, there has been a high demand for lawyers particularly in certain practice areas due to the changes in our economy and new regulations. There is an increasing demand for greater specialization in a range of different areas ranging from mergers and acquisitions, to transactional and regulatory work. Here are some of the emerging and profitable practice areas that all lawyers, law firms, and in-house legal departments should be aware of:
Heating Up
Intellectual Property, Cybersecurity, Licensing: With the rapid growth of technology, new platforms, software, and delivery systems, there has been a massive need for attorneys who are knowledgeable of this space. This directly correlates to all new laws and regulations surrounding Blockchain, Cryptocurrency, and the increase of new start-up technology and FinTech companies across the globe.
Health Care: Regardless of what ends up happening with the Affordable Health Care Act, health care law will be a very hot area this year and next year as the US population continues to increase and more and more US citizens will require healthcare services and plans.
Financial Services: Financial services will always be a hot area, especially in the investment management space. Many hedge funds and asset managers are in a good place as their businesses are continuing to thrive and are able to hire additional attorneys in their legal department as needed.
Cooling Off
Litigation: Generally, litigation and commercial litigation have become very quiet as businesses are looking for less-costly ways of settling disputes rather than going to court.
Labor and Employment: Recently, several labor and employment lawyers have been reporting that their work is slowing down as well.
Blockchain, Privacy & The Law
What is Blockchain and why is everybody talking about it? To put it simply, the Blockchain is an immutable digital ledger of economic transactions that is programmed into every computer that is part of a Blockchain network. If all the participants of the current financial system transitioned onto a single blockchain then the world would see the first major attempt at a democratized financial system in the digital era. That is the reason that everyone from Jamie Dimon to your teenage son has been talking about Blockchain. But how does it relate to the law?
With any new emergent technology, the law seems to be a few years behind. This is again the case as Blockchain gives rise to a whole new field of legal quandaries. The latest complexity that firms are scrambling to navigate is how to capitalize and integrate Blockchain into structuring asset-backed securities transactions. At the annual Global ABS conference in Barcelona, Matthew Duncan, a partner and head of Morgan, Lewis & Bocklusโs London-based securitization practice, expects to see the first Blockchain securitization by mid-2019, stating that โSecuritization will change fundamentallyโ. Other major firms have also seemed to confirm Duncanโs statements. Firms such as DLA Piper and EY have started to invest in building the foundation to accommodate Blockchain transactions.
With the confirmation of the General Data Protection Regulation (GDPR), many wonder and debate the future of data privacy in the United States. But the truth is, no one actually seems to understand the specific implications of its rules. Some firms ascertain that firms will now have to carefully police third party vendors that have access to client information and also monitor themselves when asking third parties for information. This may seem like a headache for firms but there lies a potentially lucrative opportunity to monetize the work; firms looking to capitalize on this opportunity will see this as an opportunity to generate more litigation work. Regardless of your perception of GDPR, it will certainly have a major impact on most law firms across the country.
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