Law firms with 2 tiers of associates pay 2nd ranks up to 50% less

For years, a number of law firms have had two tiers of partners, often differentiating between equity and non-equity holders of the same job title.

Now, in a new trend that is taking hold among some California law firms, there may be two ranks of associates. Paid as much as 50 percent less than their traditional partnership-track counterparts, those in the second tier are billed out to clients at perhaps 25 or 30 percent less, creating a financial incentive to staff matters with those in the lower ranks, says attorney Justin Miller of the Union Bank in a Recorder article reprinted in New York Lawyer (reg. req.).

"In other words, if a non-partnership track associate bills 1,800 hours, the firm makes a larger profit and the clients pay less money than if a traditional associate were to bill the same number of hours," he writes.

By contrast with contract attorneys hired for temporary assignments, who may spend only limited time with--have have limited loyalty to--the firm's partners and traditional associates, second-tier associates are a more stable work force and may even see certain aspects of their jobs, such as reduced billable-hour quotas, as a plus. Meanwhile, because they are better-integrated into the firm, their work quality likely is higher, reducing hidden costs of contract attorneys, including but not limited to a significant error rate, according to Miller.

The lengthy article offers a number of suggestions for making such two-tier associate tracks work. Among them: The arrangement should be a win-win for all concerned. Hence, it is likely to operate best in firms with plenty of assignments for first-tier associates, who would then welcome help rather than see the second tier as competition for scarce billable time.