Law firms are using a wide array of plans to keep incoming graduates at bay amid the plunge in business, but the idea that they will eventually hire those deferred recruits may be a case of wishful thinking.
The deferral strategies represent an effort by firms to keep their word to recruits, to preserve their reputations at law schools and to maintain a stockpile of new talent should the economy rapidly rebound. But even if firms are in a position to make good on assurances to this year's graduates -- still a very big question mark -- the class of 2010 could prove to be the fall guy.
Many top law firms have delayed start dates for first-year associates until January 2010, September 2010 or as late as January 2011. Most are offering some level of stipend, sometimes contingent on graduates finding public interest or skills-development work.
Morrison & Foerster, for example, earlier this month announced a multifarious deferral plan that includes an April 2010 start date, a January 2011 start date, a $5,000 monthly stipend and a $15,000 additional payment for some recruits. Morrison & Foerster Chairman Keith Wetmore said the firm structured its plan based on its best predictions of its future demands and on the plans that other firms already had implemented. While he expressed confidence that Morrison & Foerster could bring aboard the class of 2009 on the dates set forth in the plan, Wetmore expects reverberations, and not just at his firm. "I have theory that we may have several years where the so-called 'first-year class' will have people with varying graduation dates," he said.
A "collision of classes" is what James Leipold expects. Leipold, executive director of the National Association for Law Placement (NALP), expects that the supply of full-time job seekers, once deferral dates arrive, will outstrip demand, especially if firms leave in place salaries of $160,000 for new attorneys. "It's hard to imagine they'll be able to start all these people when they say they can," Leipold said. "A law firm that's deferring people might not even exist in the future." He pointed to the 2002 decision by now failed Brobeck, Phleger & Harrison to pay incoming associates $3,000 and delay their dates until January 2004.
Leipold expects a pile-up of talent even though firms have pared down the number of associates they expect to need from the class of 2010. According to NALP data, the median number of summer job offers from firms with more than 700 attorneys fell from 30 for the class of 2009 to 18.5 for the class of 2010.
Each year, the nation's 200 accredited law schools send about 40,000 law graduates into the job market. About 55 percent of those graduates take jobs in private law firms.
Delaying start dates and calculating stipends -- as opposed to canceling offers, an arguably simpler undertaking -- apparently stems more from business and public relations interests than legal concerns. Catherine Fisk, an employment law professor at University of California, Irvine School of Law, said that most law firms explicitly state that associates are at-will employees and that firms would argue that an offer of at-will employment, even if they are true offers, may be revoked or modified at will.
Another factor making it difficult for firms to predict their need for associates is the change in demand from clients. With their own pressures to cut costs, more legal departments are refusing to pay for new associates' on-the-job training. Even if workloads return quickly to boom-time levels, law firms, especially those that are very large, may not be able to put as many associates on matters as they have the past.
"The problem is that law firms don't know what the next business model will be," said Bill Henderson, a professor at the Indiana University Maurer School of Law-Bloomington. His scholarship focuses on law firm operations. "The question is: How do you absorb these associates into the equation?" he said. "Law firms are saying that they wouldn't be surprised if a January 2010 start date becomes September 2010."
Besides the black eye that firms could suffer on law school campuses by pulling offers, deferring start dates enables them to maintain a pipeline of fresh talent even in down times, said Bruce MacEwen, editor of the legal blog Adam Smith Esq. , which focuses on law firm economics. "They want new talent coming on, as inopportune as it may seem," MacEwen said. He added that law firms are concerned about a repeat of the associate shortage, and the high starting salaries that resulted, when the economy rebounded after the downturn following the Sept. 11, 2001, attacks.
Houston-based Andrews Kurth recently announced that its incoming class would start in January 2010. The firm's leaders opted for the January start date out of concern that, with a one-year deferral, the firm would lose the talent that it had recruited. It expects 20 incoming associates in the fall. "You can't for the long-term best interest of the organization cut off the pipeline," said Bob Jewell, managing partner of the 407-attorney law firm.
Firm leaders grappled with deciding the duration of the delay. "We talked about what three months was really going to buy us," Jewell said.
The firm considered holding off on a deferral, but part of the benefit of moving ahead was to offset the costs of hiring those lawyers until 2010.
But most firms won't need all of their deferred associates once the deferral date arrives, McEwen said. The number of graduates who decide to continue with careers in public-interest law won't offset the number of graduates who still will want to work for the firm that planned to hire them.
Law graduates with start dates delayed for less than a year have a better chance of eventually joining those firms than if they have to hold out for a position at a firm with a longer deferral, MacEwen said. For firms that have a clogged pipeline, implementing a year-long delay is a way to give more graduates time to find permanent work elsewhere.
"If a firm is delaying for a year, it's saying, 'We have no idea what things will look like,'" he said.
Heather Frattone, associate dean for career planning and professionalism at the University of Pennsylvania Law School, is telling deferred students to have a Plan B. She remains optimistic that law firms will follow through on their assurances, she said, but she also is encouraging students in the 2010 and 2011 classes to scrutinize law firms closely to make sure that they are in solid financial shape. Some students who are getting ready to join firms as summer associates already have been told that those selected for full-time jobs will have deferred start dates.
It's more important than ever for students to know all they can about the firms they want to join, she said.