Many of Marcus Peterson's fellow alumni from Loyola Law School, Los Angeles, are still cooling their heels after graduating one year ago, waiting to start law firm jobs thanks to long deferments.
Not Peterson. He spent the past 10 months on the job in Howrey's Los Angeles office, bouncing among firm-sponsored classes, pro bono cases, regular billable work and shadowing partners. It's not the first-year associate experience he was anticipating. "I kind of assumed that you spent the first couple of years doing doc review," he said. Instead, "I've had some good substantive experiences. I'm preparing to argue in front of an administrative law judge this month."
Peterson is among 24 first-year associates in Howrey's First Tier program -- a two-year apprenticeship intended to make new associates more valuable to clients by giving them real-world skills and a better understanding of how to practice law.
Howrey was one of three law firms to unveil apprenticeship programs during the summer of 2009, partially in response to pushback from clients increasingly reluctant to pay for on-the-job training of young lawyers. Philadelphia-based Drinker Biddle & Reath launched its six-month First Year Associate Development Program in September, while Ohio- and Kentucky-based Frost Brown Todd started its yearlong first-year associate program the same month. Those three firms followed in the footsteps of two smaller firms that added apprenticeship programs in 2007 -- labor and employment firm Ford & Harrison and Dallas-based Strasburger & Price.
Proponents hail the programs as a positive step away from the sink-or-swim environment many young attorneys encounter when they show up at large firms, and as a practical response to the growing cost-consciousness of clients. The firms bill at much lower rates or not at all for work performed by the apprentices, who earn lower salaries than the industry standard.
Nearly one year in, partners said they are pleased with the progress new associates have made with more extensive training, while first-year associates said they have a better understanding of how lawyers work and what clients want. Firms need a few more years to gauge whether these apprenticeships ultimately produce lawyers who work more efficiently, bill at higher rates and stay with the firm longer than the typical associate, but Howrey, Drinker Biddle and Frost Brown all plan to continue the apprenticeships for new arrivals in September. "It's turned out fabulously, to be honest," said Frost Brown Todd partner Chris Habel, the chairman of the firm's attorney advancement committee. "The clients understand that we are trying to improve the legal profession, and the partners have been happy with it."
Not that there's any rush to jump on the bandwagon -- no other firms have announced similar programs since last summer. Critics worry that lower apprenticeship salaries will hurt a firm's ability to recruit top prospects and that the programs aren't worth the necessary partner time and resources. The few firms that have made the transition are either litigation-focused or regional in scope. No large general practice or white-shoe firms have started apprenticeship programs, which likely adds to the overall reluctance to take that step, said Jordan Furlong, a Canadian legal consultant. He discussed apprenticeship programs at U.S. firms during a recent symposium on the evolution of law firms at Georgetown University Law Center.
"If a firm Like Hogan Lovells instituted something like this, it might get the ball rolling," Furlong said.
Several elite firms declined to discuss their view of apprenticeship programs, although representatives from Cleary Gottlieb Steen & Hamilton confirmed that they aren't considering shifting to an apprenticeship model.
"Change doesn't come easy, and not every firm is ready to put in the time and effort to do this," said Kathryn Levering, the partner overseeing Drinker Biddle's program. "My guess is that there are a fair number of firms debating this. A number of firms have contacted me to pick my brain about it."
Nixon Peabody is among the firms still on the fence. Such a program would add a level of consistency to the training that young associates receive and relieve them of the intense pressure to bill a high number of hours, conceded partner John Snellings, a member of the firm's management committee.
Still, "in this economy, it is difficult to justify bringing in associates who will spend most of their time in training and not working on billable projects -- even if you lower their salaries during the apprenticeship period," Snellings said. "Given all the other pressures of modern-day practices, layering on one more project may be difficult to accomplish."
Partners at all three firms with apprenticeships conceded that they entail significant costs -- and each said they had yet to tally up their actual costs thus far. They hope the relationships associates build with clients through secondments will pay off down the road. "There is certainly a lost opportunity with the lower billing requirement," Habel said. "At the same time, because we've had first-year associates sitting in client offices on secondments, that's generating work for us. This is an investment by the firm."
The lost billable time from partners who run the programs and mentor new associates has been a revenue drain. Additionally, the firms charge at reduced rates or not at all for work done by first-year associates. Each firm has at least some outside training costs. Reducing first-year salaries has not been enough to offset those losses, they said.
Howrey dropped starting compensation to $125,000 from the $160,000 it had been paying new associates, saving $840,000 on its 24 first-years -- a fraction of the $3 million to $4 million it initially expected to spend on the training program. Drinker Biddle lowered salaries for the first six months to $105,000 from $145,000 and $160,000, depending on the market. With 37 new associates this year, that saved about $1 million. Frost Brown reduced starting salaries to $80,000 from $100,000, saving $460,000 on 23 new associates.
The firms are absorbing the costs without raising either associate or partner billing rates. "We made the decision to absorb the investment costs because we believed in what we were doing," Levering said. "Our focus was long-term and we expect the program to pay dividends for our clients, the firm and our newest colleagues."
All three firms intend to stick with their reduced hours requirements for first-year associates, even if demand picks up. Howrey's partners had already committed to the First Tier program before the recession and will continue to support it even when the economy improves, hiring partner Richard Ripley said.
"As long as there aren't significant spikes in demand one way or the other, we think the cost-benefit analysis is very compelling and our members will continue to support this program," Frost Brown's Habel said.EXPOSURE TO CLIENTS
Client interaction is a significant piece of all three apprenticeship programs. Chad Eckhardt, a first-year associate at Frost Brown who graduated last year from Northern Kentucky University Salmon P. Chase College of Law, has spent three days a week for the past seven months working in the legal department of a large Cincinnati-area health system. "As a first-year associate, I'm attending and conducting meetings with C-level executives. No first-year gets to do that," he said. "Being able to have that access, you get to really know a client's methods, their business model and their priorities. This is the practical stuff you don't get in law school."
Liz Wright, a recent George Mason University School of Law graduate and new associate in Howrey's antitrust practice, has sat in on several meetings and phone calls between partners and clients -- in one case listening to a client respond to a subpoena that she helped to draft. "I've had some really interesting shadowing experiences, and that kind of access and contact with clients is fairly rare for a first-year associate," Wright said.
Despite some skepticism about how apprenticeships would affect recruiting, Howrey, Drinker Biddle and Frost Brown had no problem filling their summer slots, partners said. It's still unclear how the apprenticeship programs will be received by law students should the job market improve and starting salaries at other firms grow. "The economics make it difficult to say one way or another if people liked it or if they were just glad to see a firm that said, 'We're going to hire you and start you right after you graduate,'" Howrey's Ripley said.
Partners at each of the three firms said they are interested in young attorneys who are motivated by more than just money.
Being able to start her new job in September helped take the sting out of earning a lower starting salary, said Drinker Biddle associate Elizabeth Hepp, a graduate of Temple University James E. Beasley School of Law. "It was really a scary time to be a third-year in 2009," she said. "WolfBlock had just disbanded and I had a bunch of friends whose offers were rescinded or who were deferred. I was actually relieved when they announced the program. I was looking forward to having training as opposed to just showing up for work." Hepp now feels better prepared to contribute to the firm.
A relaxed billable-hour requirement is yet another foundation of the apprenticeship programs, one intended to allow new associates to prioritize training over billing hours -- something young attorneys rarely did in the prerecession years, when they had to justify sky-high salaries, said professional development consultant Susan Manch.
In-house attorneys are closely watching associate costs and training, said Susan Hackett, general counsel of the Association of Corporate Counsel. She suggested firms rethink associate compensation, better train and supervise new attorneys and ensure that clients benefit down the road from the on-the-job training for which they pay.
"Clients don't so much hate paying for inexperienced lawyers as they hate constantly paying for the learning curve of kids who cycle in and out of their work," she said.
Among the general counsel dissatisfied with traditional associateships is Michael Holston, the top attorney at Hewlett-Packard Co. "I think [these apprenticeship programs] are a great thing," he said. "I've had conversations with the chairs of law firms about this, and I'd like to see more firms taking creative approaches to training their associates. I'm not interested in paying the regular rates for a first-year. There needs to be a middle ground."