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Is Greenberg's New Residency for Recent Law Grads the Beginning of the End of the Associate?

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The news that Greenberg Traurig has created a temporary, non-shareholder-track position for new law school graduates prompted one legal industry observer this week to wonder if associates will disappear from law firms altogether.

Legal consultant Jordan Furlong, a partner at Edge International, asked on his blog if this is the decline of the law firm associate and the rise of the lawyer-employee.

Associates are employees, of course, but employees with some chance, no matter how slim, of one day becoming owners.

Greenberg is offering recent law school graduates one-year positions on a trial basis in what it’s calling a residency program, with a lower billing rate and pay scale than for the standard associate, Sara Randazzo reported last week in The Am Law Daily. The program is being rolled out in the firm’s 29 U.S. offices.

Like other large firms, Greenberg is still recruiting first-year associates but in lower numbers. It brought in 29 first-years this fall, compared to 36 a year ago—and well below the classes of 50 or more from before the recession, according to Randazzo’s story.

The residency program germinated from Fort Lauderdale shareholder Kara MacCullough’s idea last year to hire recent law graduates as “fellows.” Their assignments are equivalent to those of a typical associate, but they can spend a third of their 1,900 required annual hours on training.

The Fort Lauderdale office has six junior lawyers in that role right now—and otherwise hasn’t hired any first-year associates in a few years.

Greenberg is also creating a new, non-shareholder track position for associate-level lawyers called a practice group attorney, akin to the department attorney position that Kilpatrick Stockton & Townsend instituted late last year. Lawyers work reduced hours at lower pay but do associate-level work.

Furlong asks if the whole point of Greenberg’s residency program is to eventually replace partnership-track associates altogether in favor of fungible lawyer-employees: “We’re now on the verge of entire associate classes whose only purpose and value is to generate leveraged work. They are not meant to be future partners: they are temporary employees meant to sustain the practices of current partners for as long as those partners need them,” he writes.

“Lower salaries? Essential for continued partner profitability and more reflective of actual associate value. Lower billing rates? Clients aren’t paying the higher rates anyway, so you might as well find a rate that they will pay. Lower billing targets? There isn’t enough work available for partners to make their targets, let alone new lawyers. As the [Randazzo] article makes clear, these are really the only differences between a “resident” and an “associate.” Which of these two classes do you think the firm will want to sustain?”

Furlong worries that this shows short-term thinking by large law firms, who will recruit lateral partners instead of developing them from within: “Many firms are employing fewer new lawyers than ever, and they have little incentive to invest heavily in the long-term development of the ones they do. They don’t need more equity partners — many firms are busily culling their own ranks — and if they do, they’ll get experienced, plug-and-play veterans with books of business via lateral acquisitions in the free-agent market.”

The risk is that a firm “might permanently lose its capacity to develop any lawyers at all,” he warns.

A survey of large law firms’ staffing models released earlier this month by legal consultancy Altman Weil suggests that the partnership-track associate is becoming a vanishing breed.

The Law Firms in Transition survey, which Altman Weil has conducted since 2009, polled leaders of 791 law firms with 50 or more lawyers. Completed surveys were received from 238 firms (30 percent), including 37 percent of the 250 largest U.S. firms.

Asked which lawyer-staffing trends are here to stay, the overwhelming majority of firm leaders foresaw more contract lawyers (74.6 percent), fewer equity partners (72.1 percent), more part-time lawyers (70.5 percent) and smaller first-year classes (62.2 percent).

Pressure to do legal work more efficiently, along with more commoditized legal work and competition from non-lawyer service providers are driving the shift toward fewer owners and more lower-paid employees, according to the survey respondents.

Among the advice to law firm leaders from Altman Weil principal Tom Clay, who authored the survey: “Make equity partnership very difficult to achieve.”

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