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Law360 (November 4, 2020, 6:20 PM EST ) Baker Botts LLP is fully reversing salary cuts instituted in the spring because of the coronavirus pandemic and issuing a round of interim bonuses, in a move that comes less than a month after it slashed dozens of staff positions.
Baker Botts said in a memo that a complete rollback of salary reductions for nonpartner timekeepers would be effective on Nov. 1, citing its higher-than-expected financial performance, the firm confirmed to Law360 on Wednesday.
The decision follows the firm's move in early October to eliminate roughly 50 staffers and comes as a growing contingent of major U.S. law firms, including Hogan Lovells, Katten Muchin Rosenman LLP and Baker McKenzie, couple staff cuts with salary restorations.
In early October, Baker Botts said the layoffs were a response to a "fundamental workplace shift" created by the health crisis and that the decision was part of an effort to gear its business to a "changed environment."
The firm was one of many earlier in the year to implement salary cuts and alter its summer associate program in preparation for an economic downturn prompted by the pandemic. The reductions were as high as 25% for staff, 20% for associates and 30% for counsel. People earning less than $70,000 were exempt from the cuts.
By July, Baker Botts managing partner John Martin announced a rollback of the salary reductions by 50%, in addition to interim bonus awards to counsel and associates who made "exceptional contributions" during the summer. The new interim bonuses will be based on the period between August and October.
The firm did not comment on whether the salary rollback would include restoration payments making up for lost income.
A number of firms have cited strong cash flow as reasons for the reversal of austerity measures, suggesting the legal industry has fared better than it did in the immediate aftermath of the 2008 recession. While the profession shed more than 60,000 jobs in April, experts have said that declines in expenses have helped firms withstand some of the more damaging economic impacts of the pandemic.
However, some have also noted that workplace shifts could cause permanent changes to the structure and makeup of a law firm's staff.
When imposing a 4% reduction to business services staff in North America, Hogan Lovells CEO Miguel Zaldivar also said that the firm saw "continuing uncertainties in the market for 2021" and needed to prepare for that period.
A majority of decision-makers in the legal sector said in a recent survey that their organizations would likely backfill positions eliminated during the pandemic, though just 1 in 4 said it would happen within a year.
The list of firms who have in recent months reversed salary cuts and implemented layoffs includes Seyfarth Shaw LLP, Bryan Cave Leighton Paisner LLP and Nixon Peabody LLP. While the layoffs have impacted attorneys at firms such as Katten, Baker Botts, Hogan Lovells and others have only slashed staff roles.
--Additional reporting by Aebra Coe, Xiumei Dong, Kevin Penton and Emma Cueto. Editing by Michael Watanabe.
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