The U.S. is staring down the possibility of a recession and inflation has skyrocketed. Business demand in Biglaw has slowed dramatically from its peak in 2021. Legal recruiters say that “demand for associates no longer exceeds supply.” Outright layoffs and hiring freezes have already happened and more may soon be on the way (not to mention stealth layoffs, which may already be happening). According to tipsters, incoming associates, once so happy-go-lucky about starting their Biglaw jobs, might want to start getting worried about their futures. Perhaps these soon-to-be first-year associates won’t be associates — at least any time “soon.”
Why’s that? The deferral is making a comeback.
Back in 2009, when Biglaw firms were faced with the problem of too many employees and not enough work, they came up with a unique plan to deal with this issue: the deferral. (This was part of a larger plan to deal with The Great Recession and also included mass layoffs, stealth layoffs, hiring freezes, and pretty much whatever Biglaw firms could think of to save a few bucks.) Incoming first-year associates’ start dates were delayed for up to a year (or sometimes longer) and many received compensation for going away with the understanding that they would be able to come back to the firm and resume their Biglaw careers after the deferral. Unfortunately, even the best laid plans fall apart, and some associates weren’t welcomed back to their firms on time — or at all, ever.
Silicon Valley powerhouse Gunderson Dettmer — which adopted the Cravath scale back in March, offering salaries of up to $425,000 to its most senior associates — reportedly announced a deferral program for incoming first-years late last week. Gunderson is the first major firm that we know of to defer its incoming associates’ start dates this year.
Sources tell us that that the firm has delayed its new associates’ start date, firmwide, from October 31, 2022, to January 17, 2023. Partners communicated the temporary deferral to incoming associates by phone, and they were told the reason behind their stalled start date was that “demand has slowed significantly.” It was suggested that start dates for incoming associates could be delayed even further if demand remains slow.
Deferred associates will receive a monthly stipend of about $6,000, but the firm will not provide health insurance until associates actually start in January (or later). Given that first-year associates at the firm make $215,000 annually, Gunderson’s deferral stipend is just a fraction of what they’d be making if they started working on time. That’s certainly one way for the firm to save money during a slowdown in work.
We reached out to the firm several times to confirm these deferrals and for comment otherwise but did not immediately hear back. If and when we do, we will provide an update.
UPDATE (7:30 p.m.): A representative from Gunderson confirmed the deferrals and noted that because this is a personnel matter the firm had nothing more to say.
Now that one Biglaw firm has reportedly deferred its start date for incoming associates, we suspect that more firms will be comfortable doing the same. We will continue our coverage should this becomes an industry-wide trend.
If your law firm planning to defer incoming associates? Please text us (646-820-8477) or email us (subject line: “[Firm Name] Deferrals”) and let us know.
Staci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.
Kathryn Rubino is a Senior Editor at Above the Law, host of The Jabot podcast, and co-host of Thinking Like A Lawyer. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).