The Impact on Law Firms of Deferring Associate Start Dates

• Pages: 28-29
• Date: 01 October 2023
• Author: Daniel S. Wittenberg
• Subject Matter: Civil Law

Published in Litigation News Volume 49, Number 1, Fall 2023. © 202 3 by the American Bar As sociation. Reprodu ced with permission . All rights reser ved. This information o r any portion ther eof may not be copied o r disseminated in any form

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he legal industry has experienced its share of

challenges and transformations in recent years.

From the global nancial crisis to the COVID-19

pandemic, law rms have had to adapt to shifting

economic landscapes and evolving client needs. One

signicant change that has become more prevalent in recent

times is the deferral of associate start dates. While this may

seem like a practical response to uncertain times, it comes

with its own set of nancial implications for law rms.

By the Numbe rs

According to recent U.S. Department of Labor data, the legal

services sector lost 1,200 jobs in July and 4,200 more in

August, its lowest level so far this year. The jobs report also

adjusted downward its projections for legal sector employ-

ment. According to a recent report from Wells Fargo’s Legal

Specialty Group, “law rms continue to be swollen with

excess lawyers” through the midpoint of 2023.

Large law rms are advising on fewer deals, with a smaller

combined value, as mergers and acquisitions activity fell to

its lowest level in more than a decade during the rst quarter

of 2023, according to data released by Renitiv. Law rms

surveyed by Wells Fargo “reported a drop in productivity

during the rst six months of 2023. Lawyers so far this year

have logged an average 1,538 billable hours during that time

period—150 fewer hours than in the rst half of 2021, when

average billable hours peaked, according to Wells Fargo.”

“We’ve never seen numbers this low,” according to Wells

Fargo Senior Vice-President Owen Burman, Bethesda MD, in

a recent Reuters article.

Even though law rms have sharply curbed their hiring—

with some deferring new lawyer start dates—the number of

lawyers employed full-time at the rms surveyed by Wells

Fargo increased by 3.9 percent in the rst half of the year.

Despite this fact, overall demand for legal services dropped by

0.4 percent during the rst six months of 2023, compared with

the same time last year when demand increased by 0.2 percent.

According to the survey, “law rms’ biggest challenge in the

near-term is that client demand for their services does not jus-

tify the number of lawyers they have.”

Understanding Associate Deferral

Deferring the start date for incoming associates is a strategy

law rms use to manage their workforce and mitigate nan-

cial risks. Traditionally, law rms hire a new class of associates

each year, with start dates usually set for the fall after these

fresh graduates have taken the bar exam. However, economic

uncertainties, changes in client demand, and over-hiring in the

wake of disruptions like the COVID-19 pandemic have led

rms to implement a deferral strategy.

Reasons for Deferral

The reasons for start date deferral are varied, but they all

relate in some manner to a law rm’s top or bottom line:

Economic Uncertainty: Economic downturns can

severely impact law rm revenues. During such peri-

ods, clients may cut back on legal services, and rms

may nd it challenging to support a large incoming

class of associates.

The Impact on Law Firms of

Deferring Associate Start Dates

By Daniel S. Witt enberg, Litigati on News Asso ciate Editor

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