Metal-As-Story
Judge Samuel Kent's Evolving Defense

Pay to Work: Are you Kidding Me?

Older lawyers at large law firms often complain that associates are not profitable.  This is silly, when you do the math, as I do below.  Here's the latest incantation of this silliness:

On Sunday night at dinner, an out-of-town friend since college, and member of a large U.S. law firm, raised the above question. "Jack's" verbatim query was a bit, but not much, different. After being startled for a moment, I wrote it down:     "If associates get all the benefits of training at my law firm in the first three years, and can't really add much value anyway, why don't they pay us?"

The blogger who was told this lie thinks it's a good idea.  Yes, folks, associates should pay law firms for the privilege of working for them. 

This is moronic.

As a practical matter, many lawyers do "pay" for real legal training and experience.  They take government jobs at a huge opportunity cost to learn something.  The blogger, however, is talking about large law firms.  So let's see what associates at those firms learn.

Those who don't pay (via the opportunity cost) for a post-law-school education, but rather go to a large law firm, "learn" how to do the very challenging task of staring at pages all day.  This is called "document review."  Why does someone need to pay to learn this skill?  It's not hard.  You can learn the law of attorney-client privilege, as it applies to document review, in one working day.  Staring at documents and keeping a privilege log are not educational.

When not doing document review, most associates are "learning" how to write memos.  And maybe an occasional motion or brief.  Once you've done a dozen memos (over a few weeks' time), you have it down.  It's really not that hard.  Read a bunch of cases.  Crunch them.  Type. 

Yes, becoming a good writer takes time, and is something that will happen (or not) as you do more of it.  Still telling someone to, "Type me another memo that I can bill the client for," isn't really training writers, though, is it? 

The idea that lawyers are learning so much from large law firms is a total scam.  People repeat the assertion uncritically.  If you read the comments to the post I linked to, above, you'll see many ignoramuses supporting the idea.  With nary a paragraph of analysis.  Just assertions. Is that what large law firms are teaching associates?  "Just eat whatever steaming pile of bullshit we shovel onto your desks."  Some education! 

Let's look at the assertion that large law firms do not make money off of associates.  Let's run the math.

Most large law firms expect an associate to bill (at least) 2,000 hours.  Large law firms bill out young lawyers at  $300 an hour or more.

I have seen realization data (actual hours billed to the client) from large law firms.  So has at least one other law blogger (scroll down the comments for an awesome discussion).  Partners generally bill out 85-95% of the time young lawyers claim.

So then, we have a lawyer billing 2,000 hours.  Those will "realize" into 1,800 hours.  1,800 times $300 equals how much?

Nothing, right?  Zero, zilch. You should pay us, losers!

No, over half-a-million ($540,000, actually).  Let's assume a collection rate (what the client actually pays relative to the bill sent) of 90%.  This leaves the law firm with $486,000 brought in by the worthless associate who should be paying the law firm to learn how to stare at documents and write memos.

Um, OK.

And, yes, I know there is overhead associated with these lawyers.  So we'd need to subtract the lawyer's salary ($170,000), bonus ($40,00), plus staff salaries (let's grab 1/3 secretary, since he will be shared with other lawyers, for a cool $25,000) and office expenses (rent isn't cheap in Manhattan), plus paper and telephone bills.  Not cheap.  But overall, I'm betting those costs add up to less than half-a-mil'.  Which means... profit.

Associates - especially at large law firms - are a profit center.  They thus don't need to pay anyone for the privilege of staring at documents, writing memos, and being lied to about their prospects of making partner.

Now, I know, some partner will say, "We lose money on associates!"  They always say this, but they never open their books.  If anyone wants to refute me, go ahead.  Instead of repeating the tired (and unsubstantiated) assertions, open your books.

How much do you bill your associates out at?  What's your average realization rate?  What's your average collection rate?  What is the exact overhead associated with each associate?  Don't fudge the numbers, either, by saying that there are hundreds-of-thousands of dollars in "recruitment costs" per lawyer.  Also, don't throw in the cost of the marketing department.  And if you add in facilities managers (which you should), divide them by the number of total people; since it's not like the AC only runs in the young-lawyers' offices.

So, show me they money.

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