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Why Law Firms and 3Ls Alike Should Consider Deferring

By Hugh A. Simons
June 01, 2023

We can expect that soon some enlightened Big Law firms will level with their incoming associates (or at least the corporate ones) and explain that market conditions are such that the firm cannot assure them of the volume of work necessary for their normal growth and development and, accordingly, the firm is offering a stipend (and health insurance) to those who choose to defer for a year. If such is to be expected, then it is to be fervently hoped that many 3Ls will give such deferral serious consideration.

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First, a Little Debunking

This consideration probably begins by putting in perspective the notion that deferrals are about firms lowering their costs and thus moving money from the pockets of would-be new associates to those of partners, and that all that constrains firms from deferring is the potential for brand damage on the campuses of elite law schools.

In reality, the cost savings from deferrals are relatively modest. The meaningful cost-reduction levers are things like: transitioning out the off-track and non-equity partner lawyers who aren't going to make equity partner but who are retained as executional capacity when market demand is strong; outplacing newly-promoted partners who are not showing the requisite business development nous and lateral partners who've failed to deliver their purported business case; pulling back from under-performing new office and practice initiatives; and, moving on more senior partners whose comp has drifted upward with tenure and now exceeds their practices' economic worth. Further, the savings from deferrals that would benefit calendar year 2023 financials — a period that matters disproportionately to firms trying to avoid a second down year of partner comp — are especially small potatoes given that it entails barely three months of salaries.

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