Associate Salaries: Higher and Higher?

  • August 07, 2014
  • Julie Stauffer

In 2007, first-year associate salaries in the U.S. topped $160,000 in 2007, as big-city firms tried to out-bid each other for the brightest law school graduates, while also trying to keep their best lawyers on staff with healthy pay raises and attractive bonuses. What a difference a year makes: today’s talk of recession has dampened speculation about the next big pay raise, and associates are under the microscope to justify such big salaries.

But law firm partners in Canada hoping associates salaries here will face similar downward pressures might be disappointed: associate pay continues to climb, affected by myriad factors beyond the overall economic crunch.

“Downtown Toronto is a significantly different market [than other places in Canada],” says Lisa Borsook, managing partner of WeirFoulds LLP. “One of the most significant factors has to be maintaining your competitive advantage.” This has meant sizable increases in salaries in recent years in order to prevent lawyers from looking elsewhere.

“The very large firms set their salaries to induce those students who might look at working in New York or London,” Borsook explains. “Starting salaries for associates are set with a view to being competitive on a global basis.”

Global competition also affects Vancouver firms. “We compete with Toronto, California, and the east coast of the United States for associates, just like most of the major markets in Canada,” says Jim Sullivan, chair of the associates committee at the Vancouver office of Blake Cassels & Graydon LLP. “And in order to compete, we’ve had to have fairly significant increases in associate salaries, whether it’s first year or upper years.”

But John Sandrelli, managing partner of Fraser Milner Casgrain LLP in Vancouver, thinks local factors play a greater role. “While there’s been tremendous upward pressure on associate salaries, it’s been the result of the economy being bullish in general in recent years,” he says.

Associate salaries are rising in Halifax too, says Daniel Gallivan, Chief Executive Officer of Cox & Palmer, but “financial compensation is just one dimension of the total package… Things like the nature of the work, professional development opportunities, work environment, work/life balance, all those other factors come into play. The package of criteria that exists in Halifax is different than in Toronto.”

So are these Canadian firms beginning to feel the same recessionary pinch that many of their U.S. neighbours are?
“This is the probably first year in quite a while where there has been a hesitation in the Vancouver marketplace with regards to an increase in associate salaries,” says Sullivan. “I think it’s a caution that’s being shared across the country, at least in the major marketplaces.”

However, this caution doesn’t reflect what is actually happening in Vancouver, where firms like Blakes are still aggressively looking for associates. “Vancouver is not as manufacturer-oriented as Ontario, and therefore, the high Canadian dollar doesn’t have the same impact on our legal market,” Sullivan explains. He points out that much of the cross border work done in British Columbia is resource-based, an area that continues to be strong. As well, Vancouver has close ties with Asia, which also remains strong.

In Halifax, Gallivan says it remains to be seen whether the expected economic downturn will affect associate compensation, but he doesn’t expect the impact would be as great as in Toronto. “We probably have less acute specialization than you would find in Toronto,” he says, explaining that some Toronto lawyers do only securities work, and when the financial markets have a downturn that securities work would dry up. In Halifax, more generalized lawyers would focus on other areas.

Still, firms in Toronto are not feeling the same pinch as their counterparts in cities like New York and Philadelphia. “I haven’t seen associate salaries levelling off and they’re certainly not declining,” says Borsook. She points out that Canada is a little behind the United States and that the effect of a slowing economy is not as pronounced here yet.

“But there doesn’t seem to be any question that an economic slowdown is coming,” she adds. “The banks are already being more selective on what they’re financing…and people also are scrutinizing much more closely the deals that they’re making...So it’s inevitable.”