Wal-Mart has demanded a freeze on across-the-board rate-increases from its
US outside counsel, claiming that associate salary-hikes have had an unacceptable impact on law firm billing rates.
A memo sent out last week by the retail giant to the relationship partners at its network of outside counsel said that while the salaries firms chose to pay junior associates were “none of its concern”, the company was worried by the impact pay-rises were having on charge-out rates.
Associate general counsel Miguel Rivera said in the memo that the New York benchmark of $160,000 (£76,850) salary for newly-qualified solicitors was being used as a measure by other firms in other cities.
Rivera wrote: “Based on the size and frequency of the rate increase rises we have seen in the past three years, it appears that many of the requested increases are largely attributable to the steady nationwide increase in junior associate salaries.”
The retail giant – which instructs a large number of firms in the US, including Hogan & Hartson and Greenberg Traurig – said it would only consider individual requests for rate increases from top-performing lawyers working with Wal-Mart to meet the supermarket chain’s legal objectives.
Wal-Mart demanded that all rate increase requests be submitted by 15 December and that panel advisers provide it with hourly rates charged by every level of associate over the past three years.
The move comes after Wal-Mart in 2005 issued a letter to its 100 panel firms asking for a range of diversity statistics, followed by a further request to nominate women and lawyers from ethnic minorities as relationship partners.
Ellie Doohan, general counsel at Wal-Mart’s UK subsidiary Asda, said: “We are an everyday, low-cost retailer and our suppliers need to deliver great value to us. We have a similar approach to Wal-Mart in that if our suppliers are looking to impose cost increases they need to give us a good reason.”
She added: “We have our own fee negotiations and we challenge costs both at periodic reviews and on a case-by-case basis but we don't currently approach the issue in such a systematic way.”
Wal-Mart declined to comment.
Talkback: Is this what law firms mean when they say it's up to clients to drive fees down? Click here to have your say.
So can I, as a consumer, send out similar memos to all supermarkets and oil companies? What if I write that I am extremely concerned regarding the exponential increase in severance pay for senior management?
It is quite surprising that these chains are actually commenting on associate salary hikes. I would love to see their reactions if the memo (legal memo – to be sent by an associate) was one hour later than the expected (as opposed to agreed) time of delivery.
Wal-Mart is clearly not only bully in the consumer industry; it now seeks to bully the lawyers. It will be interesting to see how the lawyers respond. But we must applaud Wal-Mart's demand for diversity statistics from its outside counsel.
Diversity stats are nonsense. What next? Quotas?
Re: their buying power, well they're the consumer, that's their choice. If enough Wal-Mart users did likewise, they'd have to listen. As an associate, I'm not thrilled but that's the market for you....
I think it is fair play. If partners in large law firms see the need to increase salaries to associates to prevent them leaving (which let's face it is normally because the associate can see what they add to that law firm's bottom line and how much ends up being distributed to the equity partners and not to them for their hard work)surely some / all of the cost of that pay increase should come out of the partners annual PEP? Law firms cleints are not there to subsidise equity partners breaking the £1.5 million barrier.
"Law firms clients are not there to subsidise equity partners breaking the £1.5 million barrier"...sadly, yes, that's exactly what they're for. Law firms rarely make money from anyone other than their clients. That's why, as an in-house lawyer who instructs City firms, I'm sick seeing headlines boasting of ridiculous super-profits for equity partners. I accept that clients have to pay to ensure they've got the best brains on relevant matters but that's not always required. You don't need a Rolls Royce to nip down to the Co-op for your paper and pint of milk. A Corsa (or perhaps a small BMW) will do just as well. I can't say I totally adopt Wal-Mart's position; however, law firms who try to do anything other than very specialist boutique work would be well advised to analyse what it means to their clients when the thorny question of wage inflation and super-profits arises.
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