The Return Of The Dreaded Biglaw Deferral Is Now Being Praised By Industry Insiders

Business demand in Biglaw has slowed dramatically from its peak in 2021. Outright layoffs are happening across firms of all stripes, with lawyers and business professionals being "rightsized" out the door, and stealth layoffs are happening at the same time. Is it time for incoming associates, once so happy-go-lucky about starting their Biglaw jobs, to worry about their futures?

It just may be, because we now have industry experts promoting the case for deferring first-year associates.

If case you're unfamiliar with deferrals, we'll provide some background. Back in 2009, when Biglaw firms were faced with the problem of too many employees and not enough work, they came up with a unique plan to deal with this issue: the deferral. (This was part of a larger plan to deal with The Great Recession and also included mass layoffs, stealth layoffs, hiring freezes, and pretty much whatever Biglaw firms could think of to save a few bucks.) Incoming first-year associates' start dates were delayed for up to a year (or sometimes longer) and many received compensation for going away with the understanding that they would be able to come back to the firm and resume their Biglaw careers after the deferral. Unfortunately, even the best laid plans fall apart, and some associates weren't welcomed back to their firms on time -- or at all, ever.

Some Biglaw firms, like Gunderson and Cooley, pushed their first-years into deferrals more recently in the wake of announcing layoffs en masse. And now, with layoffs running apace, deferrals are being praised.

Hugh A. Simons, former senior partner at The Boston Consulting Group and chief operating officer at Ropes & Gray, predicts in a column published in the American Lawyer that sometime in the next few weeks, Biglaw firms will approach their incoming associates with a year-long deferral offer -- one that includes a stipend and insurance -- explaining that due to current market conditions, they may not be able to work as much as necessary to grow and develop with the firm. "If such is to be expected," he writes, "then it is to be fervently hoped that many 3Ls will give such deferral serious consideration."

Based on some of the recent deferrals we've seen, would-be first-year associates will receive just a fraction of what they'd be making if they had started working on time, and to our knowledge, they will not receive health insurance. That sounds like a bit of a raw deal. But why not use those lemons to make lemonade, counters Simons.

Market demand for corporate transactional services is extraordinarily soft right now. This lowers the prospects of incoming associates having a strong, successful, start. A curious dynamic within Big Law firms is that a strong start is hugely predictive of having an enjoyable and rewarding career, with the reverse also being true. Thus, pushing off a start date for a year, by when market demand is expected to have rebounded, positions an incoming associate more robustly for success.

More broadly, a career can span 30 to 40 years. The loans will get paid off. Taking a year before you dive in and instead exploring something outside the mainstream is no bad thing. When firms offered deferral stipends in the wake of the global financial crisis, people went off and worked at non-profits, took lower-court clerkships, helped in political campaigns, did advocacy work for immigrants, took master's degrees, or just traveled. Saliently, 10-15 percent didn't come back to their firms. There was something more compelling out there.

So, what'll it be for incoming first-years? Will their firms opt to defer them or accept them into their loving corporate arms, soft demand be damned? We suppose we'll have to wait and see which firm is next to make a move.

The Case for Deferring First-Years [American Lawyer]

Staci Zaretsky is a senior editor at Above the Law, where she's worked since 2011. She'd love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.