Dec 23
Texas flag sticks out of mound of cash

What to Make of Headlines About $500k Associate Bonuses Offered by Texas Law Firms

Legal media has created eye-popping headlines about Texas law firms offering up to $500k signing bonuses for associates. Let’s unpack what is at work.

Texas appears to be experiencing a once-in-a-generation shift in demand for certain practice areas, such as M&A and securities law. The influx of businesses moving to Texas has created a sudden surge in demand. Los Angeles law firms went through a similar scenario in the mid-1980s, when New York firms started to open up L.A. offices, driving up associate compensation at certain firms by 50% in a few months.

Firms are now rushing to establish a presence in Texas in response to a flood of deals, which are happening “at a near record pace” according to Travis Wofford of Houston-based Baker Botts. Kevin Lewis, Co-Managing Partner of Sidley Austin’s Houston office, describes hiring dozens of lawyers within a few months and still needing to attract more talent immediately in order to keep up with the pace of transactions.

These signing bonuses are good news for a tiny subset of attorneys. If a firm can bill out an experienced associate at $700 an hour or more, paying a one-time bonus of $400k or $500k is profitable, especially if the associate stays at the firm for a few years. But there is a non-trivial risk that those who are attracted to such a flashy bonus are disproportionately likely to bolt for another offer after a year or so. By all accounts, very few law firms are even considering providing six-figure signing bonuses to associates. For a vast majority of law firm attorneys, the most reliable way to earn anything approaching seven figures remains unchanged – build a book of business and lead a team of lawyers and staff members to serve those clients well.