IAAL, IAMOL

March 26, 2019 7:29 PM

Mid-size firm in a secondary market. I've been there since law school, and now, they want to make me an income partner. Should I let them?

Pros:

• My day to day life is good. I get along with everybody in my department. For the part three years, all of my reviews have been glowing.
• For the size of firm that I work at, my work/life balance is unbelievable. I have dinner with my kid 80% of the time, and only occasionally work after she is in bed. I rarely look at work e-mail at home or on the weekends. I have never billed more 1800 hours a year in my career. Yet they're still putting me up for partnership, and I get very good raises and bonuses (at least on my firm's pay scale).
• Sure, I make less than a first-year at one of the mega-firms in town, and about $100,000 less than somebody of my seniority at those mega-firms, but I still make enough to live comfortably and have my spouse to be a stay-at-home parent.
• The firm supports my professional, community, and business development efforts.
• My work is generally interesting, the clients are pretty good, and about 50% of my workload is supporting a shareholder who is a professional and personal role model. They do fascinating work at an incredibly high level.
• There are a handful of long-term, continuing matters that I have worked on for years with this shareholder. It would be sad leaving before wrapping up.
• I'm the sole breadwinner/insurance provider for my family, and my spouse had cancer several years ago. It's in remission, but if the ACA is repealed, and my spouse's cancer comes back, and we don't have employer-paid health care, we're fucked.

Cons:

• I have no faith in the future. In particular, I have no faith in firm leadership. The chairman of the firm is a bully who has maintained a death grip on power, despite the firm having shrunk by half since I started. He is in his seventies, and has just been re-elected for a third five-year term.
• I don't trust the people who will be running the firm in 10 years. They're my peers, by and large. Some of them even think of me as a friend, and we're friendly and chatty, but I've seen how they operate.
• I am not interested in coming firm leadership.
• I am not interested in becoming a shareholder.
• I am not interested in firm politics.
• Being an income partner means a net pay cut of 1.5% to 7% a month, although I'm assured my pay cut will be closer to 1.5%. I'm told there is no room to negotiate, because I am already one of the highest-paid associates at the firm.
• Raises for income partners are negligible. The firm's expectation is that after a couple years of income partnership, you become a shareholder and make a minimum of $50,000 more. In reality, lawyers like me don't make shareholder. Instead, we get stuck at income partner with stagnating wages for decades.
• The firm does not pay for health care for income partners. They give a one-time salary increase to make up the difference in the first year, but if premiums go up by 35% in a subsequent year, you're SOL.
• I asked my department head why I would want to become an income partner if it meant a pay cut, and was told that the "firm wanted me to have some skin in the game."
• I am being pressured into partnership. I was allowed to say no last year, but if I try to say no this year, there will be "a lot of pressure." This year, the reviews from my department head and her ally (also in the department) were full of references to how I perform like a partner, which I interpret as the start of pressure. There have also been chatty visits to my office aimed at sussing out how I feel about partnership. I loathe being manipulated and pressured like this.
• The shareholder that I adore is on the tail end of their career, and has had a number of significant health crises. They are starting to scale down in preparation for retirement, and while they are trying to transition business to me, I'm a decade too junior. Their clients are unlikely to stay with me after the shareholder is gone.

Complicating this is a good friend who left the firm several years ago to start his own. I trust him in a way that I do not trust my firm's current or future leadership, and my friend is really, really, really good at business development. After four years, they have more work than they can handle, and my friend wants to hire me, despite the fact that I have no clients and my practice area doesn't line up with that of his boutique firm. He thinks I know enough to start, and respects my ability to learn the rest.

They don't offer employer health care, but I have an offer letter in hand for my current base salary, and a verbal agreement to match what I currently make between base, bonus, and health benefits. Right now, we're waiting for my bonus memo to come out, so that we can have a follow-up negotiation and pin down numbers. The minimum bonus at the boutique is basically the biggest bonus I have ever gotten. And the work load would be similar. And I know and like everyone there. And I could take a six week vacation between jobs.

My spouse is totally on board with me quitting to work for my friend, but the IRL lawyer-friend I'd talk about this is the friend who wants to hire me.

Thoughts? Perspective?

posted by sockacre, esq. to Work & Money (19 answers total)

IAAL, and I am an equity partner at my firm. (We don't have shareholders, and I don't fully understand the distinction at your firm between income partners and shareholders with respect to equity and pay, but that doesn't really matter.)

I strongly encourage you to take the offer. The only thing keeping you where you are is inertia, and perhaps fear of the unknown. Of course, we are lawyers, so we are naturally risk averse, so there are some things you can do to help you feel more comfortable with this decision. Specifically, ask him if he can share specifics about firm finances - namely, does his firm have debt? What about reserves? What are monthly/quarterly/annual operating expenses, and has he projected those numbers out over the next year to five years? You mention that he won't provide healthcare - what about a retirement plan or other benefits (life insurance, short- and long-term disability, etc.)? Does he have a plan to offer health insurance at some point in the future?

Get comfortable with those numbers and that information. He may not be able to share everything, of course, but it's reasonable to ask him to share at least the broad contours. (If you were joining his firm as a partner, you would of course have the right to see those numbers, as you'd be buying in, but since it sounds like you'll be an employee, he may not want to share all the details.)

Once you've had a chance to get comfortable with the numbers, get comfortable with what the move means for your personal finances (particularly with respect to health insurance, given your wife's medical history). This is really the one tricky piece, since you won't have group coverage and will have to buy in the market, so it may be worth doing some research into what that will cost you at least this year (and figuring out how much of an increase you can accommodate in your budget).

If the numbers work, I'd say go for it. This is the kind of move lawyers in your position hope for but often don't get - from getting out of a firm where politics and leadership are destroying it from within, to getting into a smaller yet as (if not more) lucrative position with more room for growth, to getting to work with people you respect and trust - it's all upside, except for the health insurance piece.
posted by devinemissk at 7:55 PM on March 26, 2019 [3 favorites]

IANAL, but my best friend is. He took a pay cut to leave a fairly well-known corporate law firm when they offered him a position similar to what yours is offering you (that is, some type of partnership, though the details probably were not the same). He did so because he did not like the firm leadership and did not think they were taking it to a good place. He now works as in-house counsel for fairly large corporation (it rhymes with Wiccan Jones) and AFAIK it was the right move for him. Obviously that's not directly parallel to your friend's boutique firm, but it's maybe a 3rd option to consider (that is, looking for a position similar to your own with rock solid health benefits and a path toward career advancement you would like).

Another consideration is, how binding is it to become this type of partner? I know basically nothing about how it works, but an obvious question in my mind is, can you take the promotion and later leave with little by way of repercussions, or alternately refuse it for another year? Specifically if you hedge your bets until Nov 2020 or so in this way you may find you're in a much better position to make decisions about the future.
posted by axiom at 9:17 PM on March 26, 2019

Can you clarify what else, if anything, is entailed in being an "income partner"? As you've described it, there's nothing but downside. Less pay, no health insurance, same amount of work. Why would anyone do this? It sounds like a trap.

I think you know which way you want to go - the narrative baked into your description makes it clear that you're ready to leave. You don't really need the validation from us. But, if it helps, I think that you should make the jump. You'll need to make some contingency for health insurance, but it sounds like you're in a strong position to negotiate the numbers to make it all work.

Good luck!
posted by Citrus at 10:07 PM on March 26, 2019 [6 favorites]

It's in remission, but if the ACA is repealed, and my spouse's cancer comes back, and we don't have employer-paid health care, we're fucked.

Your firm's size has shrunk by half since you started. I think you should put any stock whatsoever in the idea that your employer would continue to cover health care for your spouse indefinitely, especially if they already don't subsidize premiums for income partners. The fact that they have a group plan now does not mean that they are going to continue to maintain it if the firm shrinks further, costs escalate, and they're not actually compelled to do so.

From everything you've written here, it doesn't sound like you're in a position where five years from now, when they're looking at the budget, they're going to say, "oh, but we can't make this major change to our health coverage because of sockacre's spouse".
posted by Sequence at 1:05 AM on March 27, 2019 [2 favorites]

I don’t see any upside to taking the partnership and a lot of downside. I’d take the new job offer or at the very least start seriously talking to a headhunter about something else. If your friend would make you an offer like that, chances are others will too.
posted by Jubey at 3:49 AM on March 27, 2019

Not a lawyer, but my brother is. He was the top biller as an associate 3 years in a row at a large big city firm. He refused partner to become part of an in house counsel team at a large publicly traded company. 25 years later he has never looked back. Dinner with his kids, vacations with his family, all the pros you talk about.

The only thing to consider is if you think you can make a move in the future. What if you turn them down again? Will they move you out? What are the prospects of finding another job like the one your friend is offering you? Will your friend offer you or keep the offer open for some period of time?

I am not you, but I would make the move.
posted by AugustWest at 4:52 AM on March 27, 2019

Hold out for equity partnership now, with the higher income, if you feel you should stay. Otherwise, what the other commenters said.

I'm guessing "income partner" means that they give you the meaningless "partner" title and pay you a percentage of your billable time, or worse, of the fees actually billed out to the clients, or even worse, of the fees actually collected; and that under any of these measures, you would take home less than your present fixed salary.

These measures are too much under the control of the equity partners and you should avoid letting the firm base your take-home on them.

(I'm a lawyer and I don't know what "IAMOL" means.)
posted by JimN2TAW at 5:05 AM on March 27, 2019

(I think it's I Am My Own Lawyer)
posted by gideonfrog at 5:10 AM on March 27, 2019

Leave. I am a government lawyer and I've been toying with a jump to private practice for the last year. Your second situation sounds great. Your current situation sounds like it can't stay as it is and you don't like any of the future possible outcomes.
posted by notjustthefish at 5:25 AM on March 27, 2019

IANAL, I am in the field. I've seen a lot of people get stuck somewhere between associate and full partner - that seems to be a new normal. So I think you're absolutely right to not rely on the second promotion to shareholder. The first is probably all they need to pitch you to the clients as your boss's successor. Also, it sounds like 'income partner' is much cheaper for them than what you make now. (A pay cut, no raises, no healthcare contributions? What a deal.)

I have also worked at a midsized firm as it went under. We had both layoffs and practice groups splitting off (as people familiar with the firm's finances did the math and decided to go elsewhere). It became a miserable place to work, with tons of firm politics and drama. Everyone who had 'skin in the game' lost some.

I too vote 'Leave'.
posted by mersen at 5:30 AM on March 27, 2019

Response by poster: Thanks for the responses, folks. Having a wider perspective is really helping clarify things.
Please keep it coming!

A couple answers:

As people have guessed, income partnership is basically a meaningless title. I'd still be a W-2 employee with a fixed salary, and don't have a capital account or buy-in. However, the firm stops subsidizing my health care and paying for certain other benefits. The firm also requires contributions to a firm retirement plan that sounds like a 401K, but worse. (There is a counsel track where compensation runs as JimN2TAW describes, but they didn't bring that to me, because even they know I'm not that loyal/stupid. Also, I suspect there are firm politics reasons that my department wants me to be a partner.)

Theoretically, the upside of being an income partner is that business development is easier with the title. Also, the firm line is that after a few years of being an income partner, I'll become a shareholder (an equity partner with a capital account), which comes with a raise of about $50,000.

From what I can tell, some people become income partners because they think they'll be a shareholder in a few years, and life will be better, in that they'll get that $50,000 raise and they have a shot at firm leadership. Others feel trapped -- my firm is well-known for having reasonable billing hour requirements and "collegiality", whatever that means, so people show up, do good work, and then feel like they can't move elsewhere without business or taking a huge hit on work/life balance.
posted by sockacre, esq. at 5:37 AM on March 27, 2019

I'm the sole breadwinner/insurance provider for my family, and my spouse had cancer several years ago. It's in remission, but if the ACA is repealed, and my spouse's cancer comes back, and we don't have employer-paid health care, we're fucked.

They don't offer employer health care, but I have an offer letter in hand for my current base salary, and a verbal agreement to match what I currently make between base, bonus, and health benefits.

To the extent you trust your friend's verbal offer, which it sounds like you do, he's offering everything you would have gotten by staying. At that point, you're really taking a bet on the relative stability of the two firms: one older but clearly in decline, the other less proven but apparently ascendant.

Plus, you say you talked to your spouse and he's on board too.

This seems clear to me, if only by virtue of not having your comfort and familiarity with your current job. But maybe that's exactly the unattached perspective you need.
posted by meaty shoe puppet at 6:10 AM on March 27, 2019

IAAL, but I’m the nonprofit kind. Go with your friend. The place you’re at sounds terrible and like they want to “reward” you with a pay cut and less benefits, which is... not a reward. You also have a lot of warning signs about the future and how great it won’t be if you stay there.

Take your friend’s offer and get out.
posted by bile and syntax at 6:48 AM on March 27, 2019

The only concerns I see with taking your friend’s offer are: (1) there is always a risk mixing business with friendship, and (2) you may feel more responsibility there to bring in business or deal with management issues given the small size of the firm compared to your current one. If you’re ready to navigate those challenges, then I think taking the new offer is a no-brainer. You only live once!
posted by sallybrown at 8:26 AM on March 27, 2019

IAAL, although I work in nonprofits, but having watched several colleagues negotiate similar situations in recent years, I would jump to your friend's firm in a heartbeat. No question.
posted by saladin at 9:35 AM on March 27, 2019 [1 favorite]

IAAL and a current income partner at a firm that's Biglaw but boutique so it's very "lifestyle" for Biglaw. For what it's worth, my vote is leave. I'm doing the income partner thing because I believe in firm leadership and because there's a clear/demonstrated/short path to shareholder for me, and in the meantime I got a hefty raise this year (and they cover healthcare, which it never occurred to me not to expect). Your current firm doesn't sound like it has a great long-term future, your mentor and main source of work is on their way out, and you don't want what the firm wants for you, which is only going to lead to acrimony. Get out of there - worst comes to worst they would probably take you back if things don't work out with your friend. Feel free to MeMail if you want to discuss in more detail.
posted by wuzandfuzz at 10:08 AM on March 27, 2019 [2 favorites]

Theoretically, the upside of being an income partner is that business development is easier with the title.

I have no idea why this would be the case and I have not found it to be true in my own career - though I admit that this could be true in some practices. But that’s a shitty reason to give you a shitty offer. Either they support you in business development or not; giving you a new title is not support, though.

Leave.
posted by devinemissk at 10:17 AM on March 27, 2019

I would say that it's much much harder for an associate to get a call back from potential clients than a partner, at least in the litigation world. I don't know if it's different in the transactional world.

Ah, OK, I can see that. /end digression
posted by devinemissk at 6:33 PM on March 27, 2019

IAAL and i do some diligence on your friend's firm as suggested by devinemissk, then seriously consider making the move. i spent the first part of my career at a firm with leadership i didn't trust and didn't have a good feeling about. i made income partner and just as i made equity partner, a group asked me to move to a new firm with them. boy was i reluctant to make the move, even though i felt that my then-current firm was sliding into decline. as devinemissk said, the reasons i was reluctant to pull the trigger were inertia and fear of the unknown. but guess what? new firm turned out to be much better than the old, in so many ways.

so yes, your friend's firm is a risk, but the payoff could be huge--either income-wise, happiness-wise, or both. also, partner title may marginally help you land business at your new firm, but as a sr associate or income partner with little-to-no business, lateral moves will be tough. either way you slice it, your current firm doesn't sound like a good long-term bet.

so, bottom line for me is that life is too short to stick it out in a dead-end firm, particularly when you have a good alternative on the table.
posted by smokyjoe at 7:00 PM on March 27, 2019