This is what awaits all associates if you are not asked to leave or are fired from your law firm after several years of service.
It is important to know what awaits you because it gives you the ability to make decisions about your future. It is also important to understand whether you want to accept one of these positions.
1. What Does Of Counsel Mean: The Types of Attorneys That Are Of Counsel
Of counsel is a role that is traditionally given to attorneys that the partnership of the law firm and others like and want to have around; however, it is reserved for the attorneys who traditionally do not have much business and are also not interested in working extremely hard. This depends on the caliber of firm, however. Someone who is "of counsel" at Skadden Arps would likely be a partner at a firm like Dechert. The quality of the law firm (and competitiveness of the law firm) often determines what types of attorneys are of counsel.
Of counsel is by definition an interesting role. It is not a partner and it is not an associate. The role has a "permanence" about it, unlike an associate. Someone who is "of counsel" in a law firm is generally someone who has been around awhile and will also stay around. In contrast, the shelf life of most associates is quite limited – clients and partners in the firm know that the associate is likely to be gone at any time.
Here are the types of attorneys that generally find themselves in an of counsel role:
Attorneys Who Do Not Have Business—Or What It Takes to Be a Partner in a Major, Major Law Firm. If you last 14+ years at a firm like Skadden Arps and work extremely hard, the odds are very good they will make you "of counsel". Only attorneys with huge clients, or who achieve some sort of national prominence, are likely to be made partner in a firm like Skadden. If you are not asked to leave after 12 to 14 years, a firm like Skadden will generally make you "of counsel". This is in a rarified world. Someone who is of counsel at a firm like Skadden would almost certainly have been made a partner at a firm like Kirkpatrick and Lockhart, Kirkland and Ellis, or White and Case. Of Counsel is an excellent "safety net" for very good attorneys who are not yet ready to be partner at a major, major law firm, or who will never be. A law firm like Skadden may pay an of counsel attorney $375,000 a year and bill the same attorney out at $750 an hour. They are happy to do this all day long because it is profitable for them and gives the of counsel attorney enough security to remain happy.
Attorneys who do not want the pressure of being a partner in a law firm and just want to do their job and go home each night. There are all kinds of pressures that go along with being a partner that will be discussed later in this article. Many attorneys choose to become "of counsel" after being a partner for some time simply because they do not want this pressure. They consciously choose to make $225,000 a year in a large law firm instead of the $350,000+ as a partner. Of counsel attorneys would much rather just bill 1,800 hours a year and not be evaluated on all of the factors that partners are evaluated on (business generation, collections, outside activities, mentoring and so forth). I have seen many great attorneys who were partners in a major law firm tell the law firm they preferred to be of counsel. For many attorneys, this is a great choice.
Attorneys who are older and may have left the law firm environment to go into politics, in-house, become a judge, or something else and want to return to the law firm. An attorney may start out their career and work several years at a law firm like Gibson Dunn & Crutcher and even make partner there. Then, they may go to work for the State Department or something similar for 15 years before deciding to return to the practice of law. Attorneys like this can generally "make a deal" with a firm like Gibson Dunn to come back in an of counsel role. The firm will utilize this attorney's high-level government qualifications to impress clients and everyone will be happy. The attorney will be given as much work as the firm has to give them (generally, not a ton of work), and much of this work may come from people who were contacts of this attorney. In addition, the attorney can do work for clients who may flutter in from time to time.
Attorneys who are simply very old and do not have the energy to work hard any longer. Many partners eventually start losing steam and no longer want to work long hours and face the pressure of bringing in clients. These attorneys may then decide that they would prefer to, instead, have a less stressful life that allows for the occasional golf game, days off during the week now and then, and regular vacations. If an attorney has put in 30+ years of service at a law firm, law firms are often more than happy to give them this title and steady salary—or an arrangement that gives the attorney a percentage of their billings.
Smart, nerdy attorneys without client generation skills that the partners in the law firm like. There are generally attorneys inside of law firms that are very intelligent—some startlingly so—but who do not have the ability to bring in clients (and in some cases even relate to them). These attorneys may be excellent writers, great at catching details in deals and otherwise exceptional. At the same time, they may not have the best interpersonal skills with other attorneys in the firm and may be more comfortable in their offices with their doors closed. These same attorneys are also (quite often) very committed to their jobs and loyal to the law firm. These are great candidates to be "of counsel" in a law firm.
Attorneys with various personal demons who have trouble "getting it together" but still do good work. In one law firm I worked in, there was an attorney who was a graduate of Yale Law School and incredibly brilliant. He found himself in and out of the hospital for various psychological demons. The firm—quite obviously—could not make him partner, but, when he worked, he worked very hard and provided a ton of value to the law firm. He was of counsel. Other attorneys who are of counsel may take frequent time off, be sick or injured consistently and otherwise have issues that make it difficult for them to be 100% dedicated to the firm. These attorneys are often of counsel.
Attorneys in a practice area of the firm that does not have enough business to make it very profitable. Some law firms often get work from time to time in practice areas like bankruptcy, patent prosecution, trademark, or trust and estates. Because the law firm does not have a lot of work but needs senior people to do the work for important clients, they generally have an attorney on their payroll in an "of counsel" role who is able to provide service to these clients when the work comes in. Large law firms often have trust and estates practices for their larger clients, for example, but the money these practices generate is minimal compared to more active practice groups like litigation and corporate. Therefore, the highest anyone can often go is "of counsel" in this practice group. One interesting fact about these "niche" practice groups is that law firms often significantly reduce their hiring standards when bringing on associates. They do this because they want attorneys who will stay and not be overly ambitious and likely to leave—they want someone who will be happy graduating into a role such as of counsel. Thus, a trust and estates practice may hire someone from the middle of their class (who is attractive, refined and has excellent social skills) from a second tier law school when the majority of the attorneys in the firm went to first tier law schools.
Attorneys for niche management-related jobs inside of law firms that do not necessarily involve a lot of interaction with clients. Large law firms often have attorneys who do things like work on conflict checks and negotiate these conflicts with clients. These attorneys are often made of counsel so they have some authority in the law firm, but this is generally a glorified clerical-type role. In addition, law firms often have people in various administrative roles that they make of counsel. For example, of counsel attorneys are often made firm administrators and mediate various disputes among the attorneys and staff of the law firm. Other of counsel attorneys may work on collections for the law firm. Some may be in charge of firing people and doing exit interviews.
Attorneys that may have a lot of other stuff going on (outside businesses and so forth) and want to maintain a connection with a law firm. Some attorneys may have outside interests that are very strong. Yet, they want to maintain a connection with a law firm. I have even seen an of counsel attorney with a major law firm have a side solo law firm practice. Still other attorneys may be spending a lot of their time teaching law, for example. These attorneys are frequently made of counsel.
Women who have left the practice of law for a period of time and then come back. Many women may become partners, or may be hardworking senior associates, who left to have children for a time and want to come back to the practice of law—albeit, on a reduced schedule. Law firms will often make these women "of counsel". The women may choose these roles voluntarily because they need to spend time with their children or have other obligations.
People with political and other ambitions that keep them away from the office a lot. I have met many people who view practicing law as just a way to pay the bills—their real ambition is politics. Law firms generally do not have many problems with this. They like people who make them look good (and what better way than politics). Law firms will often give attorneys this title and a lot of leeway when they have political ambitions.
Of counsel is a way for good attorneys to stay involved inside of law firms and, at the same time, not be as accountable as equity and non-equity partners need to be.
2. What Is a Non-Equity Partner? The Types of Attorneys That Are Non-Equity Partners
"Non-equity partner" is a relatively recent invention that started to gain popularity starting in the 1980s. At that time, law firms were beginning to hire consulting firms and started to realize there were partners inside of their law firms that were not that profitable.
New methods of rating and categorizing partners were suggested, and the practice of having equity and non-equity partners took off.
While numerous law firms today continue with the practice of just having one tier of partnership, the non-equity partner is something that becomes more and more common in law firms each year. Non-equity partner is by definition a frightening title and suggests less permanence in a law firm than even of counsel. In reality, being of counsel is probably a "safer" position if someone wants to survive long-term inside of a law firm. Being a non-equity partner is sort of like being an associate with the knowledge and added pressure that if you do not bring in business, you are likely to be out of a job within a few years.
So what is a non-equity partner?
In reality, it is not much different than being of counsel. Most non-equity partners:
Do not have significant business
Receive a salary (and not partnership distributions)
The biggest difference between a non-equity partner and of counsel is that a non-equity partner is someone who shows the ambition and drive to potentially be an equity partner. They generally have interpersonal skills, are willing to work very hard and also have good legal skills. They are just not really quite there yet.
Non-equity partners are generally:
People who were formerly associates that are now being "groomed" and tested to see if they can fill a real partnership role; or,
Attorneys who were formerly equity partners but are no longer cutting it and are being given time to get business.
If I had to choose a way to describe non-equity partnership, it would be "secret probation". It is a role that (generally) only other attorneys in the firm know about. In addition, it is a role and title that is not likely to last more than a few years unless the attorney brings in some business.
Many non-equity partners are likely to be men with young families who really want to get ahead. They have mortgages, car payments and other commitments, and the law firm channels this drive into its growth and survival. Women, of course, are also non-equity partners when they show consistent commitment and the sort of drive that this role suggests—but they achieve this position less often because they frequently start families. People generally make non-equity partner after years of pressure and billing extreme amounts of hours at a level that is nearly impossible to do for attorneys spending a lot of time with families.
If you go to a law firm like White and Case, work extremely hard as an associate, and impress all of the right people, at some point in your association with this law firm, they will either ask you to leave, or tell you that that "you are on the right track". (Alternatively, they may make you of counsel if you are not sufficiently motivated.) If you joined this law firm as a lateral, they will likely not have this conversation with you until you have been there at least three years working your tail off.
I want to be clear that at a law firm like White and Case, it is not easy to get to the point where you are considered for even a non-equity role (you need to be really outstanding). The odds of making non-equity partner in a large law firm that hires 60 first-year associates each year is low. Only one or two of these people will even be around long enough to be considered for a non-equity partner role. It is not easy.
After a year or two of stringing you along, you will be made a non-equity partner. Once you are made a non-equity partner at a very large law firm, the following will happen:
You'll be given some money to decorate your office.
You will be given a salary of around $350,000 a year.
You will be told in no uncertain terms "congratulations" but you now need to generate some business.
A whole new set of expectations will fall upon you. You are expected to begin bringing in enough business to not only support yourself, but support a few associates with work and also [hopefully] support some partners and of counsel attorneys in the law firm as well. The point is, becoming a non-equity partner is sort of like being on probation.
The law firm is basically giving you the title of partner because they want to make sure that you have credibility with potential clients. The General Counsel of a bank is never going to be as enthusiastic talking to an associate, or person in an of counsel role, as they are a partner. Thus, the title is important for you to get business.
The expectation is that you will either rise to the challenge or fail. Regardless, the law firm is giving the attorney a vote of confidence, and a title, to go out and get business.
An attorney who is a non-equity partner generally does need to get business. While I am not going to get too far into this discussion, non-equity partners will use all sorts of methods to get business. They are expected to go out into the community to develop business and find ways to bring more work into the firm. Not all non-equity partners will do this, of course. These non-equity partners can sometimes get around this requirement by latching onto an extremely powerful equity partner (or partners) with a TON of business who feeds them a lot of work. If this occurs, and the powerful partner sticks up for the non-equity partner, the non-equity partner can make partner with that person backing them.
Each year, the non-equity partner will be reviewed, and the number of hours they billed and generated will be tallied. They may be shown an "average" number that equity partners are generating and told they need to get to that level if they hope to make it. If after a few years of this, the non-equity partner is still not pulling his weight, he will lose his job, or be given another role in the law firm if he is well-liked enough.
What happens to most non-equity partners that do not make it? Generally one of a few things:
They go in-house, open a solo practice, or take another job. This is the most common thing that non-equity partners end up doing. They realize that, for whatever reason, they do not have what it takes to be an equity partner—but they are skilled legally—so they decide that they are going to go in-house. This works very well for many attorneys, and I would estimate that this is what the majority of them do. Clients think this is a great deal because they can save money compared to what the same attorney would cost inside of a major law firm. Given the competitiveness of finding in-house work, many of these attorneys get frustrated and attempt to open their own practice. The results of this can be mixed. If the attorney could not get business with a partner title and major law firm behind them, how are they supposed to do this on their own? Fortunately, at this point in their careers, many of these attorneys have substantial savings to support themselves while they figure everything out. It does not always go well, though—and the entire thing is scary. I've seen many attorneys fail because they have little understanding of business once they open their own practices.
They go to another law firm legitimately. Sometimes the amount of business an attorney needs to become an equity partner can be staggering—even up to $2 million. Thus, an attorney at a major firm with $500,000 in business and very good legal skills in an in-demand practice area can be very marketable to smaller firms (or even similar sized firms with a need). Even with no business, these partners can be in demand by many larger and smaller firms. Thus, using their qualifications, these attorneys can move to a law firm and carry out their career elsewhere.
They go to another law firm illegitimately (and start a cycle of moving while exaggerating the amount of business they have). This is extremely common. As a legal recruiter, I know more attorneys around Los Angeles that I can count who have been carrying on this scam for years.
Here is how the scam works: The attorney may be working at a given law firm and (using a recruiter or otherwise) get in touch with other major law firms. They will represent that they have $1 million or more in business and provide the prospective firm with "fictional" write ups about how much they billed and collected from their clients over the past several years. They may represent they want to leave the major law firm where they are a non-equity partner because (1) there are "conflicts" and there are certain clients they cannot bring in, or (2) the law firm they are with cannot support certain clients and they are leaving business on the table.
Incredibly, the world opens up to these attorneys, and they generally get numerous offers from other law firms based on these representations. Because the attorney's business is impossible to verify, the law firm hiring the attorney has to take them at their word.
When the attorney gets to the new law firm, they suddenly represent that some of the clients are not ready to move or that their former firm is "playing dirty" to keep the clients. The attorney may, in reality, have a small amount of work but not much. Unfortunately, the new law firm may have already done press releases and announcements about their new hire. This charade is allowed to continue for one to three years, at which point the new "partner" is fired or asked to leave. These partners generally start looking for a new law firm to fall victim to the scam.
I've seen this happen frequently. This is almost always perpetrated by younger attorneys (in their 30s to mid-40s). Many of these attorneys begin abusing substances, disappear from the law firm for long periods during the day – and they almost always burn out. Some—miraculously—get lucky and snag huge clients. More often than not, though, their reputation eventually catches up with them.
One reason this scam goes on so long is that law firms are generally paranoid of getting sued. Thus, when a partner is leaving or looking for a job, the law firm will say nothing whatsoever. They just want to be rid of the partner without getting sued.
Another type of attorney likely to become a non-equity partner is a partner who is not making it as an equity partner. Rather than humiliating the partner and voting them out of the partnership and destroying their career, the law firm, instead, makes them a non-equity partner. For many partners, this is a huge indignity and is very upsetting. It is usually a signal that the person should get another job and move on.
Why would someone be voted down from an equity partner to a non-equity partner?
There are many reasons for this. They generally are:
The attorney is not billing enough hours.
The attorney does not have enough clients and business.
The attorney may have serious performance issues—a malpractice lawsuit, poor work product, and other issues.
The attorney may have developed various personal problems that the law firm is uncomfortable with (substance abuse, problems with the law, a messy divorce airing embarrassing personal information).
The law firm is at fault and does not have the business to give the attorney that it had when the attorney was made an equity partner.
The law firm has hired consultants who have determined that there should be two partnership tiers.
A younger generation of "hard hitting" partners with a lot of business has risen up in the firm, wants more profits for themselves, and is lobbying hard to push down people not carrying their weight.
Equity partners are leaving the firm because they are not making enough money and the law firm is under pressure to increase their pay and reduce the pay of non performers.
The most common reason for making someone a non-equity partner is generally that the person does not have enough business. That is almost always the reason why. In any event, once an equity partner is "de-equitized", it sends them a strong signal that they better "shape up or ship out."
3. What is an Equity Partner? The Types of Attorneys That Are Equity Partners
Being an equity partner in a large law firm means you are performing at, above, or close to the standard this law firm sets for its partners. Being a partner at a law firm like Wachtell, Lipton means something entirely different than being a partner at a law firm like Baker & McKenzie. The expectations are simply quite different.
An equity partner is generally going to be someone with an excellent reputation inside and outside of the law firm, and who is more than capable of carrying their own weight. They are able to generate business for the law firm, able to support associates, and able to bill a tremendous number of hours. To be an equity partner in most large law firms means that you have dedicated your life to your career and to servicing the law firm and its clients. Not only have you dedicated your life to this, but you are succeeding.
When you examine what an "of counsel" or "non-equity" partner is inside of most law firms, an equity partner is generally everything they are not:
Better interpersonal skills
All of these things are what make an equity partner. They are generally wholeheartedly and 100% still in the game, trying hard and making every effort to stand out and do well. In addition, most equity partners will need to be "invested" in the firm to be owners. This means that they may have to come up with anywhere from tens of thousands of dollars to several hundred thousand dollars to be "invested in the firm". This is generally called a "buy in" or "capital contribution". The law firm will generally loan the partner the money for this, or many law firms have special relationships with banks that do so as well.
What is so interesting to me about equity partners is that all of this is really a product of the demands and expectations of the law firm the person is a partner in. In a law firm like Cravath Swaine & Moore (which has only one non-equity partner), for example, being an equity partner means something far, far different than being an equity partner in a firm like Foley & Lardner. A higher level of commitment, work ethic, intelligence and client-getting ability is suggested by having a partner title at a firm like Cravath than it is at a firm like Foley and Lardner. In fact, Foley is an outstanding law firm, but becoming a partner at a firm like Cravath (and getting a job there even) is something that is entirely different than becoming a partner at Foley and Lardner.
Being an equity partner also means taking an interest in the "business side" of things. Equity partners are responsible for not just doing work, but often for:
Evaluating non-equity partners and associates,
Making financial decisions about when to hire and when to cut back,
Voting to hire new partners and others,
Making decisions about opening and closing offices,
Being responsible for pitching large potential clients,
Making decisions about how to market the law firm,
Making money when the firm does not make money,
Assuming liability for malpractice and other actions against the firm,
Being a point of contact for important firm clients,
Keeping the morale up of associates and others in the firm by portraying everything in a positive light,
Maintaining (or improving) the hiring standards of the firm,
Recruiting other attorneys with business to keep the firm profitable,
Making advertising and promotion decisions about the law firm,
Creating budgets, one and five year plans for the law firm,
Supervising the creation of content on the law firm's website,
Assisting public relations for the firm when issues come up,
Negotiating and finding office space for the law firm and supervising build outs,
Keeping files secure and overseeing the firm's IT department and record keeping.
In general, being an equity partner comes with the responsibilities of running a business. The average equity partner is not going to be involved in each of these things – but they will be involved in some.
Most equity partners need to have something more than just the ability to do legal work. They need to not just have the ability to bring in clients; they need to have a spark and often an ability to inspire those working with them. In addition, they need to take an interest in the practice of law as a business as well. Obviously, this is not something everyone is cut out for.
Every partnership agreement is different and every law firm evaluates and emphasizes different things. Some value business more than others as part of an ultimate compensation formula and others value other types of contributions. It all depends on the given firm.
In general, once an equity partner in a large law firm has a lot of business ($2 million or more) their jobs become very secure. They also are very marketable to scores of other large law firms if they are not treated to their satisfaction. It is not uncommon for these partners to continually move every three to five years when they get bored or annoyed with their colleagues. A law firm partner recruiter often helps these types of partners make a move to another law firm. A partner with a lot of business is generally the "big fish" in the pond.
In general, an equity partner will bill out at a similar rate to a non-equity partner and take home about 3-times as much money.
Law firms are fascinating environments offering many opportunities for attorneys of different skill, motivation and business-getting abilities. Ultimately, the most important thing to rise up the food chain and stay there is the amount of business the attorney has.