Lateral Market Update (Dec. 2021)
What a year! High deal volume, trials resuming, comp increases. Practice groups stretched thin, as attorneys navigated the pandemic, working from home, school closures and lingering quarantines.
While 2021 feels like a busy year for lateral activity (and it has been), the increased activity is more likely the result of pent-up demand from economic activity and lateral hiring that did not take place during the pre-vaccine peaks of the pandemic, rather than a new normal. Leopard Solutions, a company that tracks lateral moves, noted 12,238 lateral moves nationally among the AmLaw 200 from January 2021 through early December. This is a whopping 4,671 more moves than the entirety of 2020. However, averaging 2021 and 2020 yields 10,151 moves per year, which is largely in line with the most recent 5-year average (9,902).
Q3 2021 was particularly active. Typically, most lateral movement occurs in the first two quarters, after partners receive distributions and associates receive year-end bonuses. The shutdown in the 1st half of 2020 led to a more active than normal Q3 2020, and Q3 2021 eclipsed that relatively high mark by 177% in lateral associate hiring and 65% in lateral partner hiring, according to Leopard Solutions.
Q3 2021’s uptick in lateral hiring tracks movement in headcount and demand, as reported in Thomson Reuters’ Q3 Peer Monitor Index. Headcount increased 2.3% over the preceding twelve months at the 160 major law firms surveyed by Thomson Reuters. And hours billed increased 4.4% over Q3 2020 and even eclipsed pre-Covid Q3 2019 by .8%.
Diversity, Equity & Inclusion Gaps in Hiring
Leopard Solutions’ data reveal that AmLaw 200 firms are making progress in diversity hiring at the lateral level, but not at the entry level. The hiring gap between non-diverse and diverse lateral hires decreased 11 points to 49% in 2021 from an average gap of 60% over 2019 / 2020. But for entry level hiring, the gap closed only 1% in 2021, from 61% to 60%. Leopard Solutions pegs the persistent gap in entry level hiring as “the primary reason that the overall diverse population is not increasing in the Top 200 firms.”
Turning to gender, Leopard Solutions’ data reveal a widening gap in entry level hiring in the AmLaw 200, favoring women. Although roughly the same number of men and women were hired in 2019, 10% more women were hired in 2020. The gap increased to 15% in 2021, perhaps reflecting in part that women have out-numbered men in enrollment at ABA-accredited law schools in each of the past 5 years (2016-2020) and registered 54.09% of enrollees in 2020.
Lateral hiring data in the AmLaw 200 reveal a gap in the other direction, with men accounting for 11% more hires in 2021. This gap may be explained in part by the relatively small % of women who leave for another AmLaw firm. According to Leopard Solutions, of the 8,168 exits by gender diverse attorneys, only 11% landed at another AmLaw firm, while 31% joined a firm outside of the AmLaw 200.
By comparison, of the 4,926 ethnically diverse attorneys who exited AmLaw 200 firms in 2021, 34% joined another AmLaw firm. Only 14% joined a firm outside of the AmLaw 200.
North Carolina Lateral Year in Review
Lateral movement in N.C. was spread fairly evenly throughout 2021, with 24% of moves occurring in Q1, 29% in Q2, 28% in Q3, and 20% in Q4. As of Dec. 9, there were 298 intra-state moves to or from a law firm, with 257 of these laterals staying in the same metropolitan area.
122 attorneys lateraled to a law firm in N.C. from out of state, with 76 landing in Charlotte and 36 landing in the Raleigh metro area; of these laterals to N.C., 26 practiced in NY prior to moving, followed by 16 from Texas, 10 from DC, & 9 from Chicago. Entrants from other markets are always an important component to meet overall demand in the N.C. market, as they increase the pool of talent.
76 attorneys left law firms in N.C. for out of state opportunities, with 14 landing in D.C. and 12 in N.Y. Whether these 76 physically moved or are now working remotely indefinitely for out-of-state firms is not immediately clear from web data. For years, D.C. has been an attractive lateral destination due to its relaxed rules for bar admission by waiver. And the increasing acceptance of the Uniform Bar Exam (now 41 jurisdictions) is aiding mobility among junior lawyers. On the other hand, comfort gained with remote work during lock-downs has caused some firms to view the entire U.S. as recruiting territory for remote talent.
Across all laterals in and out of N.C. law firms, Litigation made up 23% of total moves, followed by Corp/M&A (18%), Banking/Finance (16%), Real Estate (11%), L&E (10%), and IP (6%).
