Despite a lot of talk, law firms continue to make little progress down on the diversity path. Law firms set billing rates of ethnically and gender diverse lawyers, particularly at more experienced levels, lower than white males.
Director of Strategic Counseling of LexisNexis’ CounselLink had a problem. She was tasked with giving a webinar on benchmarks for diversity and equality in law firms and was looking for a new way to go at the issue.
Satkunas had an idea. She reasoned that while pundits often talk people numbers: how many women, how many diverse lawyers, how many this, how many that. No one looked hard at the money. Remember the adage: “follow the money”? Satkunas had the bright idea to follow the money: analyze the billing rates lawyer charge their clients. She reasoned that billing rates are the critical factor in driving lawyer compensation (and power in law firms). As she puts it, billing rates are “a proxy for a lawyer’s value to the firm.” And she had a pool of data to look at how the rates of diverse lawyers and women compare to those of white males.
LexisNexis’ CounselLink requires lawyers that bill through the program provide data on ethnicity and gender. Satkunas was able to marry this data with billing rates reflected on invoices run through the ConselLink program. CounselLink is used by in-house legal departments of many large corporations to monitor and analyze legal fees.
Using CounselLink data, Satkunas analyzed some 20,000 attorney profiles in CounselLink and the data with the attorneys’ hourly billing rates on invoices billed between January 2020 and September 2021. Satkunas and CounselLink released the analysis on November 17.
In a sentence, the results ain’t pretty. At lower billing rates-those of younger attorneys- billing rates are generally the same across gender and diversity lines. But when you get to higher billing rates-those of more experienced or lawyers or those with specialized practices-the rate discrepancy between white males and ethnically and gender diverse lawyers is jarring.
Here are the details:
- Associates: There is no noticeable disparity through the 10th/25th/50th percentiles of billing rates, but an 8% gap forms between males and females in 75th billing rate percentile which remains through the 90th.
- Partner: For firms overall, there is no disparity in billing rates until the 50th percentile (6%). At the 75th billing rate percentile, the gap widens to 10%. At very large firms (>750 lawyers), the gender billing rate disparity among partners is constant across all percentiles, ranging from 11% to 17%.
Ethnicity – Black vs. White:
- Associate: By the 25th percentile of billing rates, white rates are 4% higher. By the 90th percentile, the differential is a striking 23%.
- Partner: Black partner billing rates in the 10th percentile start slightly higher than whites, but at the 25th percentile, they surpass their Black colleagues. At the 50th percentile, there is an 18% differential, which expands to 22% in the 75th percentile.
Ethnicity – Hispanic/LatinX vs. White:
- Associate: Hispanic/LatinX associate billing rates start 25% lower than whites, and a significant gap is evident across all percentiles. By the 90th percentile, the hourly rate gap is 32%.
- Partner: Hispanic/LatinX partner billing rates follow a similar pattern, with a gap of 8% materializing at the 10th percentile. After that, the disparity grows, ranging from 16% to 28%.
A pollyannish view of this data is that there just aren’t that many ethnically and gender diverse lawyers at the experience level in law firms to command higher rates. Therefore, the discrepancy. That the efforts to become more diverse just haven’t yet borne fruit at the higher levels. According to this theory, law firm diversity programs will eventually result in more diverse lawyers becoming partners and rising in the ranks. More diverse lawyers with experience will close in glaring billing rate discrepancies.
In stark contrast to the rates of other diverse lawyers, Asian billing rates start higher than other ethnicities and remain so across all percentiles
But before firms pat themselves on the back too much, consider what Satkunas’ analysis shows for one particular ethnic group. In stark contrast to the rates of other diverse lawyers, Asian billing rates start higher than other ethnicities and remain so across all percentiles:
Ethnicity – Asian vs. White:
- Associate: Asian associates’ billing rates are higher than their white counterparts at every percentile. A gap of 13% appears in the 25th percentile, which widens to 19% at the 50th.
- Partner: Asian partner billing rate trends mirror those associates, starting and remaining higher vs. white partners at all percentiles, and are much higher than partners of other ethnicities.
So clearly, law firms value Asian lawyers differentially and higher than both women and lawyers of other diverse groups. And despite all the hoopla, all the Diversity Director appointments, and all the press announcements about how much diversity is valued by law firms, little tangible progress has been made. Says Satkunas: law firms “have not put their money where their mouths are.”
Its time to insist that ethnically and gender diverse lawyers are paid equal rates.
And while it’s true that law firms set the billing rates of their partners and associates, clients are not exactly blameless. At the end of the day, the clients control billable rates: they either agree to pay them, or they don’t. Yes, it is perhaps asking a lot of clients to insist on higher billing rates for some lawyers on the team. But where clients trumpet how much they value and demand diversity, it’s not unreasonable for them to also put their money where their mouths are. Its time to insist that ethnically and gender diverse lawyers are paid equal rates.
The Power of Data
I applaud Satkunas for coming up with this approach and shining the light on what’s really going on in law firms when it comes to diversity. It confirms the power of data that is available and which can be unlocked by creative thinking.
Women, hispanic and black lawyers are billed out at lower rates and are compensated less than white males and asians.There is no other way to put it
I’m saddened by what this data shows, however. Law firms and in-house legal simply have made little progress on the diversity path, a topic I have written about here, here and here. It’s a sad fact of life: women, hispanic and black lawyers are billed out at lower rates and are compensated less than white males and asians.There is no other way to put it.
Maybe using data to shine the light on the inequality of billing rates will have an impact. Maybe law firms that preach diversity will take action to make rates equal. Maybe in-house departments will use this data to demand better compliance with lofty diversity goals.
It’s time to stop just talking the talk. It’s time to walk the talk.