Speculation was that last week’s relatively low bodycount (100 lawyers, 253 staff) might have been a result of the Easter and Passover holidays, but that trend continued into this week. With just 121 layoffs confirmed at major law firms this week, four of the last five weeks have been among the slowest this year. Is the tide turning? The pessimist in us suspects we’ll see another wave as first-quarter results are finalized.
Layoffs slowed in the broader markets as well, with first-time claims dipping slightly, but continuing claims keep breaking records. So even though the pace of layoffs may be slowing, there still isn’t any significant hiring to offset the job losses.
The big story in law firm layoffs this week was Skadden’s deferral program, mostly because it was picked up by the New York Times. They’re far from the only firms doing so, though, so check the ATL Start Date Round Up.
Of course, deferrals only apply to associates. Staff attorneys need not apply - MSNBC has the story of Frank Scudere. Skadden gave Frank a break and didn’t fire him when the firm cut a host of other staff attorneys on January 16, but only because he was still drying off after being on the plane that crash landed in the Hudson River. His luck didn’t last long, though. He lost his father a week later and his job last month.
After the jump, we analyze layoff and other cost-saving activities this week.
Layoffs by Region
We’ve done sporadic reports in this series on particular markets (California, Chicago, and London so far). Figuring out which firms haven’t had layoffs announced in a market where most have has, not surprisingly, been a strong indicator of firms to watch.
California
For example, in the first California roundup, we wrote
That pretty much leaves Gibson Dunn; Irell & Manella; Manatt, Phelps & Phillips; Paul Hastings; and Quinn Emanuel as the major California firms that haven’t had layoffs yet. Most of those skew towards litigation, so perhaps there won’t be major cuts.
We subsequently revised that list to add Munger Tolles, but far more firms dropped off. Within three weeks, the list went from six major California law firms that hadn’t had layoffs to two.
London
London is almost impossible to keep up with. Suffice to say, there are always layoffs there, although Freshfields and Slaughter & May seem to have avoided them so far. This week it was Eversheds letting go 11 in its London real-estate practice, the firm’s third round.
They’re too small for us to track and getting smaller (check the methodology), but Howard Kennedy is in redundancy consultation with up to 40 people – salaried (i.e., nonequity) partners, associates, and staff. Last June, the firm was one of the first movers, when it laid off 20 attorneys and 30 staff. Trowers & Hamlin, which is another small UK firm, had its third round of cuts. This time, 17 associates and staff.
Atlanta
This week, we’ve been given a gift. Janet Conley of the Fulton County Daily Report, in a piece primarily about stealth layoffs at Troutman Sanders, has rounded up most of the Atlanta activity.
Troutman Sanders tried to go the shameful stealth route, but Janet knows how to subtract. Number of lawyers before announcement minus number of lawyers after announcement minus solid information from firm equals 28 fewer lawyers. As we say in the Law Shucks Layoff Tracker methodology, we will use that number until the firm provides better information.
Turning to the rest of the city:
Alston & Bird in January and April announced the layoffs of more than 20 associates, roughly 2 percent of its attorneys, and some 60 staff; King & Spalding in March said it cut 122 people, including 37 lawyers — about 4 percent of its attorney ranks. Paul, Hastings, Janofsky & Walker said in March that it would cut 44 associates, or about 6 percent of its associate head count, and 87 staff from its U.S. offices.
In February, Bryan Cave, known as Bryan Cave-Powell Goldstein in Atlanta, cut some 5 percent of its 1,200 lawyers firmwide; Holland & Knight bumped 243 employees, including 70 lawyers, or about 7 percent of the firm’s lawyer ranks; and Epstein Becker & Green laid off more than 20 attorneys, or about 6 percent of its lawyers nationwide.
One major Atlanta firm she didn’t mention was Sutherland Asbill & Brennan, which laid off about 15 associates, including eight in Atlanta. From what we know of the Atlanta market, that leaves Kilpatrick Stockton and McKenna Long & Aldridge as the only Atlanta law firms without layoffs (so far).
Salary Cuts
McKenna may not have had layoffs, but it was one of the notable firms engaging in the increasingly hot trend of salary cuts. The firm is rolling first-year (class of 2009) salaries back by $20,000 (from $160k to $140k). With 12 new lawyers coming in, they’re saving $240,000 – with overhead, that’s only about one job saved. Presumably, that goes with a salary freeze for continuing associates, so on the bright side, everyone still makes more than those in the classes below. Frankly, in this environment, not getting a raise isn’t so bad – ask your clients what the non-promotion pool at most corporate law departments was (hint: rhymes with Nero). As firm chairman Jeffrey Haidet noted, “I think [the incoming first years] were probably happy we were not calling to rescind any offers or delay start dates six or 12 months like some other firms.”
Greenberg Traurig, McGuire Woods and Allen Matkins (who?) are all cutting salaries by 10% across the board, and Connecticut’s Robinson & Cole (which isn’t on NY scale anyway – first years start at $110) is cutting by $10,000. Considering the fully loaded cost of an associate is about double the salary, that means a 10% across-the-board cut saves one job for every 20 associates.
So a 5% RIF and a 10% paycut have pretty much the same economic effect. Which is better? In the aggregate, disinterested groups of people would probably say it’s better to get 90% than $0, but in the world of over-achieving BigLaw associates, I suspect the vast majority of individuals think they wouldn’t be cut (the Lake Wobegon effect) and would rather see their firms trim the “dead wood.” And what about the marketing effects (which is probably the real deciding factor at the management level) – is it better for a firm to be below “market” without layoffs, or at “market” with layoffs?
Inhouse
Inhouse positions have historically been safer places to wait out layoffs. Unlike law firms, which have their hands tied with 85% of expense fixed in rent and compensation, corporate law departments have a massive variable expense: outside-counsel spend. It’s a lot easier, friendlier, and more cost-effective to send less work out and to shift the work that is sent out to cheaper firms.
The risk inhouse is that the law department is itself almost always a cost center (DuPont notwithstanding), so when profitable lines of business are forced to make headcount cuts, general counsel face significant pressure to “share the pain.”
The other impetus for inhouse cuts is in the aftermath of a merger. In those situations, large law departments are an “opportunity to realize synergies” due to the significant overlap in functions. In the best-case scenario, disparate businesses are combined, leaving the line-of-business ranks intact, but that still leaves duplication in corporate functions like M&A, securities, tax, and the other high-end specialties that tend to recruit more heavily from BigLaw.
Those two factors played a role in Wells Fargo’s layoffs confirmed this week. Last month on Law Shucks, we identified several other corporations whose law departments have been hit.
The Numbers
121 laid off this week (60 attorneys / 61 staff)
788 this month (232 / 556)
8,661 this year (3,381 / 5,280)
Layoff Tracker
Added:
- Howrey (25 – 0 / 25)
- Womble Carlyle (20 – 10 / 10);
- Perkins Coie (38 – 12/6);
- Eversheds (10 – 10/0);
- Troutman Sanders (28 – 28/0).
Didn’t add:
- Kirkland is laying off staff, but no solid numbers yet, so couldn’t add
- Didn’t add aforementioned Howard Kennedy (40 people) or Trowers & Hamlin (17).
Errata
We missed a round at Eversheds in November and have added it back in.
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