As usual, we start with the big-picture number, and once again, it’s not good. Initial jobless claims were up to 637,000 last week, from an adjusted 605,000 the week prior. The streak of continuing-claim records continues, now in its 15th week, as net jobs continue to contract. Unemployment is at a 25-year high of 8.9%. There may be some room for optimism, as many pundits believe the surge is a result of the auto industry’s continuing woes. Other sectors may be seeing some of those green shoots.
[Pfizer]’s four-year “tour de layoffs” has cost the company $7B, according to an SEC filing. To date, PFE has spent $5.3B for employee-termination costs, including severance payments, pensions and post-retirement benefits, as well as costs associated with write-downs on properties, plants and equipment. PFE has axed 40,000 (yeah, 40,000) employees over the last five years, with 1,650 positions gone in Q1. The damage is not done either. PFE says that once the WYE merger is done, another 19,000 will get the axe with 8,000 coming from PFE and the rest from WYE. PFE expects the merger and restructuring will cost between $6-8B, but will reduce annual costs by $4B starting in 2012.
After the jump, back to updating BigLaw layoffs (despite some parties’ selfish objections) and other cost-cutting measures.
Stealth layoffs continue to be a problem, but at least IP firm Fish & Richardson finally saw the light. After trying to pawn off some of its previous layoffs as performance based, this time around the firm at least had the decency to acknowledge the 35 lawyers and 85 staff it just laid off were victims of the economy. We applaud the candor, if not the behavior. Sullivan & Cromwell, on the other hand, is still trying to go the stealth route. Initial reports of 15-20 have climbed to 30 and may go as high as 10%, which would be 45-50 associates.
Willkie seems to be in full-blown stealth mode, according to numerous tips to ATL. Supposedly, the affected have been given five months to transition elsewhere (where, exactly, is that supposed to be?) and the layoffs may actually just be presaging an impending wave of layoffs as deep as 10%.
Ahh, the life of a slacker. We’ve previously been blessed by local reporters covering the markets in Canada and Russia, Philadelphia, and Atlanta. This time it’s the most-remote of common-law markets: Australia. This week, AmLaw Daily pointed us to an Australasian Legal Business piece, including a poor local shadow of our layoff tracker.
Among the larger Aussie firms enacting cuts:
– Minter Ellison said that “softening” demand for legal services was behind its decision to let go of 35 staff members–11 lawyers and 24 support staff.
– Blake Dawson terminated 89 employees–23 lawyers and 66 support staff–after its March review of business.
– One of Australia’s largest firms, Allens Arthur Robinson, announced a firm-wide salary freeze in light of a “shrinking Australian legal market.”
– Corrs Chambers Westgarth has delayed the start date for its 2009 recruits from February to April and paid graduates roughly $1,740 each in compensation. (All dollar totals have been converted to U.S. dollars.)
In addition to the layoffs, ALB reports the Aussies are taking many of the same activities we’re seeing in the US and have been summarizing in this series.
London has signed up for a permanent place in this series, giving us something to write about almost every week. What we’re seeing now is the final numbers for the mid-February layoffs. DLA Piper came in under its original estimate, laying off 24 attorneys and 100 staff, below the original projection of 140. Bear in mind, that’s just London – New York was 80 associates.
Partners at Dechert have made it clear that they’re voluntarily sharing some of the pain. The original reports were that chairman Bart Winokur was taking a $1 million pay cut, but it turns out that 36 of the firm’s top-paid partners have taken reduced draws. Winokur’s cut might also not be $1 million – it’s based on a percentage of draw, but one source says that number is “wrong” without saying whether it’s more or less. Still, the guy supposedly made $8 million back in 2007.
DLA Piper jumped on the bandwagon, too. Global Chairman Frank Burch Jr., Joint Chief Executive Lee Miller and U.S. managing partner Terry O’Malley and other partners are taking “significant reductions” in their draws. Senior counsel and of counsel are getting their pay cuts and associates aren’t getting class raises. But at least they’ll continue to make more than the people coming in behind them as the scale shifts downward. First years are coming in at $145,000, down from $160,000, in New York with corresponding cuts in other markets. Clients will be happy, though. Rates are coming down, too.
Even judges have agreed to take a cut, although it seems largely symbolic. 368 of North Carolina’s 396 trial and appellate judges agreed to a 0.5% pay cut as part of a statewide initiative. First years still make more:
Base pay for judges ranges from $109,372 for District Court judges to $124,382 for Superior Court judges. Judges also earn longevity pay and raises for legal experience.
A new development in law firm cost cutting this week! Drinker Biddle is taking a page out of the Simmons playbook and is developing a six-month training program for deferred associates. One would think that three years of law school would have prepared students for firm practice, but apparently not. It’s actually more like an articling or pupilage program than what Simmons is doing, which is more like a mini-MBA. The participants (students? associates? trainees?) will be “shadowing” partners to gain some on-the-job apprentice-style training. They’ll be paid $105,000 for the duration and go to “market rates” when the program ends.
People are finally starting to notice something we’ve been talking about for weeks. These deferrals are going to lead to a massive backlog of new attorneys, as the class of 2009 competes with next year’s graduates for starting spots in 2010 and beyond. There are basically only two ways to resolve that: skip a year’s hiring and fix it in one year, or continue to defer every class and take smaller classes each year. Already first years are worried about fighting with summers for the few scraps of work that make it down that far.
Layoff Tracker Errata
Somehow we missed tracking the DLA Piper UK redundancy from February. It probably got confused with/overshadowed by the 180 people laid off by the firm in the US. We’ve added the final UK number to the tracker (24 lawyers, 100 staff). That moves the firm up to #4 on the Total Layoff ranking, and #7 on the Lawyers ranking.
Similarly, Simmons is now at a grand total of 91 (18 associates, 73 staff), up from the 69 originally announced, as the numbers for its redundancy consultation were finalized.
We upped the S&C count to 30, based on the updated reports from ATL.
391 this week (102 lawyers, 289 staff)
977 this month (308 lawyers, 669 staff)
10,015 this year (3,851 lawyers, 6,250 staff) More on this milestone later.