This Week in Layoffs – 6/26/09

by lawshucks on June 26, 2009

Pic: U. Chicago

Pic: U. Chicago

Forgive us for sounding like a broken record. There are only so many ways to say the same thing about US unemployment: the rate of new filings has slowed down, but overall unemployment continues to rise. Unfortunately, it looks like last week’s brief drop was just a blip in an otherwise unbroken trend of worsening data.

That pretty much mirrors the trend at law firms – fewer layoffs but still no hiring (with one exception).

More detail, after the jump.

Overall, law firm layoffs have certainly taken a turn for the better, with the second quarter coming in far below the first quarter of the year. But while the worst may be behind us, it’s not exactly smooth sailing ahead. Managing partner confidence is slightly less bad than previously, according to Citi Private Banking’s Managing Partner Confidence Index. As the WSJ Law Blog noted (emphasis added),

With weak anticipated demand, MPs are looking to reduce expense growth, primarily by cutting or freezing headcount, and this recession continues to be marked by record layoffs among law firms. Additional measures include shelved summer associate programs, delayed start dates for first year associates, and programs paying associates to take time off to do pro bono work or pursue other interests. A few firms have even taken the unprecedented step of reducing associate pay, and we expect others could soon follow suit.

The indices for equity partners, associates and non-equity, non-associate lawyers all came in below the neutral baseline this quarter, indicating flat or declining headcount over the next 12 months. Overall, it appears that leverage will also be down over the upcoming year, with associate headcount levels trailing equity partner levels.

At this point, the issues seem to be whether New York firms will come out of the closet and own up to the stealth layoffs, whether those law firms that have held out this long make it through the downturn, and whether firms that have already laid people off have to go back to the well (although we can’t imagine anyone challenging Clifford Chance’s astonishing lead in that category). There’s one additional possibility, although we expect the numbers won’t really be significant and it will be kept even quieter: one third of managing partners expect to cut non-equity partners, and a quarter expect the equity ranks will thin.

As far as actual layoffs go, this week could have been what we have been waiting for for months. No, not the Kwisatz Haderach – the week without layoffs. Then Detroit had to go and ruin it for everyone. Crain’s Detroit Business (we were recently surprised to find out there was a Cleveland version of Crain’s so their covering Detroit really shouldn’t have been a surprise…) rounded up layoffs at three of the Motor City’s biggest firms: Dykema, Miller Canfield, and Honigman Miller. This is the first time we can recall that all of the layoffs reported in a week were in a single city.

You know things are bad when the spawning pool for BigLaw is cutting back. Harvard University is laying off 275 employees, including a dozen from the law school, despite increasing, or at least flat, law school applications.

While they don’t qualify for the “major law firm” standard we use for the tracker, an apparently well known North Carolina firm, Robinson Bradshaw, put lie to the claim that mid-sized regional firms were thriving (or at least weathering the storm better than BigLaw). The firm laid off six lawyers and fewer than a dozen staff.

Meanwhile, the bad news continues for the classes of 2009 and 2010. Those few who were lucky enough to score summer positions, despite the smaller classes, already knew they’d be getting a shorter audition. But now they’re also finding that the “automatic offers” of previous years have also fallen by the wayside. Georgetown is predicting offer rates as low as 50-80%.

Even though layoffs have slowed to a trickle, firms continue to cut costs. This week, the vast majority of the activity was in salary cuts. 10% off the bottom is becoming de rigeur, with Buchanan Ingersoll being among the latest to hop on that train. Venable decided to be quirky and went for 8%.

Kaye Scholer is half-assing its paycuts – saying it’s “withholding” salary from associates who aren’t on track to hit 1600 hours this year. The worst part is the firm is making up for the first half of the year’s full pay by “double withholding” at 20% for the balance of the year, for the promise of getting the money back if the threshold is crossed by year end. How is that playing out with associate morale?

To the extent anyone can be “pleasantly” surprised by this sort of activity, that’s pretty much how we felt about Howrey turning the clock back by a century or so. The firm is instituting a turn-of-the-century-esque training program in which its new hires will spend only one third of their time on client work, with the balance in training and pro bono. Of course, that comes at a price: pay starts at $100,000, with bonuses and raises as the participants progress through the program.

We were sickened by the firm’s statement, which described the program as “a first of it’s [SIC SIC SICKENING] kind entry level lawyer training and initiation program.” We’re hoping a grammar refresher will be part of the curriculum and whoever wrote that will be forced to attend.

DLA Piper is the other firm dipping its toe in the creative-solution pool. The firm is “revamping” its associate program by reducing incoming class size, departing from lockstep, and relying more heavily on staff attorneys. Getting put into the staff track pays a hell of a lot better, but it’s pretty close to the same dead end career as temping and unemployment.

So even when it’s a quiet week, it’s still bad news.

71 people laid off from law firms this week (28 attorneys, 43 staff)

481 people have been laid off from law firms this month (134 lawyers, 347 staff)

10,723 this year (4,015 lawyers, 6,708 staff)

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