The Law Shucks Mid-Year Layoff Review

by lawshucks on July 3, 2009

lawshucks-2009-vennWe’ve reached the halfway point of what is by far the worst year for law firm layoffs.

All told, 125 major law firms have announced or had confirmed layoffs. The combined total is 10,723 people, 4,015 of which are attorneys and the balance, 6,708, are staff.

After the jump, we go into excruciating detail, complete with charts (and our first Venn diagram!).

Layoffs ramped up in January, February, and March, then plummeted in the second quarter. The pace slowed (relatively speaking) in April and May, with more than 1,000 people laid off in each month. In June, layoffs slowed even further, likely the result of the arrival of summer associates and the runup in the stock markets.

lawshucks-2009-layoffs-month

This year has been a tale of two quarters. The first quarter was marked by unprecedented layoffs seemingly on a weekly basis, then the second quarter was markedly lower. February and March combined for almost 60% of the total layoffs this year, 73% with January.

lawshucks-2009-pie

So which firms were laying people off?

Based on 2009 numbers only, the top ten list looks pretty familiar.

lawshucks-2009-total-layoffs

The firms are geographically diverse (given the limited universe of BigLaw, which is dominated by US and UK firms).

There are four UK firms (A&O, DLA Piper, Clifford Chance, and Linklaters) and six US firms. Of the US firms, only one is based in New York (White & Case), two are from California (Orrick and Latham), and there is one each from Chicago (Baker & McKenzie), Philadelphia (Morgan Lewis), and Tampa (Holland & Knight).

One thing the firms do have in common, though is size.

Based on the American Lawyer’s Global 100, these are some of the largest law firms in the world by number of lawyers and revenue (data as of October 2008 – see below for analysis based on the more-current, but US-centric, AmLaw 100 and AmLaw 200). By number of lawyers, the firms range from Baker & McKenzie at #1 with 3,626 down to Orrick at #39 with 923 lawyers. Similarly, by total revenue, the firms range from Clifford Chance at #1 with $2,660,500,000 gross to Holland & Knight at #51, with $612,500,000.

Put another way, of the ten largest global law firms by revenue, six are also on the top ten list for number of people laid off. Of the ten largest by total number of lawyers, all but two are among the top ten list for layoffs (only Jones Day and Freshfields, neither of which has had any reported layoffs, don’t make the latter list). Further, six firms meet all three criteria: most revenue, most lawyers, most layoffs.

Could there possibly be anything better than a Venn diagram to show those overlaps?

lawshucks-2009-venn

Of the ten largest law firms by global revenues, only one didn’t have any layoffs: Jones Day (although in fairness, the ten people Freshfields laid off were a result of the firm closing its Bratislava office). It’s almost the same result when looking only at the US market. Of the top ten firms by gross revenue on the Am Law 100, Jones Day and Greenberg Traurig are the only firms without layoffs, but neither Skadden nor Weil Gotshal has laid off attorneys.

62 firms in the Global 100 have laid people off, ranging from Allen & Overy’s 462 down to a UK trio tied at ten: Freshfields, Eversheds, and Ashursts. The Global 100 account for 8,120 of the 10,723 people laid off by law firms this year (75.72%). Those larger firms cut lawyers slightly more aggressively than smaller firms. 3,207 lawyers were laid off by the top 100 law firms, which constituted just under 79.9% of the total number of lawyers laid off. The top firms laid off 4,913 staff, which was 73.2% of that total.

For the most part, layoffs in the Global 100 correspond to the firms’ revenues.

lawshucks-2009-global100

The top ten firms by revenue accounted for 2,580 layoffs (31.7%) and the numbers go down from there for the most part. The fourth decile (nos. 31-40) is slightly larger than the third, due to the presence of Orrick. Similarly, Holland & Knight and Pillsbury are in the sixth decile, which had more layoffs than the fifth. The real outlier is Fish & Richardson, which despite being in the bottom 10 by revenue, has laid off 190 people.

But those numbers are based on gross revenues and we all know bigger isn’t necessarily better. Of the top ten firms on the Global 100 by revenue per lawyer, only four have laid lawyers off, and one of those is Quinn Emanuel, which laid off approximately six in addition to unconfirmed stealth layoffs (but denies all of it while admitting to staff layoffs). The other three firms in the Global 100 with the highest RPL and layoffs are Sullivan & Cromwell ($1.5 million RPL).

Turn that analysis to the US, and the results are even more stark. Of the top ten firms in the US by RPL, only Sullivan & Cromwell (30) and Cravath (25) have laid off lawyers, and Simpson Thacher (20) has laid off staff. (Note that we used RPL for all firms in the top 200, so Munger Tolles, Williams & Connolly, and Irell & Manella bump Quinn Emanuel (as above), Skadden (80 staff laid off), and Milbank (49 lawyers, 40 staff)).

Higher RPL has a pretty strong correlation with a firm’s ability to avoid layoffs.

lawshucks-2009-US-RPL

Surprisingly, though, there is less correlation between Profits Per Partner and avoiding layoffs. Five of the top ten American law firms by PPP have laid people off.

lawshucks-2009-US-PPP

That’s it for what has been an interesting six months. For more detail, we have regular weekly and monthly writeups that are much closer to the events. They also cover the other law firm cost-cutting measures, like deferrals, salary reductions, and the like.

All of the layoff data are from our Layoff Tracker.  The AmLaw 100, AmLaw 200 and Global 100 are from American Lawyer.

Of course, we’re trying not to be all about the numbers, so don’t miss one actual laid off associate’s perspective, in the Laid Off Diary.

  • Realist

    Good post. Nice summary and analysis. But I don't think Quinn and Kirkland are fairly lumped in with the other most profitable firms that did layoffs. Quinn fired a small handful of associates. Kirkland didn't fire any associates at all. All of the 25 terminated attorneys were non-share partners who were not going to make equity partner and were let go a few years earlier than they would have in a good economy.

    • http://intensedebate.com/people/lawshucks lawshucks

      Thanks. Re: QE and K&E, I had to draw the line somewhere, so I just went with the straight binary equation- laid people off yes or no? Every firm made the same sort of analysis. In fact, K&E's decision is arguably even more questionable. The firm had gross revenue of $1.4 bn, so they clearly could have kept the people around through the downturn if they wanted. At least they didn't try to be sneaky about it like Freshfields (and countless others) apparently.

      • Realist

        That's true. I guess I view firing some senior, very high salary deadweight as less cruel and less ill-advised than firing good associates in slow practice groups. But I see your point. It's still going to be hard for these income Partners to find a new gig in this economy without a book of business. The 'charitable' thing would've been for K&E to have waited if it could've afforded to which seems likely.

        As far as overall numbers, with all the layoff news, it IS hard to keep things in perspective and remember that terminated attorneys are only a small percentage of overall attorneys in Biglaw. The real hits come in firms that cut salaries. And probably in offer rates for summers this year and summer associate hiring for next year's class (though hopefully it won't be as bad as we expect)

  • Realist

    Good post. Nice summary and analysis. But I don't think Quinn and Kirkland are fairly lumped in with the other most profitable firms that did layoffs. Quinn fired a small handful of associates. Kirkland didn't fire any associates at all. All of the 25 terminated attorneys were non-share partners who were not going to make equity partner and were let go a few years earlier than they would have in a good economy.

    • http://intensedebate.com/people/lawshucks lawshucks

      Thanks. Re: QE and K&E, I had to draw the line somewhere, so I just went with the straight binary equation- laid people off yes or no? Every firm made the same sort of analysis. In fact, K&E's decision is arguably even more questionable. The firm had gross revenue of $1.4 bn, so they clearly could have kept the people around through the downturn if they wanted. At least they didn't try to be sneaky about it like Freshfields (and countless others) apparently.

      • Realist

        That's true. I guess I view firing some senior, very high salary deadweight as less cruel and less ill-advised than firing good associates in slow practice groups. But I see your point. It's still going to be hard for these income Partners to find a new gig in this economy without a book of business. The 'charitable' thing would've been for K&E to have waited if it could've afforded to which seems likely.

        As far as overall numbers, with all the layoff news, it IS hard to keep things in perspective and remember that terminated attorneys are only a small percentage of overall attorneys in Biglaw. The real hits come in firms that cut salaries. And probably in offer rates for summers this year and summer associate hiring for next year's class (though hopefully it won't be as bad as we expect)

  • Anonymous

    Freshfields did have layoffs other than for the closed office. It has conducted significant stealth layoffs in its offices worldwide.

  • Anonymous

    Freshfields did have layoffs other than for the closed office. It has conducted significant stealth layoffs in its offices worldwide.

  • Anon

    There have been, and continue to be, very significant stealth layoffs at many firms. You'll be shocked, I'm sure, to discover that not all law firms are honest and forthright about their layoffs.

  • Anon

    There have been, and continue to be, very significant stealth layoffs at many firms. You'll be shocked, I'm sure, to discover that not all law firms are honest and forthright about their layoffs.

  • Lance Basstronaut

    The charts are fun. Nice job. Though, it kinda reminds me of this sitcom episode where one guy is obsessed with charts and creates a "Pie Chart ranking the city's Bars" and then a "Bar graph ranking his favorite Pies."

    I had read a random comment on AboveTheLaw that over 90% of BigLaw associates had survived the layoffs. At the time, I thought he might've overestimated, or at least pulled that number out of the air. But your two charts at the bottom w/ RPL and PPP seem to bear that out. So thanks for that info. (Though, I guess the percentages could always be drastically different at lower firms). Not that it's any solace to the 10% or so that have been laid off, but at least the situation isn't as dire as BigLaw being cut in half or some such thing.

    Happy July 4th!!!

    • http://intensedebate.com/people/lawshucks lawshucks

      That's a good point. Relatively speaking, very few lawyers have actually been laid off in the grand scheme of BigLaw. I'll have to see what numbers I can work out on that front. The shock is that people are being laid off at all, I guess – but for a lot of firms they were playing a game of "keeping up with the joneses" that was totally unsustainable.

      The charts were from How I Met Your Mother. Love the reference, love the show.
      http://wickedanomie.blogspot.com/2009/05/pie-char

  • Lance Basstronaut

    The charts are fun. Nice job. Though, it kinda reminds me of this sitcom episode where one guy is obsessed with charts and creates a "Pie Chart ranking the city's Bars" and then a "Bar graph ranking his favorite Pies."

    I had read a random comment on AboveTheLaw that over 90% of BigLaw associates had survived the layoffs. At the time, I thought he might've overestimated, or at least pulled that number out of the air. But your two charts at the bottom w/ RPL and PPP seem to bear that out. So thanks for that info. (Though, I guess the percentages could always be drastically different at lower firms). Not that it's any solace to the 10% or so that have been laid off, but at least the situation isn't as dire as BigLaw being cut in half or some such thing.

    Happy July 4th!!!

    • http://intensedebate.com/people/lawshucks lawshucks

      That's a good point. Relatively speaking, very few lawyers have actually been laid off in the grand scheme of BigLaw. I'll have to see what numbers I can work out on that front. The shock is that people are being laid off at all, I guess – but for a lot of firms they were playing a game of "keeping up with the joneses" that was totally unsustainable.

      The charts were from How I Met Your Mother. Love the reference, love the show.
      http://wickedanomie.blogspot.com/2009/05/pie-char

  • brad

    Paul Weiss has been conducting secret layoffs for months.

  • brad

    Paul Weiss has been conducting secret layoffs for months.

  • Paul Potte

    Boies has had layoffs, compare a cached version of the directory with a new one, and don't think people just decided to up and leave in this market. I'd be surprised if their numbers are even that close to 250 anymore.

  • Paul Potte

    Boies has had layoffs, compare a cached version of the directory with a new one, and don't think people just decided to up and leave in this market. I'd be surprised if their numbers are even that close to 250 anymore.

  • anonymous

    Freshfields has done extensive stealth layoffs to over half of its capital markets group and has targeted 6-8th years claiming they are suddenly conducting partner reviews early.

  • anonymous

    Freshfields has done extensive stealth layoffs to over half of its capital markets group and has targeted 6-8th years claiming they are suddenly conducting partner reviews early.

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  • http://www.DarrenChaker.com Darren Chaker

    I see 'stealth' lay offs as a good or bad thing. Bad in the sense it appears the firm is in trouble, but good by appearing like a leaner litigation machine. I equate it to when GM fires tons of people, but replaces those jobs with robots who perform the same task the fired workers did. It keeps the company afloat. (For the record I am against robots replacing human jobs!) Darren Chaker

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