Where did that come from? The big news for the week is obviously DLA Piper blasting us back to mid-March form, with the biggest layoff since, actually, completion of its own UK redundancy consultation in May.
More on that later. But first, we’ll take our traditional quick look at the broader economic activity.
The numbers were actually surprisingly good this week, with initial jobless claims down to the lowest levels since January. In fact, the numbers are probably significantly worse than that indicates; early plant closing masks some serious seasonal adjustments that are skewing the numbers. And, of course, overall unemployment was up again, to 1983 levels, as new jobs just aren’t being created yet.
In fact, overall unemployment is getting to record levels. According to Calculated Risk, “the current recession is now the 2nd worst recession since WWII in percentage terms – and also in terms of the unemployment rate (only early ’80s recession was worse).”
As we learned from DLA Piper, layoffs at law firms are still on the table. Details after the jump.
DLA Piper is obviously going gangbusters in this latest round of cost cutting. The firm just laid off 21 lawyers and 100 staff, is reportedly volunteering people who weren’t otherwise planning to participate for deferral until 2011, and announced that it’s “revamping” the associate track.
Even Cadwalader, which kicked things a year and a half ago and was just recently praised for its transparency, laid people off again this week – although there’s some semantic trickeration going on. Thirty-four associates are being forced into sabbaticals with no assurance of re-employment when the year is up. Frankly, we view this as a blatant result, but logical extension of, the Mayer Brown “secondment” program, about which we have a very low opinion (which opinion is not particularly popular, either).
Cadwalader wasn’t the only white-shoe firm to lay people off. Cahill Gordon has also laid off an undisclosed number of junior associates (we still need a number before we can put it in the tracker, though).
The APAC region was also particularly hard hit. International behemoth Baker & McKenzie is cutting 11% of its lawyers and staff in China (HT: ABA Journal) and Australia’s Allens Arthur Robinson is cutting 114 people through a voluntary redundancy program. It was a big week for the firm we rarely hear from – they also came in a surprising #10 on the Bloomberg M&A rankings and #4 on the Reuters league table (largely due to antitrust work on the Pfizer/Wyeth deal).
Couple that with layoffs at Hogan & Hartson and Eckert Seamans, and this week was the worst since early May.
Other than layoffs (other than that, Mrs. Lincoln, how was the play?), salary cuts abound recently. Weil Gotshal, which is raking in the bankruptcy fees, is cutting salaries in London, although they’re already and still paying above market there.
Alston & Bird cut salaries by $5,000 across the board. With 451 associates and being halfway through the year, that’s a savings of a whopping $1,127,500. WTF? In the 2007 AmLaw 100 (we can’t afford a subscription), the firm had PPP of $855,000. So they’re saving pretty much one partner’s draw. At least Schnader Harrison had the decency to cut associate pay and partners’ draws at the same time. Associates are taking a $10,000 cut, partners 5%, and even “high earning” staff are getting hit by 3-5%. Presumably, it hurts less when it’s fair.
The Recorder did a pretty thorough analysis of California’s mid-sized firms, most of which are cutting salaries to what is fast becoming the new standard, $145,000. Frankly, they never should have been paying $160,000 in the first place, and $145,000 still sounds high. Blank Rome is cutting first years to $130,000, but the firm wasn’t on the $160,000 scale anyway.
More importantly, with all the salary cuts, where are the rate cuts for clients?
Anyway, while we’re speaking of California firms. Orrick is addressing a looming problem that we’ve been talking about for weeks. Firms that are deferring incoming classes now are eventually going to have a logjam. Orrick is already telling its current summers that they’re going to be deferred to January 2012. And, to try to alleviate the flood of associates, they’re skipping fall OCI to do it later in the school year when they have a clearer picture of what their needs will be for new attorneys in the fall of 2012.
Ropes & Gray is trying to deal with the problem, too. They’re deferring current summers to no earlier than January, 2011. That’s better for the incoming class, but it’s not likely to be enough to solve the problem. They’re probably hoping that the deferral will lead to enough attrition that they don’t end up too far above their needs.
Both Orrick and Squire Sanders are following in DLA Piper’s footsteps and getting off lockstep. We’re not going to touch that one in this article, but may later.
Hopefully this week doesn’t signal a return to the earlier part of the year.
352 people laid off from law firms this week (105 lawyers, 247 staff)
466 this month (145 lawyers, 321 staff)
11,216 this year (4,176 lawyers, 7,040 staff)
