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More Layoffs Coming in 2009?

Tuesday, December 16, 2008 11:03 AM - By Elie Mystal

financial crisis legal salaries.JPGI’ve been operating under the assumption that the legal layoff party of 2008 would stop in 2008. My rose colored logic has been simple. I’ve assumed that Biglaw managers can: A) count, B) add, and C) figure out a sustainable 2009 business model. If those three assumptions are true, I figured that most well managed law firms would be able to get through all of their attorney reductions in 2008 and get themselves into an appropriate position for 2009.

Flawed logic? Perhaps. It’s what the shrinks like to call a “coping mechanism.”

Of course, in making these assumptions I ignored the possibility that some firms were still using “operation ostrich”: a heads down, asses high approach that gleefully exposes tail feathers to the still spinning wheel of economic destruction.

The Legal Intelligencer today warns us that the first quarter of 2009 could see more chopping at firms that are still trying to ride out the storm:

Move over, New York — it’s Philadelphia’s time in the hot seat. Legal blog Above the Law was abuzz with reports and rumors Monday that two Philadelphia firms saw associate cuts with one of them laying off staff as well. And according to one consultant, the Pennsylvania market could most likely expect to see more attorney cuts in the new year as firms wait out the holiday season.

After the jump, the new cuts in the new year aren’t likely to be localized just to the Philadelphia area.

2009 job losses are going to be more than a localized problem:

Ward Bower of Altman Weil said he thinks firms have already done the staff cuts and the next round of layoffs — which he said could be expected in the first quarter of 2009 — will involve attorneys with perhaps some additional staff.

In fact, Altman Weil just released a new study which shows that the global financial crisis hasn’t yet fully hit the legal community:

“We expected to see more distress from law firms. But it appears that market conditions have not yet fully hit law firm balance sheets,” says James Cotterman, an Altman Weil principal.

This actually tracks with what firms have been telling us. Layoffs, Half-Skadden bonuses, and the new phenomenon of salary freezes have all been done with an eye towards 2009, so we’ve been told.

I suspect that much of the doom and gloom 2009 firm talking points are just laying the ground for excellent partner per profit numbers. Partners made a lot of money in 2008, but they don’t want to share it with associates in 2008 because 2009 is going to be — in the immortal words of Brigitte Nielsen — “so berry, berry, bad.”:

While 66 percent of firms that responded to the survey said they expect to make less money in 2009, nearly all of those firms said they don’t expect revenue to fall more than 10 percent.

But if 2009 is going to be tough — and they know this — then why can’t firms get their staffing levels into line? Nobody wants to get fired, but going to work everyday with the Sword of Damocles hanging overhead is almost worse:

Associate layoffs will most likely occur in January and February in part because of performance reviews at the end of calendar fiscal years, Bower said. But the larger reason for the delay, he said, is the holiday season.

Bower said he knows of a few firms that have decided to lay off attorneys but didn’t want to do it right before the holidays so they are waiting until after the start of the new year.

I call “false choice.” Firms have had months to see this coming. Don’t tell me that you only figured out a week ago that you might have to let people go.

Sadly, it looks like the layoff beat will go on.

Layoff Reports Swirl Around Wolf Block and Drinker Biddle [Law.com]
Altman Weil Survey Shows Poor Market Has Not Fully Hit Law Firms [BLT: Blog of the LegalTimes]

Earlier: Prior ATL coverage of law firm layoffs.

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