For the first time this year, we had three consecutive business days without any major firms announcing layoffs. As in Erich Maria Remarque’s novel, though, the individual suffering continues even as the “big picture” is unremarkable.
The layoff-free streak ended on Wednesday, when Chicago’s Jenner & Block laid off 34 staff.
The major announcement of the week was the long-anticipated layoff at Katten Muchin, where a total of 69 – 12 associates, seven non-equity partners, four other attorneys, six paralegals and 40 staff members – were fired. The firm is offering associates an interesting choice: one month’s severance, or sign a separation agreement and receive three months’ pay. Income partners get six months’ severance with the separation agreement. Those who remain are facing pay cuts of up to 20%, depending on billables.
All in all, though, this week was a major pullback from prior weeks. “Only” 158 people were laid off from major firms – just about 10% of last week’s 1,477. The first two weeks of the month were also significantly higher: 1,132 for the week ended March 6 and even the 560 for the week ended February 27. Still it was just enough to put March ahead of February as the worst month on record: 2,937 to 2,782 for total layoffs. February is still worse for attorneys laid off: 1,121 to 1,059.
After the jump, the firms’ ameliorative and prospective attempts to deal with the situation.
News of layoffs continues to trickle in from smaller firms, including Field Fisher Waterhouse, a UK firm that is now on its third round of layoffs – seven more attorneys, on top of the 42 staff and attorneys previously fired. Still, the beginning of the week was a welcome reprieve from seemingly incessant layoff announcements.
Interestingly, this week two firms fessed up to prior stealth layoffs: Clifford Chance confirmed that it fired 35 support staff in New York in December, 2008 and Manatt Phelps & Phillips acknowledged that it had engaged in stealth layoffs of 47 people – 12 attorneys, three paralegals, and 32 administrative staff. We commend the firms on the full, albeit belated, disclosure.
Speaking of Clifford Chance, even the partners aren’t safe there: they’re voting to make it easier to eliminate underperformers. Apparently, proponents of the measure think all (or more than half) the partners consider themselves to be in the top half. Interesting math.
Last week, California was the hotbed of activity; this week it’s Chicago. Sidley Austin laid off 229 last week, then Katten Muchin and Jenner & Block as described above, and on Friday, Mayer Brown (which laid off 33 associates and “some support and administrative staff” in November) announced redundancy consultations with up to 55 lawyers and staff in London.
Of the other major Chicago firms:
- Baker & McKenzie has laid off 116 in four tranches,
- Kirkland & Ellis cut loose 15-25 non-equity partners in January,
- McDermott Will & Emery has laid off a total of 178 (83 lawyers) – most notably 149 total in early February,
- Schiff Hardin laid off 11 staff in February, and
- Seyfarth Shaw had separate waves of 30 attorneys in December and 25 staff in January.
By our non-Chicago-practicing assessment, that leaves Locke Lord and Winston & Strawn as the major Chicago firms with no announced layoffs. In total, Chicago firms have laid off approximately 800 people.
We reported two weeks ago that Manatt was one of the few California firms that hadn’t fired anyone. As we mentioned above, they have come clean but are now scratched off the California no-layoff list. Los Angeles peer Paul Hastings has not been so forthcoming – rumors of stealth layoffs in Atlanta and Los Angeles abound. Also, as a commenter pointed out, we should include Munger Tolles & Olsen with Gibson Dunn, Irell & Manella, and Quinn Emanuel as the major California firms that haven’t had layoffs.
But layoffs might not even make financial sense. The Project for Attorney Retention claims its numbers prove that “flexible downsizing with balanced hours may save as much or more than layoffs. Flexible downsizing also helps firms retain their investment in high-performing attorneys and avoid certain legal risks.”
If the Project for Attorney Retention is right, and layoffs are the wrong solution, what should the firms do?
Countless firms are delaying start dates into 2010, offering incoming and existing associates a stipend to work at a public-interest agency, and other methods. Equal Justice Works cautions that care should be taken in transitioning (temporarily or otherwise) from BigLaw to public interest.
Atlanta’s Morris, Manning & Martin is trying a particularly frightening method: laying people off before they’ve even started. The firm has canceled its incoming and summer classes – leaving six third years looking for work in a not-so-good market and nine second years trying to replace summer employment. That’s the same thing Luce Forward did last month – revoked its offers to those who were in last summer’s program and those coming in this year. Texas firm Winstead has also canceled its summer program.
Professor Peter Capelli of Wharton says pay cuts make more sense because of the absence of severance payments and the reduced risk of litigation. His numbers don’t quite add up, though: a 5% pay cut only reduces base comp (which is not the full cost to the firm of the employee), while a 5% layoff reduces the total cost of the terminated employee (but adds in the severance cost, so maybe he thinks that’s a wash). Assuming those numbers are close, though, there’s a compelling case to be made when the effects on morale and ability to scale back up are factored into the equation.
The other strategy being discussed is ending lockstep salaries. Bloomberg calls the model ‘Medieval’ and says Orrick, Shearman and WolfBlock are among the firms going to a more performance-based pay system.
Of course, some people aren’t taking things too badly. A former Cadwalader attorney claims he knows people who have been partying it up since being laid off.
All in all, a relatively (key adverb here) quiet week. At major firms,
For the week, 158 layoffs (48 lawyers, 110 staff)
For the month, 2,937 (1,059 lawyers, 1,878 staff)
For the calendar year, 7,259 (2,874 lawyers, 4,385 staff)
As always, there is further supporting information on the Layoff Tracker and methodology on the series’ home at Law Shucks.