Law Shucks, Layoffs

This Week in Layoffs: 05.02.09

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[Ed. note: Above the Law has teamed up with Law Shucks. Law Shucks has done excellent work translating all of the layoff news into user-friendly charts and graphs: the Layoff Tracker.]

Happy International Workers’ Day, comrades! In light of the scarcity of jobs, we expect few lawyers will be taking to the streets to protest poor working conditions this year.

Once again, mixed news on the broader employment front. Initial jobless claims unexpectedly dropped by 14,000, but continuing claims hit a record high for the 13th consecutive week. That mirrors what we’re seeing at the major law firms: layoffs are slowing down, but new work isn’t being created to vill the massive void.

By the way, Google is rolling out some cool new tools that allow you to view various statistics. Here’s a chart of the New York unemployment rates. Check out TechCrunch for more on the feature.

After the jump, we break down layoffs by region, plus a recap of other cost-management activities.

Layoffs

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The most-interesting news of the week is probably that White & Case and Clifford Chance have identified the partners who will be laid offand begun the notification process. Both firms had earlier indicated that the partner ranks would be thinned. Legal Week is reporting that nine White & Case partners in the firm’s London finance practice are to be gone by the end of the year; most were not equity partners. Sources tell Law Shucks that partners in other offices (New York in particular) received one of two emails. Email “A” included the partner’s comp for the year; email “B” was basically a “come see the principal” note. White & Case marginally extends its lead in the big three layoff categories: total, attorneys-only, and staff-only.

Despite four months of significant layoffs, one expert doesn’t think it’s been enough yet. Dan diPietro, client head of the Law Firm Group of the Citi Private Bank, is concerned that 2008’s results weren’t bad enough to shock partners into correcting a broken business model. He’s concerned that last year’s 3% decline in PPP “will be greeted with relief and complacency.” In fact, the model is greeted with scorn:

Among our 175-firm sample, head count for fiscal 2008 was up 4.5 percent from fiscal 2007. I showed the flash report of our sample to a colleague of mine who lends money to Fortune 100 companies. Her response? “So, Dan, the way law firms make money is to grow head count when demand drops?” This is a neat way of summing up the problem firms faced as they entered 2009–too many lawyers chasing too little work.

He’s predicting that without further significant layoffs, profits will decline 5-10%, but even at those levels, several manging partners told him he was being too optimistic. He’s not the only optimist, though. For some incomprehensible reason, law school applications are up 3.8% this year. Do applicants think they’ll be the ones who gets the few jobs there actually are out here, or are they just trying to hide in school for three more years to avoid the entire mess?

Our good fortune continues with local reporters summarizing their regions for us. We’ve previously enjoyed having our work done for us in Atlanta and Philadelphia. This week, we’re doubly blessed, with two non-US markets surveyed. But first, London.

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London

There’s always something going on over there. Allen & Overy’s massive redundancy consultation – 200 lawyers, 200 staff and 47 partners, came to a close this week as the individuals were identified and effective dates of termination were set. That’s about 10% of the firm’s total headcount. Legal Technology Insider analyzed just how much these actions cost:

The restructuring is expected to cost A&O £44m once redundancy packages are paid out, with the firm previously stating that equity partners had been asked to contribute an average of £30,000 each of fresh capital, equating to around £11m, to help fund it. A&O’s restructuring was guided by a series of principles set out by senior partner David Morley, who told staff that A&O had considered alternatives such as reduced hours, reduced pay, sabbaticals, secondments and trainee deferrals, but concluded that none of the methods would deliver the appropriate level of cost savings required.

(A GBP costs about $1.50 today, so add 50% to convert to greenbacks).

Meanwhile, LegalWeek has the details on the Herbert Smith payouts to the 84 people it’s laying off (30 lawyers, the rest staff). Despite a policy that requires severance of only two weeks’ pay per year of service, the firm is being slightly more generous.

The deal means a newly-qualified lawyer who trained at the firm will receive £27,100 in severance pay, while those with one-year post qualification experience (PQE) will receive £30,700, two years PQE £36,900 and three years PQE £48,700.

Lawyers subject to compulsory redundancy will also serve three months’ notice but will only receive three weeks’ pay for each year of service, with no three-year minimum payout.

On these terms, a newly-qualified lawyer who trained at the firm would receive £21,900, while lawyers with one year PQE will receive £28,800, two years PQE £34,100 and three years PQE £44,700.

Laid-off support staff are thought to be receiving similar packages, although notice periods are understood to vary from one to three months depending on seniority and length of service.

Further to what we said above, at Clifford Chance, “several real estate partners and two leveraged finance partners have been notified.” The pain is just non-stop over there. That marks the ELEVENTH separate report of layoffs. Clifford Chance extends its runaway lead in the one category White & Case doesn’t own: number of discrete layoff reports.

For the rest of this article, head to Law Shucks. We cover the Canadian and Russian markets in detail, the notable US activity, inhouse layoffs, compensation, deferrals, and, of course the final numbers for the week.

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