Last week, Dan Slater, formerly of the WSJ Law Blog, wrote a piece for Dealbook entitled In Praise of Law Firm Layoffs. His poster child for laudatory layoffs? One of the first firms to make significant cuts to its ranks, Cadwalader, Wickersham & Taft.
It seems that Cadwalader really likes layoffs. As you can see from our collected coverage, CWT has laid off over 150 lawyers since January 2008 — and today the firm announced further cuts. To its credit, Cadwalader has been open and transparent about its reductions in force; it hasn’t taken the “stealth layoff” approach.
But the firm is not above trying to put a little spin on today’s layoffs. In response to our inquiries, a CWT spokesperson issued this statement:
The debt markets, particularly the real estate debt markets, remain very slow. As a result, Cadwalader’s Capital Markets and Real Estate Finance groups do not have enough challenging work for all the lawyers, particularly the young lawyers, in these groups. Unfortunately, two years into this financial crisis, there are no near term solutions for the problems which vex these markets.
In order to address this situation, Cadwalader has asked 34 lawyers to accept a one year, unrestricted sabbatical. During the sabbatical, participating lawyers will receive one-third of their current compensation and medical benefits. In addition, a committee comprised of partners and senior administrators will work diligently to place these lawyers with clients, prospective clients, and not-for-profit organizations.
What happens to lawyers who decline the “sabbatical”? Will the lawyers on sabbatical be able to return to the firm after the year is over? One of our Cadwalader sources described this as a round of layoffs with four months of severance (i.e., “one-third of their current compensation”).
Update: This really is a round of layoffs, not an offer of “sabbaticals.” We’ve received some clarification from affected associates, which we provide after the jump.
Additional details, including a tie-in to the strip club story, after the jump.
Here is what we’ve heard about today’s reduction in force at CWT, from numerous sources:
Our sources say “layoffs,” but the firm says “sabbaticals.” Even if they are called “sabbaticals,” it’s not clear (1) whether the associates on sabbatical have a right of return at the end of the year, and (2) what happens to a lawyer who doesn’t accept the sabbatical.
We have follow-up emails and calls in to the firm, and we will update if and when we acquire more info. If you can shed light on the situation, please email us (subject line: “Cadwalader”).
Update: Call them layoffs, not sabbaticals. From a CWT source:
Affected lawyers were given two options: (1) take 3 months full severance or (2) take 1/3 salary over the next year and get placed with clients or pro bono organizations. At the end of the year with the client or pro bono organization, they will look into rehiring us. I seriously doubt that will happen, but who knows.
They have already lined up 61 positions, some of which are paid and some of which are unpaid. So theoretically you could get the 1/3 salary plus a salary from the other place. Clearly the pro bono organizations are not paying associates during their time there.
If you take the severance and the job market changes, you will apply for a job just like anyone else. You will not be preferred if you were not a part of the “Cadwalader Connections” program. It is a hard choice to make and I have no idea what to do….
Further update: From another Cadwalader tipster:
My understanding is that you have (i) the standard 3 month severance, plus benefits, or (ii) 4 months pay spread out over the next 12 months, plus 12 months benefits. If you choose option (ii), you can basically do anything but take a full time position somewhere else; if you do, you lose the remainder of your pay and benefits. The idea is to place you with clients, pro bono or public interest positions with a reduced salary from them which would supplement your 4 months pay from CWT.
If the market turns around, they would look to bring you back prior to hiring other candidates. I say that I am fuzzy, because when it was explained to me there was some doubt as to whether or not you even needed to be employed during the 12 month period under option (ii). So, if you don’t need to be employed during this time it would be essentially a sabbatical with no promises of a job at the end of the time frame (obviously this last part isn’t exactly how a sabbatical would typically work).
Either way, I think it is a great option for us in a shitty job market. I commend CWT for not (ever) doing “stealth layoffs” and recognizing that it is all based on the economy.