Law Shucks

This Week in Layoffs: 02.28.10

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Ed. note: Above the Law has teamed up with Law Shucks, which has done excellent work translating all of the layoff news into user-friendly charts and graphs: the Layoff Tracker.
How many times have we heard this before?

The number of Americans filing first-time claims for unemployment insurance unexpectedly increased last week, a sign that the economic recovery will be uneven as the labor market struggles to rebound.
Initial jobless applications rose by 22,000 to 496,000 in the week ended Feb. 20, the highest level in three months, Labor Department figures showed today in Washington. The total number of people receiving unemployment insurance gained and the four- week moving average of weekly claims jumped close to a three- month high.

At least it’s not just the employment sector that’s reporting bad news.

In the last week alone, reports on new and existing home sales, jobless claims, durable goods orders, consumer confidence and manufacturing have all missed expectations. Worries about a Greek debt default spreading to other vulnerable European nations have resurfaced — after quieting for a few weeks.

On the other hand, fourth-quarter earnings were spectacular compared to year-ago numbers. The financial sector, which spins off so much legal work, dragged overall earnings up 201% compared to last year – even without that segment, earnings were up 16%. It’s not clear yet whether strengthening corporate financials will be able to recover over the drag of economic data.
Meanwhile, it was all quiet on the law-firm front this week. Details after the jump.

We’re a little hesitant to say that there were no reported layoffs last week, because last time we did that, word came out that Drinker Biddle sneaked in under the wire. But it looks like this might be the week that ends the series of one-reported-layoff per week that has been the hallmark of 2010.

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Just because they weren’t laying people off doesn’t mean firms were resting on their laurels. The scramble to tweak the business continues.

And as Hiring Partner recently wrote, it is all just business.

Seyfarth Shaw provided some more information about what its take on merit-based compensation will look like. As far as we recall, that’s the first firm that also addressed the most-important component of these changes in the system: the effect on billing rates. As we said before, clients don’t care about lockstep; they care how much they’re being charged for the work. One quote we found interesting was this:

Seyfarth’s system may be unique in spelling out a link between client billing rates and associate pay, Zimmerman said. While clients may appreciate knowing what level of service they’re paying for, he added that such a system may also lead them to shy away from hiring the lowest performers.

Is that supposed to be a bad thing? It also muddies the distinction between poor performance and undeveloped skills. The former should be avoided, the latter just means that someone is inexperienced. It can also mean that clients aren’t paying for overqualified associates doing scutwork (to the extent that work isn’t being sent off to India anyway).

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Winston & Strawn is also abandoning lockstep, but is still classifying associates by class year. Within those years, individual salaries will range up to market rates. Absent further information, that’s exactly the kind of fundamentally flawed departure from lockstep we’re talking about – if the firms are willing to pay some people in a particular class less than others, shouldn’t that assessment be passed through to clients? Otherwise, firms are incentivized to deflate salaries in order to maximize the spread to the billing rate.

Meanwhile over in London, Freshfields remains on lockstep and is unfreezing salaries. English firms are far more attached to lockstep in the partner ranks than their US counterparts, so we’re not surprised to see it persist for associates. But just because they like lockstep doesn’t mean they’re willing to keep laggards on. Clifford Chance is tightening the performance requirements on its partners by instituting annual performance reviews and delegating to management the ability to oust poor performers (previously they could appeal to a vote of the full partnership).

One front that popped back up for discussion this week was deferrals, and how things will shake out when the deferrals end. 34.7% of ATL respondents would like to say, “Bye-bye BigLaw” and stay in their public-interest jobs. At Law Shucks, we think the guy who thinks they’ll be missed is out of his mind. Kash and Lat are just skeptical. But coming completely out of left field is the partner who claims firms would seek retribution against those who don’t return. We called BS on that.

The running tallies for the week, month, and year are in the conclusion of the post on Law Shucks (and don’t forget to check back later in the week for the Month in Layoffs for February, complete with charts).

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