Biglaw, Layoffs, Secretaries / Administrative Assistants, Staff Layoffs

Voluntary Buyout Watch: Biglaw Firm Seeks To Thin The Herd

Which major firm wants to trim its payroll through a voluntary retirement program, and how generous are the buyouts on offer?

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In a recent survey, managing partners of large law firms expressed tepid expectations about demand for legal services. So it’s not surprising that cost cutting — or, to put it more nicely, expense-management initiatives — remain popular in Biglaw.

Who’s the latest major law firm trying to reduce its payroll through a voluntary retirement program?

Sheppard Mullin wants to thin its herd of legal secretaries. Earlier this week, chief operating officer Ted Tinson sent around a firm-wide email announcing the firm’s voluntary retirement program. Here’s the key paragraph (the full message is reprinted on the next page):

We will be making limited and focused reductions to our office administrative workforce during the next 60 days, and will begin with a limited voluntary retirement program offered to certain employees age 65 and over. Our plan is to manage the Firm’s secretarial workforce, and certain other office administrative functions more tightly – all of the limited reductions to staffing will be focused in these areas, and in California only. Giving some of our employees the opportunity to voluntarily retire with some financial assistance may be attractive to those employees, and will help us understand any other reductions we may need to undertake in the near future.

This is a good explanation of the virtues of a voluntary retirement program. As we previously stated, in a somewhat more direct fashion, “Voluntary retirement programs allow employees to self-select, so that employees who are well-situated to enter unemployment can opt in, while employees who need their jobs badly can keep working.”

Of course, the possibility of layoffs always looms whenever a voluntary buyout program is offered. What happens if not enough people take the deal? Tinson’s email alludes to the possibility of “other reductions we may need to undertake in the near future.”

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What are the terms of the buyouts? Here’s what we’ve heard:

  • Two weeks of salary for every year of service, capped at a certain number of years (around 18 to 20).
  • An additional payment of several thousand dollars to go towards health insurance costs.

This deal seems generous. Under the Sheppard Mullin program, a secretary with many years of service could end up with around nine months of salary, more than the six months (or less) offered by other firms.

But not everyone is pleased. One secretary told us that the buyout payments will be given the less-favorable tax treatment of bonuses and that the firm doesn’t need to take these steps:

SMRH is always saying they are not in debt. They could keep us.

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That’s certainly possible. The firm did report solid financial results in 2013, including a 6.6 percent increase in gross revenue. Profits per partner declined slightly — down 1.6 percent, to a still-robust $1.25 million — but that reflected an 8.2 percent increase in the firm’s equity partnership.

More from our secretarial source:

[New COO] Ted Tinson (aka Teddy the Grizzly Bear) was brought in from the outside with no attachment to any of us. I heard that our previous Executive Director, Bob Zuber, probably left early because he didn’t want to be the hatchet man.

Or maybe Zuber got tired of potty puddle patrol? It’s a dirty job, but someone’s got to do it.

We reached out to Sheppard Mullin to see if the firm had anything to add about its voluntary retirement program; it did not. You can flip to the next page to read Tinson’s complete email, which is fairly self-explanatory.

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