Law Shucks, Layoffs

Thanksgiving Week in Layoffs: 11.30.09

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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.
Even though we’re going to see unemployment continue at the highest level since 1983, there are some promising trends. November payrolls are expected to fall by 120,000, which would be the fewest since January 2008 (or, as we at Law Shucks call it, "when Cadwalader started the law-firm layoff trend in earnest" — that’s when we started keeping track). Unfortunately, this continues to be a jobless recovery, and unemployment is expected to exceed 10% through the first half of next year.
And that’s not even considering the so-called "underemployment" rate, which is between 16-20%, depending on whom you ask (and how you count).
We might get a little direction on the U.S. macro plan on Thursday, when President Obama holds his "Jobs Summit", at which he will have lunch with a bunch of rich, employed white guys, and figure out how to magically make jobs appear after $787 billion failed to do so. And it’s even trickier now, now that his Democrat base wants him to create the jobs without spending any more money (they want the money spent on healthcare). It’s also interesting that Obama has said that the government has done what it can, so now it’s time to hear from the private sector (which makes sense with the Summit), while people like Jack Reed (D-RI) are basically saying that the government should extend its involvement in the private sector by subsidizing job growth.
But at least he’s keeping a good outlook on the whole mess, quipping that he "saved or created four turkeys" at the annual White House turkey pardoning.
So while the U.S. stumbles along with little or conflicting direction, law firms just stumble along. After the jump, firms’ most-recent efforts to return to profitability (and a big announcement from Law Shucks).

We haven’t seen too many reports on how much firms are saving, which made LegalWeek’s insight into White & Case’s London savings particularly welcome. We’ve written quite a few times about the firm’s many troubles, and since it’s already the poster child for layoffs, the firm was a spectacularly apt subject. According to LegalWeek, the office has saved $16 million over the past 18 months, of which $10 million has come in calendar 2009.

The cost savings since January include some $3.9m (£2.3m) shaved off operational spending. This includes savings of $2m (£1.2m) from renegotiating contracts with external suppliers, with further savings made through transferring its IT, administration and facilities helpdesks to the firm’s outpost in Manila.

Professional costs including reducing recruitment fees, spending on seminars, libraries and training yielded a further $4.6m (£2.7m) saving in the 10 months ending 31 October. Spend on training alone has been cut by more than $1m (£605,000) by conducting more training in-house.

Occupancy costs have been cut by $1.6m (£965,000) since January by reducing spend on rent, maintenance, repairs and leasehold improvements. Other savings include around $250,000 (£151,000) through restricting taxi usage.

Renegotiating contracts and offshoring back-office support are standard short-term costcutting measures. It’s also obvious that recruiting and training expense will go down significantly when you’re not hiring and you’re laying people off.
But none of that $10 million save includes anything for the 95 people laid off in January (about 50 of which were lawyers). That’s unfortunate, because it’s difficult to calculate with any certainty what firms are expecting to save and how much it costs for every person they let go. One professor recently said that the cost of laying off a senior lawyer could be as much as five times salary. That may be truthy, but we give firms a little more credit (read: we think they’re greedy and self-interested enough) and figure they’re not laying off a lot of people with portable books of business, which is where most of that cost reportedly comes from.
White & Case got some savings by outsourcing its helpdesk, but offshoring client-facing work is an entirely different story. According to The Lawyer, Allen & Overy has signed a legal-process outsourcing deal with Integreon for basic litigation document review work in Mumbai (of course) and New York (huh?). Several other firms are reportedly doing or considering similar work. We’ve seen some of the work product from Indian LPO providers. Suffice to say, we’ll take the under if someone wants to set a line on the term of the engagement for a conscientious client.
Traditional layoffs haven’t died yet. Schulte ruined more than a dozen people’s Thanksgivings. Apparently, the rest of BigLaw was more considerate – that was the only reported layoff by a major firm in the past two weeks. But don’t count too strongly on any holiday spirit. In 2008, 10 firms laid people off in November, compared to just six firms so far this year, and 13 had layoffs last December.
Don’t underestimate the importance of that word "reported" above. Stealth layoffs abound, and end-of-year reviews are the most-common pretext.
On the "soft" savings side, Sutherland became the latest firm to abandon lockstep, going to a tier-based competency model. Haynes & Boone informed its incoming associates (by email, the horror! *roll*) that their starting salaries would be cut to reflect the increased training (read: non-billable) time they’d be spending.
Seyfarth Shaw hit the exacta by reducing salaries and extending deferrals. (And for the love of all that is holy, yes, you should be looking for a job if you’re deferred).
Clients are hurting too. Law departments have frozen salaries and are constantly fighting to lower firms’ billing rates. Things have gotten bad enough that firms are now making "we won’t be undersold!" offers for work. Which goes against the cardinal rule of not competing on price, but whatever.
There are some rays of hope, though. Chadbourne & Parke is paying out the amount it withheld as salary cuts earlier this year.
That’s not a real bonus, though, which leads to the big announcement from Law Shucks: we’re now tracking bonuses. Just seven firms so far, but we’ll keep tabs through the rest of the season and eventually fill in historical numbers as well.

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