Just How How Much Did 2020 Suck For Law Firms?

It was a rough year, but things weren't as bleak as one might think.

When the pandemic first hit, law firms understandably freaked out. Firms cut salaries and laid people off. Few really understood how to work remotely when this all kicked off. But by the end of the year, firms were reinstating salaries, holding the line on annual bonuses, and many even offered additional COVID-appreciation payments. So just how bad was the year for law firms?

The 2021 State of the Legal Market Report, a joint effort from Georgetown Law’s Center on Ethics and the Legal Profession and the Thomson Reuters Institute, offers some insight into exactly how this all played out. As it turns out, while there were definitely trying times in the early going, the year ended on a fairly positive note for attorneys.

From February until August, things looked bleak for the legal sector. At this point, the economy was in neutral and many courts were closed, putting a drag on both transactional and litigation work. But despite the pandemic only getting worse over the latter half of the year, firms had settled into a functioning model and clients were running back to the warm embrace of their lawyers.

As one might suspect, bankruptcy had the best year, becoming the only practice area to experience growth in 2020. But other practice areas held their own, experiencing modest dips, mostly during the five or six months’ worth of early shutdown.

While furloughs and layoffs plagued the industry, they paled in comparison to the 2009 catastrophe. Attorney headcount ended up off about 1.7 percent, while it reached as high as 4 percent during 2009. That said, firms laid off a good deal of support staff over the course of the year, which makes the human toll of the cutbacks more severe than it appears based on this figure alone.

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Where firms really came out ahead was on managing costs beyond simply firing people.

Running a law firm got a lot cheaper in a lot of areas, but the slashing of recruiting and business development expenditures were steep. Obviously, those should see a significant rise once the legal industry returns to a new routine.

With revenue down a little and costs down a lot, you can imagine how profits per equity partner worked out.

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No wonder firms were willing to hand out COVID appreciation bonuses. And to the extent firms stiffed the associates, it makes you wonder how far off the market the firm ended up this year.

There are more insights to be had in the full report, but all in all it appears as though the legal industry managed to come out of this crisis well-positioned for a breakout stretch once the virus is eradicated.


HeadshotJoe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.