Kara Sears
Layoffs in Big Law have become increasingly common in recent years, with some of the largest firms in the industry announcing reductions in attorney and staff headcount. This trend has been attributed to various factors, including declining demand for specific legal services, economic uncertainty, and the potential for a looming recession. While some analysts point to specific economic factors such as increasing interest rates and high inflation, others highlight the infectious nature of copycat layoffs, where firms follow their competitors in reducing their workforce. The recent round of layoffs has also been accompanied by a rise in quiet cutting or stealth layoffs, where performance-based evaluations are used as a tool for controlled attrition, allowing firms to reshape their talent pools without public scrutiny. As Big Law firms navigate economic uncertainty and scrutiny from the government, layoffs and performance-based departures are likely to continue, impacting the careers and trust of many lawyers.
| Characteristics | Values |
|---|---|
| Law firms conducting layoffs | Goodwin Procter, Kirkland Ellis, Shearman Sterling, Stroock Stroock Lavan, Perkins Coie, Jenner & Block, WilmerHale |
| Reasons for layoffs | Performance-based, economic uncertainty, reduced demand for corporate transactions, reduced billable hours, organizational behavior, increased salaries |
| Impact on employees | Reduced compensation, stalled career trajectories, increased fear and transactional mindset |
| Strategies to avoid layoffs | Reduced headcount reductions, counseling underperforming lawyers, managing costs, performance improvement plans |
| Support for laid-off lawyers | Severance packages, health insurance, layoff trackers |
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What You'll Learn
Severance packages for laid-off lawyers
Layoffs in Big Law are becoming increasingly common, with some of the largest firms in the legal industry announcing reductions in attorney and staff headcount. This has raised concerns about larger economic issues and whether these layoffs indicate a recession. While layoffs are often attributed to performance-based reasons, they are rarely the fault of the individual lawyer.
It is beneficial to negotiate severance packages early on, when employment termination is not imminent. Lawyers can also seek the advice of counsel before signing a severance agreement, as the agreements can contain complicated legal language. In some cases, lawyers may be able to negotiate remaining with the firm until an important project is complete or taking up other vacant roles within the company. Laid-off employees over 40 years of age are granted up to 21 days to review and negotiate the agreement, which can include extended health benefits or other perks.
Overall, while severance packages for laid-off lawyers can provide financial support during a transition, the specific terms and conditions can vary widely, and it is important for lawyers to carefully review and, if necessary, negotiate the terms of their severance package.
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Stealth layoffs
The word "stealth" implies avoiding detection, and stealth layoffs are used by BigLaw firms to discreetly lay off lawyers without facing the public repercussions of taking away people's jobs. Stealth layoffs are a nuanced approach to parting ways with employees, particularly attorneys, without resorting to direct dismissal. This covert strategy involves signalling an impending termination to the attorney, granting them time to proactively seek new employment opportunities.
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Economic factors causing layoffs
Economic factors play a significant role in causing layoffs at large law firms. While there are various economic reasons for layoffs, there is no single event or trend that can be solely attributed to these decisions. One of the primary factors is the declining demand for legal services, particularly in corporate transactions such as mergers and acquisitions. According to Reuters, the demand for corporate transactional services has decreased, leading to a reduction in the number and size of deals available for big law firms. This decline in demand has resulted in a decrease in billable hours, which directly impacts the revenue generated by these firms, as their income is largely dependent on billable hours rather than performance.
Increasing interest rates and high inflation have also contributed to the economic climate that has prompted layoffs. These factors have further suppressed demand for corporate transactions, exacerbating the challenges faced by big law firms. Additionally, the rise in firm expenses, particularly the cost of recruiting legal talent, has created economic pressures that have influenced the decision to reduce headcounts.
Another economic consideration is the phenomenon of "copycat layoffs," where law firms may opt to lay off employees due to competitive behaviour rather than a significant decline in client work. This trend was highlighted by Annie Lowrey in The Atlantic, who observed that executives tend to view layoffs at competitor firms as an opportunity to reduce their workforce preemptively.
Furthermore, with the potential for an economic recession and downturn, law firms are anticipating a possible slowdown in their businesses. As a result, they are reexamining their business models and considering cost-cutting measures to sustain themselves during challenging economic times.
Lastly, economic headwinds and technological advancements have also played a role in law firm layoffs. The implementation of artificial intelligence and technological tools has automated specific legal tasks, reducing the need for certain lawyers' involvement and contributing to layoffs.
While economic factors are significant in triggering layoffs, it is important to recognize that other factors, such as stealth layoffs and performance-based terminations, also contribute to the overall landscape of job reductions in the legal industry.
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Performance-based layoffs
The rise of performance-based layoffs can be attributed to several factors. One reason is the uncertain economic climate, which has led to a decline in demand for corporate transactions and, consequently, a decrease in the number and size of deals available for big law firms. Additionally, the legal industry has been affected by "copycat layoffs," where firms reduce their workforce in response to similar actions by their competitors, even without a significant slump in client work.
The subtle nature of performance-based layoffs can also breed cynicism and affect associate morale, as colleagues witness the abrupt departure of once-valued team members. This can alter the employer-employee relationship, making loyalty and long-term commitment more difficult to cultivate. Furthermore, as awareness of these practices grows within the legal community, trust in firm leadership and evaluation systems may be undermined.
To mitigate the risk of becoming a target of quiet cutting, attorneys can take proactive measures such as meticulous documentation of assignments, feedback, and work conditions. Building relationships across practice groups and offices can also provide both professional insurance and valuable perspective during challenging times. While performance-based layoffs may help firms achieve their headcount goals, the long-term organizational costs, including the potential loss of trust and morale, are significant factors that firms should consider.
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Impact of political landscape on BigLaw hiring
The political landscape has had a significant impact on BigLaw hiring. Law firms, particularly those in BigLaw, have been reexamining their business models and practices to determine their sustainability and whether they are worth the scrutiny of the administration. This has led to a slowdown in recruiting and hiring, with firms being more deliberate in their hiring processes and facing a flooded market of lawyers leaving the government.
Trump's administration has targeted prominent law firms, and his indication of keeping an eye on firms that hire lawyers he doesn't like has caused uncertainty and apprehension in the legal industry. This has resulted in BigLaw firms being cautious about their pro bono litigation against the government and reevaluating their diversity, equity, and inclusion initiatives.
The mass layoffs of federal employees have resulted in an overload of resumes from federal government lawyers, and the impact of these layoffs on regulatory practice and work for lawyers is uncertain. BigLaw firms based in the nation's capital, which are highly reliant on government practices, may not have the option to shift their focus.
The political landscape has also influenced the skills sought by BigLaw firms. In addition to prestige, strategic expertise, adaptability, and an understanding of the political landscape have become essential for candidates navigating BigLaw hiring. Selectivity has increased, with firms prioritizing high-demand areas and candidates with government or politically "neutral" experience.
Overall, the changing political landscape has caused uncertainty and apprehension in BigLaw hiring, leading to a slowdown in recruiting and hiring, as well as a reevaluation of practices and initiatives to navigate the scrutiny of the administration.
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Frequently asked questions
Layoffs in big law are becoming increasingly common. Many big law firms have recently laid off lawyers and staff members due to declining demand for various legal services, particularly in corporate transactions.
There are several reasons why big law firms are laying off employees. One reason is the decline in demand for corporate transactions, such as mergers and acquisitions, due to increasing interest rates and high inflation. Another factor is the prevalence of "copycat layoffs," where firms lay off employees because their competitors are doing so as well. Additionally, some firms may be laying off employees to reduce costs and manage their business models better in an uncertain political and economic climate.
Yes, some big law firms are opting for "quiet cutting" or stealth layoffs instead of traditional public layoffs. This involves using performance improvement plans (PIPs) to frame departures as performance-based rather than economic, allowing firms to maintain their public image and client relationships. However, this practice has been criticized for its potential to undermine trust in firm leadership and evaluation systems.
Big law firms have a broad range of responses when it comes to layoffs. Laid-off lawyers may receive a severance package that includes pay, benefits, and health insurance coverage for a specific duration. However, the specifics of these packages vary, and information about them is often sparse.
Layoffs in big law can have several implications. They may indicate larger economic issues and an impending recession. Layoffs can also create a flooded market of lawyers seeking new opportunities, impacting the hiring landscape for law firms. Additionally, layoffs can affect the depth of legal talent available and the compensation expectations of different generations of attorneys.
