About Those Law Firm Layoffs? It Isn’t That Bad
With the repercussions of the credit crunch creating a slowdown in finance, real estate and big-deal work, several law firms have unloaded attorneys and have done so under the scrutiny of news outlets eager to report the bad news. But in relative terms, the news might not be all that dismal. “You’d think there would be a greater bloodbath,” says professor Bill Henderson. A look at the bigger picture shows a profession responding to the economic downturn rather adroitly — at least so far.
A look at the numbers shows the cuts are quite small — so far
The National Law Journal
August 12, 2008
Click on most law blogs or open a legal newspaper, and it won’t take long to see some mention of law firm layoffs.
With the repercussions of the credit crunch creating a slowdown in finance, real estate and big-deal work, several law firms have unloaded attorneys and have done so under the scrutiny of news outlets eager to report the bad news.
But in relative terms, the news might not be all that dismal. A look at the bigger picture shows a profession responding to the economic downturn rather adroitly — at least so far.
Since October, some 338 attorney layoffs have been confirmed and reported by various news organizations at 12 law firms among the NLJ 250, The National Law Journal‘s annual survey of the nation’s largest law firms.
To be sure, unreported terminations could make the layoff totals much higher. But even if stealth layoffs are twice or even three times the reported amount, the number of attorneys ushered to the exits in the last 10 months is relatively small.
Attorney layoffs since October equal about 3.5 percent of the total number of attorneys at the 12 law firms confirming layoffs. Some 9,603 attorneys work at those firms, based on the latest NLJ 250 survey. October marked the first reporting of layoffs tied to the recent economic slowdown.
The total number of confirmed and reported layoffs was derived from The National Law Journal and its affiliates, in addition to Above the Law, the Wall Street Journal Law Blog and Adam Smith, Esq., a law blog.
The 3.5 percent is “small,” said James Leipold, executive director of NALP, formerly the National Association for Law Placement.
Even smaller are the number of layoffs compared with the total number of attorneys at NLJ 250 firms — 128,213 — and with the number of attorneys in the United States, about 900,000.
One reason that the legal industry has not experienced more layoffs, Leipold said, is because many larger firms, through mergers and expansion, have diversified the kinds of services they offer. “The whole theory of consolidation is to create a broad portfolio so that it doesn’t come to a grinding halt.”
Leipold points to the troubles at Cadwalader, Wickersham & Taft, which was heavily focused on structured finance, as a “perfect example of a firm that hasn’t done that.”
The New York-based firm has let go of 131 attorneys, or 18.2 percent of its lawyers.
For every confirmed layoff, there is at least one layoff that goes unreported, said David Lat, editor-in-chief of Above the Law. His blog has provided much coverage of attorney and staff layoffs. In addition, some firms have used performance reviews as opportunities to dump attorneys from unprofitable practice areas, he said.
Wall-to-wall coverage of attorney layoffs can give readers the sense that the sky is falling, Lat said. On the other hand, considering that law firms are notoriously tight-lipped, the picture may be much worse than the reported numbers reveal. He added that the ratio of stealth to confirmed layoffs could be as high as 2-to-1.
“It’s hard to bring transparency to it,” he said.
In addition, some firms may be unloading attorneys slowly, one or two at a time, he said, which can fall under the media’s radar. Those reductions may also go unnoticed by many of the law firm’s own attorneys. The layoffs at Cadwalader represent the largest percentage of confirmed terminations within a single firm. DLA Piper, which let go five of its technology, media and commercial lawyers in London, or 0.14 percent of its 3,623 attorneys, has the smallest percentage of the 12 firms confirming layoffs.
“You’d think there would be a greater bloodbath,” said Bill Henderson, a professor at Indiana University School of Law — Bloomington. His scholarship focuses on law firms.
The number of firms reducing on-campus interviews this fall, the degree to which law firms hire contract attorneys and upcoming associate class sizes will be additional indicators of the economic effect to law firms, he said.
The U.S. law firms reported to have laid off attorneys are Philadelphia-based Blank Rome; New York-based Cadwalader; Dechert; DLA Piper; New York-based McKee Nelson; and Washington-based Patton Boggs.
Others are Pillsbury Winthrop Shaw Pittman; Atlanta-based Powell Goldstein; Sonnenschein Nath & Rosenthal; Sutherland Asbill & Brennan; New York-based Thacher Proffitt & Wood; and Thelen Reid Brown Raysman & Steiner.