Reed Smith announced significant staff cuts Wednesday, letting go of 115 staff positions in several departments across its U.S. offices.
The firm also said 11 associates may be let go in its United Kingdom offices along with seven staff members after the firm does a "redundancy consultation exercise" in the country, according to a memo sent out by firm global managing partner Gregory B. Jordan that was posted on legal blog "Above the Law."
The U.S. layoffs will affect staff in all support areas, including information technology, marketing, finance, practice administration, knowledge management, human resources and office services, according to the memo, which was confirmed by a firm spokeswoman as the one Jordan sent to the firm Wednesday morning.
Reed Smith is performing the statutorily required redundancy consultations in London and said they could result in seven staff members and 11 business and finance associates being let go because of "overcapacity."
"The decision to take these actions was difficult, but we believe it is the prudent thing to do for our business over the longer term," Jordan said in the memo. "Our recent experience and our projections dictate that we must plan for reduced demand for our services in 2009 and align our capacity accordingly."
The layoffs, including those anticipated in the U.K., totaled less than 4 percent of the firm's entire work force. He said those affected would receive "appropriate pay and severance packages."
The announcement comes a few months after the firm in April laid off 50 legal secretaries, not because of the economy but to become more in line with a desired secretary-to-attorney ratio, the firm said at the time. Around the same time it laid off the secretaries, it added staff to its centralized business center.
In an interview with The Legal Intelligencer, Jordan said the April cuts were to take advantage of the firm's investment in technology and a 24-hour client call center. The staff cuts Wednesday were clearly an effort to reduce capacity because of an expected reduction in work in 2009, he said. Jordan said he expected the U.K. reduction consultation to be completed by early 2009. All other cuts were made Wednesday.
When asked why only the U.K. offices were facing attorney layoffs, Jordan said U.S. and U.K. laws differ, affecting how firms manage their work force.
In the United States, attorneys come and go every month for all reasons, including performance, Jordan said, leading to natural attrition in certain areas.
"At the same time, we have situations that develop where you really do have overcapacity that the natural attrition or slowing down of hiring doesn't allow you to moderate," he said. "We have a situation now where, because of the slowing business climate on the transaction side in London, we think we have too many people."
Jordan said he does not anticipate any attorney layoffs in the United States nor does he expect any more staff layoffs. He did caution that the firm can't predict what might happen with the economy in the future but said he anticipates this being the last round of organized cuts.
"This is a very painful thing for us to do and we don't like to do it so we've tried to get it right," Jordan said. "We think we now have the team the way we need it to go into 2009."
Reed Smith has been in the news lately for adding attorneys. The firm picked up a 14-attorney group of renewable energy attorneys from disbanding Thelen and then brought on another three attorneys this week from the firm -- two more energy attorneys and one technology transactions lawyer.
Jordan said it's not that simple to look at the layoffs next to the Thelen hires. He said the firm has looked to grow in areas that it thinks will be strong in 2009, and pull back in others. The firm's diversification has been a help, with 53 percent of its work focused on litigation. But even with litigation making up more of the pie, Jordan said the firm is trying to make sure it doesn't have an overcapacity.
The latest attorneys to join the firm were focused in areas where Jordan said Reed Smith would be busy in the coming year -- renewable energy and employment class action defense.
"You haven't seen us hiring structured finance lawyers or anything like that," he said.
Staff reductions have been the cost-cutting measure of choice for many firms in this down cycle, but law firm consultants have said the real money savings comes from cutting attorneys.
The news from Reed Smith brings with it the largest staff reduction of any Pennsylvania-based firm since the economy turned in 2008. It looks to be the largest one-time cut of staff positions of any firm nationally when looking at raw numbers, according to "The Layoff List," a collection of layoff-related news culled together by The Legal Intelligencer affiliate The American Lawyer.
Buchanan Ingersoll & Rooney cut 25 legal secretary and administrative positions last month across all of its offices, citing the economy as the cause.
Duane Morris cut seven people from its marketing team in August and an additional 15 administrative positions, mainly in the Philadelphia office, from other departments the same week.
Ballard Spahr Andrews & Ingersoll let go of 13 support staff earlier in the year for what firm Chairman Arthur Makadon had said was in part due to the economy.
Intellectual property boutique Synnestvedt & Lechner let seven staff members go a few days after four partners in the firm left for Saul Ewing. The firm has since disbanded, with the bulk of the attorneys joining Fox Rothschild.
Blank Rome saw the departure of nine associates after the firm's annual review period. Dechert initially had given pink slips to 13 associates because of a downturn in the real estate and structured finance practice but later said those associates were offered positions in other practice groups.
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