The latest round of attorney and staff layoffs started in the western part of the state Monday with K&L Gates confirming it was making cuts. That announcement was followed shortly thereafter by Morgan Lewis & Bockius confirming that it was cutting a total of 216 lawyers and staff.
Legal blog "Above the Law" has been reporting for a few weeks that layoffs at K&L Gates seemed imminent. The blog confirmed the reports Monday and published an internal memo by K&L Gates managing partner Peter Kalis that 36 associates and 79 staff members were to be let go Monday. In addition to those cuts, six lawyer positions are being considered for redundancy in the firm’s London office.
According to an internal memo first reported on "Above the Law" and sent to The Legal , Morgan Lewis was set to let go of 55 attorneys and 161 staffers Monday across the firm’s U.S. offices. None of the affected attorneys were partners and those in Philadelphia were in the transactional practices. The memo was sent out before those affected were told of the individual decisions.
"Unfortunately, we have reached the point where we believe that the greatest good for the greatest number of our colleagues will be achieved by eliminating some positions and bringing our overall numbers more in line with the realities of the present economic environment and what we believe will be the expectations of our clients in the future," firm Chairman Francis Milone said in the memo. "Therefore, we will be informing today a number of our attorneys and members of our staff throughout the firm that their employment will end."
Milone said he regretted informing people by e-mail but wanted to get the word out before individual staff and attorneys heard about the decisions. He will be holding a firmwide videoconference today at noon to discuss the matter further.
Milone also said in the memo the firm was continuing to take other cost-cutting measures, including delaying the start dates for incoming lawyers joining from law school. He said those attorneys would be offered a "paid public service opportunity."
According to information published on "Above the Law," the first-year associates that were set to start at Morgan Lewis in October 2009 will now start in October 2010. They will be given $5,000 a month during the year delay to work in the public interest sector and that will be on a month-to-month basis. The program is not optional.
The memo stated that the firm will still have a 2009 summer class and any offers given to the second-years in that program will be for a 2011 start date. A similar public interest program will be offered to those attorneys, according to the memo.
Kalis told The Legal he would not comment on personnel matters but did confirm that the memo posted on the blog was the one he sent out to the firm Monday.
According to Kalis’ memo, the reductions — including those possible in London — include 4.9 percent of the firm’s associate headcount and 4.3 percent of the staff.
With the firm’s March 1 merger with Chicago-based Bell Boyd & Lloyd, K&L Gates said in a statement at the end of January that it expected to be at a little more than 1,900 attorneys.
The firm has been going through a growth spurt since early 2008 in a climate when many other firms were retracting. Kalis has often cited the firm’s lack of debt as the reason it could be opportunistic in this economy. In discussing last month the firm’s 2008 financial performance, Kalis wouldn’t say whether the firm had any layoffs last year. "Above the Law" had reported that there were some staff reductions at the firm in November 2008.
It was unclear what the severance packages would be at either Morgan Lewis or K&L Gates.
Altman Weil’s Bill Brennan said firms typically fall into two categories: those that are in crisis situations and can’t afford to pay severance packages and those that have only seen a minimal impact from the economic downturn but are making prudent, proactive decisions to avoid falling into the first category. The majority are in the second category, he said.
"Those firms can afford to pay generous severance packages and hopefully they are all doing that," Brennan said.
Three to six months of severance should be paid if possible, he said.
With the economy looking to be well settled into recession mode for at least a year, Brennan said, layoffs continue to make sense for a firm’s bottom line.
Firms giving severance won’t see an immediate effect on the numbers in the months the severance is being paid out, but there will be a noticeable difference once those obligations are paid, he said. There will also be savings, for example, on expenses for office supplies, telephone usage and continuing legal education, he said.
"So even if [the economy turns around by the end of] 2009, firms will benefit in reductions of force and it’s probably prudent for them to do so given the economic forecast of today," Brennan said.
And what about when the economy turns around? Will there be a mass hiring to bring firms back to those old levels? Brennan says "absolutely not."
"We are seeing a definite restructuring of the marketplace, which will recover, but will not be like the market that we all knew in the past," he said. "No one knows exactly what it’s going to be like in the future, but it certainly will be different."
The Layoff List
• Dechert has gone through four different rounds of layoffs since the economy took a turn for the worse. The firm laid off 13 U.S. associates in its finance and real estate practice in March 2008 and then later gave that group the option of taking temporary positions in other practice groups. In December, 72 U.S. administrative positions were cut and another 15 staff positions in London were put into redundancy consultation.
In February 2009, the firm cut 19 attorneys in its U.S. offices, including associates and counsel positions. That was followed a few weeks later by word the firm cut 10 staff attorneys.
• Stradley Ronon Stevens & Young laid off six associates and four staff members in December for economic reasons.
• Saul Ewing laid off 12 administrative positions in January, including its diversity program director and pro bono counsel. None of the cuts were performance-based.
• Buchanan Ingersoll & Rooney cut 25 administrative positions in November and made an additional 25 to 30 administrative cuts a few weeks ago. The firm also said it may have a lower attorney headcount at the end of its review process.
• Pepper Hamilton said it recently finished its associate review process and is beginning its staff review period. Executive partner Robert Heideck said there may be changes at the conclusion of those processes, but there have been no official layoffs. At least one staff position, however, has been eliminated at the firm.
• Fox Rothschild eliminated six or seven staffers back in September or October, the middle of its fiscal year, administrative partner Mark Silow said. He said it wasn’t because of the economy but was part of a program to get its staff-to-attorney ratio in line with that of other firms. Silow said the firm has been cutting between six and 10 legal assistant positions a year for the past two years.
• Wolf Block cut a total of 15 staff and attorney positions in January, though it didn’t specify the breakdown of each group. It said in February that it cut associate salaries by 10 percent but increased the bonus pool to move toward a more merit-based compensation system.
• Drinker Biddle & Reath let go of about 20 associates in January across a variety of practice areas.
• Blank Rome let go of 20 attorneys and 40 staff members across its offices in January.
• Ballard Spahr Andrews & Ingersoll cut about 40 staffers just a few days before Blank Rome. Ballard Spahr had let go of an additional 13 support staff earlier in 2008.
• 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.
• Reed Smith laid off 115 staff in the United States this month and said there was the potential to let go another seven staff and 11 business and finance attorneys in its U.K. offices by early 2009. The firm said this round of cuts was because of the economy and an anticipated slowdown in work, whereas its decision to lay off 50 legal secretaries in April was based on the firm’s desire to become more in line with a desired attorney-to-secretary ratio. •