Baker Donelson Cuts Pay Firmwide, Furloughs Employees

Baker, Donelson, Bearman, Caldwell & Berkowitz is the latest large firm to announce pay cuts and furloughs in a move to reduce expenses amid a sharp downturn in business activity from the new coronavirus pandemic.

The 700-lawyer, super-regional firm, based in Tennessee, announced Wednesday that it has temporarily reduced draws and salaries for shareholders to weather the crisis, and that it will make a further temporary pay cut firmwide. It will also furlough some employees “over the next few weeks,” according to a statement from the firm.

A Baker Donelson spokesperson said in an email that the temporary salary reductions will be 20% across the board, and that the furloughs will affect “less than 4% of the firm’s overall workforce.” 

According to a source close to the firm, the 20% salary reduction for shareholders took effect Wednesday and the 20% pay cut firmwide will take effect April 15. Furloughs will affect primarily staff who can’t work from home, but could extend to lawyers, the source said. “They’re trying to preserve the cash flow as much as they can.” 

Baker Donelson has implemented the measures “to ensure the financial stability of the firm moving forward,” the firm said in the statement, as first reported by Above the Law on Wednesday.

According to the firm’s statement, “In the wake of the unprecedented and far-reaching impact of the COVID-19 pandemic, Baker Donelson has unfortunately been faced with some very difficult decisions.”

“We are focused on doing all we can for all of our employees, while also ensuring uninterrupted service to our clients and meeting our temporary operating needs throughout this global crisis and beyond,” the statement said.

Baker Donelson’s announcement of the temporary salary cuts and furloughs follows a year when the firm experienced flat revenue and net income. The firm reported 2019 revenue of $378.88 million, according to preliminary data from The American Lawyer. Net income was also flat at $108.26 million, but a 10.5% net reduction in the equity shareholder ranks last year resulted in an 11.8% increase in profits per equity partner, to $550,000.

Baker Donelson said it hopes to rehire the employees whom it furloughs once the situation improves. 

“Our hope is that, once this crisis subsides, we will eventually be able to bring the furloughed team members back to Baker Donelson,” the statement said. “Until then, we are providing them with support to help minimize the impact of what we know is an extremely trying situation, particularly in these highly uncertain times.”

Just last week law firm consultant Hugh Simons, in a column for The American Lawyer, advised that firms defer payments to partners as a proactive measure in the face of the unprecedented business downturn from the coronavirus pandemic in order to have enough money to cover expenses without having to do layoffs or issue a capital call to partners.