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Former Morrison & Foerster partner Judith Droz Keyes says a change in the direction of her firm’s labor and employment practice motivated her move earlier this year to the San Francisco office of Davis Wright Tremaine. Lawyers were doing less counseling for their own California clients and instead parachuting in to assist on large corporate and litigation matters, she said. “Once the decision is made that the firm will focus on a high level of profitability and a high billing rate, and a certain type of client model, then it has repercussions for the labor and employment practice,” says Keyes. “And attorneys who practice in that area have a choice to make.” Raymond Wheeler, head of MoFo’s employment section, denied the firm is de-emphasizing the practice. But Keyes’ experience certainly encapsulates the view of labor and employment practices currently in fashion: Rate pressure from insurers that provide employment practices liability insurance is unrelenting, the thinking goes, and has made it impossible for employment and labor lawyers at national firms to charge anything but bottom-rack rates, turning employment lawyers into service partners. That, in turn, has proved a boon for regional shops like Davis Wright. “Right now, there appears to be a high number of lawyers in transition in California firms in employment law,” says Davis Wright employment partner Lawton Humphrey. “We are seeing more opportunities than we have ever seen to bring over employment partners with robust practices.” But interestingly, a countertrend has also begun to emerge. Some big national firms are taking advantage of the high deductibles that come with employment insurance to bring their clients back, especially the Fortune 500 companies who are looking to obtain volume discounts by using a single firm for all of their legal needs. Clients like Wachovia Corp., Bank of America and Mellon Bank are in some instances skipping the insurance companies � and the employment boutiques they traditionally work with � in favor of a firm that can handle their full array of work, Reed Smith partner David Weissman said. For Reed Smith, the trade-off of charging less for employment work is reaping deal work from such corporate clients, he said. Others agree that employment practices serve as a conduit for other legal work. “Labor and employment is a place where the business is constant, our relationships with clients are long term and are personal relationships,” says Patricia Gillette, co-chair of Heller Ehrman’s labor and employment practice. “And we are a portal of business for the firm.” The result is demand for certain breeds of employment attorneys, those that can straddle a middle ground of rates � higher than what the insurers pay, but low enough to keep clients around. Heller added to its New York office the chair of Kelley Drye & Warren’s labor & employment practice and two other partners. And in March, Reed Smith hired two partners from L.A.’s Musick, Peeler & Garrett. “We have been aggressively looking in the Northern California market for a partner and have been unable to find somebody,” says Weissman, who heads Reed Smith’s labor and employment practice group. “It is tough because there are certain people whose clients aren’t willing to pay the rates of the big firms.” Indeed, legal observers say it isn’t easy competing for top-tier employer work. “There are a few firms that are making a go of competing in the high-end, including Paul, Hastings; Proskauer; and Morgan, Lewis,” says legal consultant Peter Zeughauser. “But those firms have significant high-end labor-and-employment brands, and there is not a lot of room for a lot of other players.” But even if the countertrend means Davis Wright’s hiring strategy has a shelf life, it still looks like it will take a while to spoil. “Small and mid-sized firms doing employment work are busier than ever,” agrees legal recruiter Avis Caravello. “If a [smaller] firm can come out a little bit under market rate of the larger firms” the smaller firm can often cull off work.

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