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In the not-too-distant past, Brobeck, Phleger & Harrison was one of the standard-bearer law firms of the Internet and technology boom. Riding the crest of that period’s seemingly boundless growth, San Francisco-based Brobeck Phleger cultivated a reputation as an innovative firm on the cutting edge. The tech sector has been reeling for the better part of a year now, with the rest of the economy falling into recession in the last quarter. Brobeck Phleger, like many other firms, had staffed up for boom times and is now facing the unpleasant fact that it has too many lawyers and too little business. But, even in dealing with the downturn, the firm is taking an innovative approach. Earlier this month, Brobeck Phleger, which has 950 lawyers worldwide and 85 in New York, announced it would offer “separation incentive” packages to those associates in its business and technology group on track to bill less than 1,300 hours this year, far below the firm’s target of 1,950 hours. Though fairly common in the larger corporate world, such voluntary buyout plans have so far been largely unknown at law firms. Those associates who accept a buyout will receive a lump sum equal to their base salary through April 15, 2002. Brobeck Phleger associate salaries start at $135,000 for first-years. Eligible associates have until Dec. 6 to decide whether or not to accept the buyouts. Other associates may request a buyout to be granted at the firm’s discretion. Brobeck Phleger has 240 business and technology associates worldwide and 36 in New York. The firm would not specify how many of its business and technology associates are eligible for the buyout. Brobeck Phleger’s approach represents a departure from the practices of other law firms who have reduced associate ranks recently. New York-based Shearman & Sterling cut about 10 percent of its associates at the end of October. A number of other New York and Silicon Valley firms have also laid off significant number of associates in recent months. “The fact we weren’t able to look at a lot of experience on this was troubling,” said Richard L. Parker, Brobeck Phleger’s managing partner. The firm opted for a buyout plan, Mr. Parker said, because it had long held an institutional resistance to layoffs. Former chairman Tower C. Snow Jr. had said the firm would not lay off any associates during his tenure. Mr. Snow stepped down Nov. 15, replaced as chairman by Richard S. Odom. ‘A SOFTER APPROACH’ Mr. Parker said he hopes the buyout will be regarded as a softer approach to the problem. “We think this a better way to treat people,” he said. According to John A. Challenger, CEO of Challenger, Gray & Christmas, an outplacement and consulting firm, companies often opt for voluntary separation plans to ease the blow for employees. “They want to make the change without creating an environment of angry, bitter people,” said Mr. Challenger. Financial services giant Merrill Lynch & Co. offered a buyout plan to most of its 65,000 employees last month. The plan paid anywhere from 12 weeks to a full year of base salary, plus 40 percent of the employee’s previous year-end bonus. Some 2,900 employees accepted the offer. Not enough apparently, as Merrill Lynch proceeded with substantial layoffs earlier this month. Mr. Parker acknowledged Brobeck Phleger might have to lay off more associates at a later date if the buyout plan does not attract enough participants. That might have been a problem, he pointed out, even if the firm had gone with direct cuts. “We look around at a lot of the other [West Coast] firms that have already done a big layoff,” he said. “Some of them may have to do it again.” Brobeck Phleger’s plan dangles a carrot but also brandishes a stick. The firm, Mr. Parker said, has been advising associates that any severance package the firm might offer after a layoff will not be as generous as what is currently on the table. Brobeck’s lump-sum payment, equivalent to more than four months’ salary, is certainly more generous than the three months’ notice or severance that other firm’s have been offering laid-off associates. Any eligible associates who elect to stay would clearly be running a substantial financial risk. Indeed, for many associates, the difference between voluntary and involuntary separation may be scant, Mr. Parker acknowledged. Partners have been talking over the offer with individual associates, Mr. Parker said, in many instances encouraging associates to either accept or decline buyout offers. GENEROUS OFFER Associates at New York firms expressed amazement at the offer’s generosity, particularly in light of the fact that it is being offered to associates billing roughly five hours a day. One associate at Shearman & Sterling said he doubted any of the associates let go by his firm were billing so little. An associate at another midtown firm was even more emphatic, pointing out that billing 1,300 hours would probably be grounds for dismissal at most New York firms. “They get all of this, after essentially working part-time for a year,” he said. “Christmas came early this year.” Mr. Parker said Brobeck Phleger was hoping to identify people who are “not tightly connected” to the firm or its clients. However, he acknowledged a large number of stellar people will be affected and the firm may well lose many associates it would like to keep. “That’s one of the disadvantages of this approach,” he said. “You have less control over the process.” Mr. Challenger agreed that one of the major problems with such voluntary packages was the signal it sent to many prized employees. “In voluntary plans, you tend to lose a lot of good people,” he said. “The top people know they can get another job and they may not want to work in that sort of environment.” One advantage of these plans may not apply in this instance, however. According to Mr. Challenger, one of the main reasons companies go with voluntary separation plans is to diminish exposure to litigation. Perhaps surprisingly, in the context of a law firm, Mr. Parker said fear of legal action was not a consideration for Brobeck Phleger’s management. “I don’t think anyone gave any thought to the idea that associates would turn around and sue the law firm,” he said. “These people have long careers ahead of them.” Brobeck Phleger’s lump-sum payment, equivalent to more than four months’ salary, is more generous than the three months’ notice or severance offered by other firms.

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