Law Firm Furloughing: What Do GCs Think?

Law firms are hedging themselves against the financial impact of the COVID-19 pandemic in numerous ways, but the furloughing of staff has caught the attention of many – including the in-house community.

Earlier this month, legal head at GVC Holdings, Michael Leadbeater, said he would reconsider his relationships with firms if they were found to be protecting partner drawings at the expense of their junior staff.

He described the offloading of risk onto junior lawyers and non-fee earning colleagues as “morally repugnant”. However, he said furloughing of some staff, such as administrative or support staff, “makes sense”.

But many other heads of legal take a different stance. One legal head at a media company said that they can “see a rationale” for furloughing if used in a way that is protecting the viability of the firm. They added that a “balance in partners and associates making a sacrifice” is also important.

“The approach needs to be to protect those who earn least — in particular support staff — and for those who normally benefit from uncapped rights to profits to take the counter drop in profitability.”

“In general, the approach needs to be to protect those who earn least — in particular support staff — and for those who normally benefit from uncapped rights to profits to take the counter drop in profitability.”

Meanwhile, a GC at a digital bank reiterated that “furloughing is there to ensure the long-term survival of businesses and an alternative to redundancy”.

“If firms were making people redundant then that’s worth criticising,” they continued, “but criticising firms for accessing a government scheme is extraordinary.”

They further questioned how to ascertain that furloughing was undertaken to protect partner drawings. They said that the partnership model is easy to pull apart and criticise as a matter of principle, but it is “not right to take this one specific issue in a complex web and in the midst of a financial crisis”.

Another general counsel at a transport group added: “I don’t see what the problem with furlough is, per se. If law firms top up a reasonable amount of the pay (beyond the £2,500 per month) and the partners are sharing some of the pain (salary decrease for them)”.

“Done reasonably, furlough is a brief, paid break”, they continued.

Most recently, Hogan Lovells, Ashurst and Norton Rose Fulbright have joined other firms in furloughing staff.

““Done reasonably, furlough is a brief, paid break”

“It’s situation specific”, said a GC at a U.K. banking group. “Corporates work with a range of firms, from the magic circle to high street firms, so you can’t give a sweeping statement across the board — I would be reticent to do so”.

They added that legal heads may need to observe whether a holistic approach is being taken:

“It depends on whether there is a holistic approach being taken – for example, here’s a law firm paying the highest ever profits per partner, and then furloughing their workforce, then it’s difficult.

“You’ve got to look at it in the round and try to understand what issues a firm is facing.”

“You’ve got to look at it in the round and try to understand what issues a firm is facing. Essentially, it’s about firms doing the right thing: that’s different things for different firms.”

The GC at the digital bank agrees, adding that it would demonstrate a “lack of sophistication and empathy” if a GC was to “look through the window and judge others without having all the facts”.

They also don’t think they would hold staff being furloughed against their panel firms, but would be interested to know how the firm worked through the crisis.

“You can certainly ask questions of your firms in an open way. Furloughing staff might be part of their answer – but I wouldn’t necessarily hold it against them”.

Read More:

GVC Legal Head Warns Firms Against Cutting Staff to Protect Partners

A Firm-By-Firm Guide on the Latest Pandemic Measures

Hogan Lovells Furloughs European Staff, Freezes Recruitment, Defers Partner Profits