SAN FRANCISCO — At least 100 Heller Ehrman employees were laid off on Friday, without receiving the 60 days’ wages required by federal law or accrued vacation due under California law, leaving even those remaining expressing confusion and concern.
Heller staffers and attorneys arriving at work Friday received one of two e-mails, either notifying them that they had been laid off, effective immediately, or that the firm would be retaining their services for the time being. Many said they were surprised by the e-mails and frustrated that there wasn’t more warning. The e-mails did not address whether employees would be paid for accrued vacation or other wages owed to them under federal law.
The layoffs were directed at staff not involved in client-service positions and attorneys who were already known to be leaving. At least some legal assistants, library staff, marketing staff, recruiting staff and the firm’s group of about 10 IT trainers were laid off.
C. Scott Andrews, a San Francisco associate, said he and at least two secretaries who assist his group received the e-mail continuing their employment. He and other associates speaking anonymously said they assumed associates are being kept to continue collections from clients. But many may leave for new firms anyway, Andrews said.
In both e-mails, management told employees to continue serving clients and billing time when possible — “two of the criteria the banks are examining in our continuing negotiations with them to maintain an orderly transition.”
According to the e-mails from the dissolution committee, the firm’s banks — Bank of America and Citibank — forced the layoffs of “many employees.”
“Generally, they have refused to pay employees who we cannot convince them are necessary (as they define it) for the wind down efforts,” the e-mails read.
A week earlier, a memo from that four-lawyer committee indicated that employees should not expect to receive payment for accrued vacation upon leaving the firm. Employees also had been promised 60 days’ pay — through Nov. 28 — in accordance with the WARN Act. Firm management hopes to pay employees back eventually for both accrued vacation and what is owed under the WARN Act, said a source within the firm. But not paying immediately could incur penalties, noted labor attorney Stephen Pahl, the chairman of Pahl & McCay in San Jose. Pahl added that the firm doesn’t seem in such dire straits that it simply couldn’t make those payments.
“Because there’s some net worth there, I would really be surprised if they were not compensating them for the 60 days,” Pahl said. There are exceptions in the WARN Act for sudden bankruptcies or dissolutions, Pahl said, but it is a difficult case to make, given that the dissolution document would have been drafted well before it was voted into effect late last month.
“If I were representing the company, it would not be a very compelling story to say you had no idea that this event of dissolution was coming,” he said. And skimping on vacation is not a good idea, he said. “That steps in front of everything.”
Friday’s layoff e-mails also warned that it may take a few days for employees to receive paychecks. Under California law, Pahl said, if the late paychecks don’t include the remainder of the 60 days of pay, they should include payment for each day, including weekends, the checks are late.
In the Oct. 3 e-mail about vacations, the committee wrote that it had obtained the banks’ permission “to fund the payroll due next Friday [Oct. 10] in all other respects,” but did not elaborate further. Several staffers who left the firm or were planning to leave the firm earlier this week said they were told by administrators not to expect vacation payment as well.
The firm also has indicated it is “working with our bank lenders to secure their authorization to pay the premiums necessary to continue all health coverage in effect beyond October 31.”
There were no details about health coverage available on Friday. Members of the dissolution committee declined to make official statements, and other firm officials were unavailable.
Several employees found the e-mails confusing and indirect.
One longtime legal secretary, who received an e-mail that said she would remain, said that even later that day she wasn’t sure of her status.
“I went on a job interview and they asked, ‘Are you terminated?’ And I said I don’t know,” she said, adding that she expects to return to work on Monday. “I really don’t know.”
She added that some staffers had received neither the layoff notice nor the e-mail saying they were being retained. A Silicon Valley associate said the firm hasn’t been direct.
“People have been frustrated with the communications that we’ve received, the lack of notice, basically what seems to be a bait-and-switch,” the associate said.
Though the firm’s dissolution has been public knowledge for two weeks, some employees found the sudden layoff notices a surprise.
“Some people would say it was expected, but no. This is news to everyone here in the library,” said Dara Grey, a library assistant in San Francisco who was laid off.
Others said the firm had become a depressing place to be.
“You’ll come in and you’ll hear people crying,” said the legal secretary.
“They’ve taken the printer, they’ve turned off the ice so you can’t get any ice from the ice maker,” she said. “All the sugar packets and everything are missing.”
Some longtime employees were having trouble adjusting, not having had to update their resumes in decades, she said.
The Sept. 26 vote to dissolve the partnership followed a series of failed merger talks with Winston & Strawn; Baker & McKenzie and, finally, Mayer Brown. News of the Mayer talks’ failure came a handful of days before the dissolution vote. In the weeks following that vote, Heller management was in negotiations with Baker, Winston and possibly others to move hundreds of Heller attorneys, and possibly office leases and staff, in bulk. Earlier this week, The Recorder learned that those talks had fallen through. Key partners have been making moves on their own, the largest to date being 27 partners, including three former firm chairmen, announcing a move to Orrick, Herrington & Sutcliffe last week, only a couple days after 35 attorneys at the heart of Heller’s Venture Law Group unit went to Cooley Godward Kronish.
Merger talks failed, and Heller Ehrman called it quits after nearly 120 years. Our Hot Topic roundup follows the dissolution of the venerable San Francisco law firm and the changes that ripple through the legal community.
A copy of Heller Ehrman’s dissolution plan leaked on Thursday showed a firm that felt it could avoid bankruptcy, though its estimate of being able to collect 90 percent of unpaid bills struck some observers as highly ambitious.
The plan puts Heller’s assets at $258 million and its liabilities at $72 million, three-quarters of which is money owed to Bank of America and Citibank. It was unclear from that document whether the liabilities included real estate leases or payroll through November, the original wind-down period. Heller officials would not comment on the document or those details.
While the firm is solvent on paper, bankruptcy could be triggered if three creditors owed a total of more than $13,475 file an involuntary bankruptcy petition.
The document — and previous firm communication to employees — had promised to pay accrued and unused vacation time, though the plan included a provision allowing management to revise that promise, and the dissolution committee has noted that the bank, not the firm, controls payment decisions.
Staffers have had to deal with bad compensation-related news on an almost daily basis, the legal secretary said. First, there was no severance, then the prospect of year-end contributions, raises and bonuses which were all updated at the beginning of each year were thrown out. Next was vacation pay, followed shortly by the temporary freezing of 401(k) accounts and then Friday’s layoffs.
“Every day seems to be one more body blow,” she said.