Do Law Firm Layoffs Have to Happen? Part 1

So Sonnenschein Nath & Rosenthal axed 37 attorneys not long ago. Plus another 90 or so support staff. If you are one of those people and reading this, my condolences to you. Getting laid off sucks, no matter how bad the job.

[Aside: Don’t miss this funkalicious article in the WaPo written by a guy who got laid off and has yet to find a job.]

Of course the question always arises, couldn’t the partners have sucked it up and taken a bit of a pay cut so that other attorneys wouldn’t be out on their duffs? After all, it’s the economy and likely will bounce back, and the firm will need these folks again.

Let me share some insight I got once when talking to a partner I used to work for. He called himself “part of the working rich,” and yes he was seriously whining about it. While not all partners share that view, how many do you think do? I imagine quite a few, maybe even the majority of BigLaw partners. They don’t see having vacation homes, expensive primary residences, expensive cars, expensive travel, etc., etc. as something optional—they’ve earned it, is the feeling I always got from partners.

So that is one part of the why partners won’t take salary cuts. Plus, many are mortgaged to the hilt. A pay cut would make them cut into their lifestyle. Ain’t happening.

Another reason also stems from a sense of entitlement, but this one is more about associate pay. Namely, the whole lock-step system of salary based on number of years out of law school. Law firms are locked into some big salary increases for associates every year, and one of the few ways to cut attorney payroll costs is to cut, well, the number of attorneys. Because giving no raises seems out of the question for most firms. They fear the people they want to keep will get irate and leave for greener pastures.

I know, it’s heresy to suggest that associates be compensated by merit. They’ve demonstrated their merit by getting good grades in law school and working at a BigLaw firm, right? And they’re going to work lots of hours, so they deserve that salary guarantee.

Except, that kind of logic really doesn’t work in today’s economic climate. And in the end, it doesn’t really benefit associates. Partnership is a black box in part because associates don’t get honest feedback soon enough. Instituting merit compensation could certainly help clear up some of the mystery. (Of course, it would require actual honesty during reviews, which could be wildly unrealistic.) I mean, isn’t that how most professionals know how they’re doing, they get raises or don’t?

Granted, merit compensation could be (and in many firms, would be) abused. But so what else is new? (Lawyers finding ways to abuse other lawyers—tell me it ain’t so.) The billable hours system is a lousy way to live for just about everyone involved.

And, not feeling guaranteed a salary increase would actually be good for associates, because they wouldn’t feel it’s such a risk to try something else without such a high-salary guarantee. Merit salary would help them see those guarantees are worthless, anyway. More on that next time.

2 thoughts on “Do Law Firm Layoffs Have to Happen? Part 1

  1. Indeed. Partners do not want their incomes to decline, no more than executives at large companies want their bonuses to be cut. It is only at smaller firms and companies that the owners of the enterprise care about their employees. At that size, employees are like family members who cannot and will not be disposed of that easily. At larger companies, most employees, despite their hard work and loyalty, are seen as replaceable cogs in the machine.

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