Lawyer Layoffs – What It Means To You

In case you haven’t heard, lawyers and legal professionals are being laid off at a rate never seen before. According to Law Shucks, one of my favorite blogs, over the past twelve months 3,489 lawyers have been laid off. This doesn’t include the 4,890 staff (paralegals and assistants) laid off, nor does it include “stealth” layoffs or layoffs from smaller firms. Law Shucks has been all over the carnage and if you want to see detailed information by date and firm check out their Layoff Tracker.

Yes, this is somewhat due to the current economic climate, but also indicative of what’s wrong with the current big firm business model that I’ve been critiquing in my Law Firm 2.0 Series. I won’t belabor those points today; rather provide an opinion on what the layoffs might mean to you.

It depends who you are: client or lawyer. And for that matter, let’s look at the law student perspective, too.

Layoffs are bad for clients. If you note, few partners have lost their jobs, rather associates, paralegals and other staff have been let go. This inevitably will lead to what a colleague of mine refers to as “billing creep.” To paraphrase him:

What has been really noteworthy to me with all the announced law firm cuts is their focus on associates and staff. Partners seem to be saved for the time being. If the slumps of the early 90’s and 2001 are any guide, work will now move up the chain. Associates will hold on to work previously delegated to paralegals in response to less work and partners will do work they would previously hand off to associates. Add to this the natural tendency for overkill and inefficiency when you are struggling to meet billable hour targets (ignoring the increased likelihood of flat out padding) and you have the recipe for many billing disputes and billing creep.

I couldn’t say it any better. The irony is thick that law is one of few industries that can tighten the corporate belt and its customers end up paying more in the end.

Layoffs are bad for the lawyers, too. Duh, Mendelson, they lost their jobs. But it’s actually much worse than that. I don’t think that any economic recovery will create enough big-firm jobs to absorb those who were laid off. I think that most of the lawyers laid off will be permanently dislocated from the big firm profession.

This doesn’t mean that they won’t continue to be lawyers, but they most likely will get jobs at smaller firms and make less money. They certainly won’t be on partner track at an AmLaw 100 entity.

The junior lawyers laid off are going to have to compete with the 1000s of law student graduating each year and vice versa. If you are a law firm that decides to hire a junior lawyer, would you rather have a laid off 1st through 3rd year attorney or a newbie direct from law school? Well, it depends…

If you are a mid-sized or smaller firm, you probably hire the more experienced lawyer. Your business model doesn’t work so well to take on direct from law school folks. If you are the large firm, you are wary of hiring a big-firm layoff (prestige and all), but also you need to re-create the pipeline of associates from the law schools which you’ve effectively shut off today. So you begin to hire again directly from law schools to fill your junior ranks instead of reabsorbing those left behind today.

Then again, the big firm is probably never going to hire law students at historical rates given they’ve experienced two sets of layoffs in the past 8 years and from what I see are the certain changes coming their way in the future. All in all, it’s a scary time to be in law school. What seemed like a reasonable expectation to go to school, do well and come out making $150,000+ a year now seems like the exception, not the norm.

Whatever may happen, I’m fairly certain that the situation is completely different from the last few instances of layoffs and it’s not because of the unusual economic circumstances that we are facing, rather I think it’s a permanent change in the legal ecosystem.