Thanks to the pandemic, the Biglaw Firms tried to manage their expenses through 2020 through cost-cutting measures like wage cuts, vacation days and layoffs. While staff seemed to be the target of the overwhelming majority of the cuts, law firms’ workforce declined strangely through a series of stealth layoffs. Of course, the biglaw firms in question wouldn’t admit doing such a thing, but the numbers don’t lie.
Biglaw companies started pushing employees aside in Q3 2020, according to a new report from the Thomson Reuters Peer Monitor Index. If you remember what happened in 2009 when thousands of lawyers lost their jobs due to the recession, you can start off by having some flashbacks. The report notes that staff were the “primary targets of lawyer cuts” but did not specify how the cuts were made (hmmm …). Ultimately, Biglaw firms employed 1.6 percent fewer lawyers on average in 2020 than they did in 2019, and the downsizing was “at a pace reminiscent of 2009 and the great recession.” We weren’t kidding about the flashbacks.
The American attorney has some additional coverage of the report:
The drop in headcount in 2020 was due to lower demand in general, as well as handing off clients and companies to senior lawyers, Mike Abbott, vice president of market insights and thought leaders at Thomson Reuters, said in an interview Monday.
Companies “heard directly from customers that at a time of uncertainty,” we really want to rely heavily on the advice of people who know our business best and who have long-standing relationships, “said Abbott.” And that is often the partner level. Much of that work has consisted of staying with or actually going to older law firms. “
So what came of all the layoffs – apart from the misery in the midst of economic uncertainty for all concerned? A 1.4 percent increase in productivity and an increase in attorney billing rates, that’s what. But wait, there is more:[A]Aggressive cuts and “sky-high” employment rates in the final months of 2020 have brought law firms’ market performance to near record levels. The Thomson Reuters Peer Monitor Index – a compilation of factors that affect law firm profitability, such as demand, rates, productivity and spending – reached 69 in the fourth quarter, its highest score since 2006.
According to the Peer Monitor report, earnings per equity partner growth in the fourth quarter of 2020 at Am Law 100 increased by about 15% and in the second quarter by about 13% compared to the fourth quarter of 2019. The average for all companies was in the fourth quarter at 11.5%.
Profit increases are in line with Wells Fargo poll results on Monday, which found that 130 companies had an average of 9.9% growth in net income and 12.7% in Am Law 50 companies in 2020.
At least the employees who lost their jobs did so for a good cause. Pooh.
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Employees bore the brunt of the legal cuts in 2020 [American Lawyer]
Staci Zaretsky is Senior Editor at Above the Law, where she has been working since 2011. She would love to hear from you. Please send her an email with tips, questions, comments or criticism. You can follow her on Twitter or connect with her on LinkedIn.