The downtown Chicago skyline (Photo by SAUL LOEB/AFP via Getty Images)
As we reach the middle of the year, the coronavirus pandemic and volatile financial conditions have substantially affected Chicago’s legal market, limiting both the volume and scope of hiring and triggering firm cost-control measures, such as compensation reductions and layoffs. Despite setbacks, the Chicago attorney hiring market has persisted — and now shows signs of increased activity in certain areas, as firms refocus and adapt to remain competitive in a COVID-19 economy.
We will discuss Chicago law firm associate and partner workforce and hiring trends and statistics in light of recent shelter-in-place orders, as well as how firms are proceeding with the search and interview process during the pandemic.
The Chicago Associate Market: Workforce and Hiring Trends Overview
With respect to the associate job market, some Chicago firms have unfortunately conducted salary cuts, layoffs, furloughs, and complete hiring freezes to lower expenses during the recession. Fortunately, thus far, recent associate layoffs have been on a much smaller scale compared to the 2008 Great Recession, both in terms of the number of firms conducting layoffs and the number of associates let go.
Of 95 Am Law 200 and Chambers-ranked midsize firms we have tracked in Chicago, only 10 firms have conducted layoffs, and they have done so in limited numbers (e.g., targeting specific practice groups compared to massive 2008 workforce reductions).[1] Also, of the 14 Am Law 200 firms headquartered in Chicago, only 4 firms have conducted associate layoffs. In this recession, more firms have opted to institute non-layoff expenditure controls. Approximately 44 percent (37 out of 85) of Am Law 200 firms with offices in Chicago have reduced or delayed compensation for all attorneys. Firms have most commonly reduced associate salaries by 15–20 percent. Some Chicago firms have also furloughed associates for several months.
Practice areas in Chicago that have slowed the most during the pandemic and resulted in more associate layoffs and furloughs are M&A, middle-market debt-finance, transportation finance, and real estate. Some Chicago law firms have avoided layoffs by moving under-utilized associates in slower departments to busier practice groups. This is most common with interrelated practice areas; for example, some Chicago restructuring groups have absorbed M&A and finance associates. M&A and finance associates have transactional and document drafting experience transferable to restructuring practices as well as exposure to restructuring-related deals, such as distressed asset acquisition, recapitalizations, and debtor-in-possession financing. Similarly, firms have moved commercial litigation associates to bankruptcy litigation practice groups.
For those Chicago firms that have conducted layoffs, in order to ease the transition, a few firms have provided associates with three to four months of lead time to find new opportunities, permitting the attorneys to remain as salaried employees. In addition to the financial benefit, these types of arrangements can also help in the lateral application process by avoiding resume gaps and allowing the associate to maintain their practitioner skills. Most associate severance packages provide three months of full or partial salary with healthcare benefits, and some firms provide up to six months of partial salary and healthcare benefits. For associates who have been affected by a COVID-19 related layoff, be sure to consider enrolling in our Bridge Program.
Some Chicago law firms have continued lateral associate hiring, primarily in predictably recession-friendly or COVID-19 driven practice areas such as restructuring, healthcare, labor and employment, data-privacy, and cybersecurity. We have also recently seen a minor uptick in associate interview activity with select finance and real estate practice groups.
In Chicago, we currently have associate candidates interviewing in the following practice areas: restructuring, bankruptcy, debt finance, real estate, labor and employment, healthcare, commercial litigation, healthcare (regulatory and FDA-focused), data privacy, and cybersecurity. Firms are interviewing both local associate candidates and candidates relocating from other markets. Motivations for attorneys lateraling during the pandemic have been both market-driven (e.g., associates laid off or from firms that have reduced salaries) as well as traditional reasons for lateraling, such as upgrading to a higher-ranked firm, or a firm with a larger presence in a desired practice area. Associates relocating to Chicago are often originally from the Midwest or attended a Midwest law school or college with a large Chicago-alumni network.
With respect to associate interview and hiring formats, firms are both interviewing and onboarding new associate hires remotely via Zoom. Firms have made a concerted effort to go above and beyond to welcome and integrate lateral associates to the firm, with significant involvement from firm, practice group, and diversity leadership.
The Chicago Partner Market: Developments and Hiring Trends
Consistent with national trends, learning from 2008, Chicago law firms have since increased capital reserves or have more recently reduced or deferred partner distributions to shore-up cash positions and avoid overreliance on credit lines. Of the 44 percent of Am Law 200 firms in Chicago that have recently lowered or deferred partner compensation, most have reduced equity partner distributions or draws in the range of 10–20 percent.
Chicago firms are still working to tactically invest in revenue growth through lateral partner hiring during the pandemic. Many Chicago law firms are proceeding with lateral partner searches targeting both countercyclical and mainstay practice areas. With that said, given the current economic climate, Chicago firms are more risk averse and are only selectively considering practice groups and partners with proven profitability track-records.
There have also been some notable headline lateral partner and group hires in Chicago over the past few months. Willkie, which opened its new Chicago office in March, has grown to 22 attorneys, adding partners in commercial litigation, IP litigation, and trust and estates. In restructuring, Kirkland & Ellis, the recently merged Faegre Drinker Biddle, and Sheppard Mullin have recently hired leading partners in Chicago. Winston & Strawn also recently hired a renowned Chicago class action litigation partner.
Chicago Partner and Associate Hiring by the Numbers
To assess the impact of COVID-19 on the Chicago lateral market, we can look at recent Chicago associate and partner hiring numbers compared to this time period last year (looking only at Am Law 200 firms).
From March 15, 2020 (around the time Chicago office closures and shelter in place orders began) through July 8, 2020, there were 156 lateral attorneys hired into Chicago firms. Of those 156 hires, 97 were associates, 38 were partners, and 21 were counsels.[2]
Looking at this same period in 2019, during a robust legal economy, there were 220 lateral attorneys hired into Chicago firms. Of those 220 hires, 140 were associates, 54 were partners, and 26 were counsels.
Thus, since Chicago’s COVID-19-related business and law firm office closures, overall lateral attorney movement to new firms dropped by 29 percent, with associate hiring down 31 percent and partner hiring down 30 percent. Looking specifically at the three busiest attorney hiring practice areas during the same period in 2019, corporate hiring dropped most precipitously for both lateral associates and partners, down 54 percent and 50 percent, respectively. In litigation, associate hiring was down 40 percent in 2020 and partner hiring remained the same, with 10 hires during this period in both 2019 and 2020. IP associate and partner hiring essentially stayed at the same level during this period in 2019 and 2020.
Chicago lateral hiring activity has fared slightly better than Am Law 200 firms nationally during the pandemic. Chicago’s overall lateral attorney hiring decrease of 29 percent was 6% less than the national Am Law 200 lateral attorney hiring decline of 35 percent from March 15, 2020 through July 8, 2020. Chicago associate hiring decreased 6 percent less than the national rate of 37 percent, and Chicago partner hiring declined 6 percent less than the national rate of 36 percent.
Although actual associate and partner hiring declined relatively evenly in Chicago over the past few months, many of the hires were in motion pre-COVID-19, and the decrease in legal work volume tends to lag slightly behind declining client demand by a month or more. Therefore, we also need to look at the number and rate of new Chicago associate position openings to ascertain the lateral demand and hiring activity drop. New associate positions in Chicago (from our internal database, including published and non-published searches) were as follows:
- 72 new jobs from June 15, 2019 to September 15, 2019
- 104 new jobs from September 15, 2019 to December 15, 2019
- 103 new jobs from December 15, 2019 to March 15, 2020
- 33 new jobs from March 15, 2020 to June 15, 2020
- 11 new jobs from June 15, 2020 to July 8, 2020
The relatively sharp drop in new associate openings is evident. Looking at current open associate positions in Chicago compared to last year, there are currently 29 active open associate positions (published and non-published), compared to 87 open posted associate positions on July 8, 2019.[3] While the associate market has slowed significantly, as previously discussed, firms are moving forward with targeted searches in certain practice areas.
With respect to partner searches, we are working on a range of Chicago partners searches with top firms. These partner searches are rarely published, given the targeted and relationship-driven nature of the process.
Conclusion
Although the Chicago lateral market has slowed down during the pandemic, we anticipate that specific practice areas (e.g., restructuring, labor and employment, IP, litigation, and data privacy) will remain busy, particularly on the partner side. For Chicago’s transactional practice areas, with private equity firms and asset managers holding significant capital and with fewer structural banking issues than in 2008, we foresee deal activity returning along with attorney hiring as the pandemic subsides.
If you are an associate, counsel, or partner considering a lateral move or a firm or company seeking to hire attorneys please reach out to me at jhyde@laterallink.com or find me on LinkedIn (https://www.linkedin.com/in/jessephyde/). My Lateral Link colleagues and I are always happy to assist.
[1] The statistics in this post regarding firms conducting layoffs and salary reductions are from reports from firms and attorney employees found in Above the Law, the American Lawyer, and our internal monitoring of firms.
[2] The statistics in this post regarding number of attorneys hired into Chicago Am Law 200 firms are from the Leopard Solutions database. It is possible not all firms report data and that there may be a delay in reporting as well.
[3] Unfortunately, comparable data from our internal database for the July 8, 2019 is not available.
Ed. note: This is the latest installment in a series of posts from Lateral Link’s team of expert contributors. This post is by Jesse Hyde, a Director based in the Chicago office, where he oversees attorney placements and client services in Chicago and throughout the Midwest. He specializes in placing associates, partners, and in-house counsel with leading Am Law 100 and 200 law firms and premier corporations. With a proven successful track record, Jesse advises attorneys, law firms, and companies through all stages of the recruitment and hiring process to effectively reach their objectives. Jesse received his J.D. from Loyola University Chicago School of Law where he was on the Dean’s List and a Member of the Loyola University Chicago Law Journal. Jesse received his B.A. from the University of Michigan and majored in history. Before recruiting, he practiced as a commercial litigation attorney with a Chicago-based law firm for four years.
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