Thanks to the pandemic, Biglaw firms attempted to manage their expenses throughout 2020 by using the cost-cutting measures of salary cuts, furloughs, and layoffs. While staff members seemed to be the target of the vast majority of the outright cuts, law firm associate head counts began to curiously shrink through a series of stealth layoffs. Of course, the Biglaw firms in question wouldn’t admit to doing such a thing, but the numbers don’t lie.
According to a new Thomson Reuters Peer Monitor Index report, Biglaw firms started casting associates aside by the third quarter of 2020. If you remember what happened back in 2009, when thousands of lawyers lost their jobs thanks to the recession, you may be starting to have some flashbacks. The report notes that associates were the “primary targets of reductions amongst lawyers,” but didn’t specify how the reductions were made (hmmm…). When all was said and done, Biglaw firms, on average, employed 1.6 percent fewer attorneys in 2020 than at the same point in 2019, and the job cuts came at “a pace reminiscent of 2009 and the Great Recession.” We weren’t kidding about the flashbacks.
The American Lawyer has some additional coverage on the report:
The head count drop in 2020 was a result of decreased demand in general as well as clients and firms funneling work to more senior-level lawyers, said Mike Abbott, vice president of market insights and thought leadership at Thomson Reuters, in an interview Monday.
Firms “were hearing directly from the clients, that in a period of uncertainty, ‘We really want to rely heavily on the counsel of individuals who know our business best, who have longstanding relationships,’” Abbott said. “And that’s frequently the partner level. So a lot of that work was staying with or actually going to more senior people at the law firms.”
So, what came of all of the layoffs — aside from misery amid economic uncertainty for all those affected by them? A 1.4 percent increase in productivity and increased billing rates for attorneys, that’s what. But wait, there’s more:
[A]ggressive cutting and “sky-high” worked rates in the final months of 2020 propelled law firm market performance to near-record levels. The Thomson Reuters Peer Monitor Index—a composite of factors affecting law firm profitability such as demand, rates, productivity and expenses—hit 69 in Q4. It’s the highest score since 2006.
According to the Peer Monitor report, profit per equity partner growth in the fourth quarter of 2020 increased by about 15% in the Am Law 100 and about 13% for the Second Hundred, relative to the fourth quarter in 2019. The average for all firms was about 11.5% in the fourth quarter.
The profit increases are in line with Wells Fargo’s survey results Monday, which showed net income growth was up an average 9.9% in 2020 across 130 firms and 12.7% up for Am Law 50 firms.
At least the associates who lost their jobs did it for a good cause. Ugh.
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Associates Bore the Brunt of Attorney Cuts in 2020 [American Lawyer]
Staci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.