Hiring Freezes, Stealth Layoffs Hit Big Law

The legal sector lost almost 9,000 jobs in August of this year, leaving many industry observers wondering and worried about the health of Big Law.

Many firms in the Am Law top 50, according to a report from The American Lawyer, have lately implemented austerity measures in order to control their attorney numbers.

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For instance, while a spokesperson for Cooley denied the existence of an “official hiring freeze” at the firm, sources close to the firm told The American Lawyer that a freeze is indeed in place, whether official or not.

Global law firm Reed Smith, meanwhile is apparently dealing with profitability gaps between its London office and other, lower-performing, locations, according to sources, and has let go of more senior lawyers who do not have significant books.

“We continually evaluate all aspects of our business in order to best support our clients and ensure the continued strength of the firm,” said a spokesperson for Reed Smith. “In the normal course of our business, we routinely make personnel decisions. These decisions are consistent with personnel actions we have taken in the past as we prudently manage our business.”

Many legal experts, however, consider a statement like this to be little more than code for stealth layoffs.

Stealth layoffs, which have long been popular among Big Law firms to downsize their associate and partner ranks, essentially allow firms to cut their headcounts without acknowledging that the layoffs were actually financially-based. Firms often say the layoffs were due to poor performance reviews, which just so happen to coincide with downturns in the industry, whether those downturns are due to a general decline in the economy or just a reduction in demand for legal services.

Unfortunately, stealth layoffs can often have very detrimental effects. For one, they make those who are let go doubt their actual skills as lawyers. Second, being let go for performance reasons rather than for downsizing purposes looks a lot worse on a CV. And stealth layoffs also prevent interested legal industry observers from knowing what’s actually happening within firms.

However, firms continue the stealth layoff practice—and we will likely see more of them in the near future now that some firms have clearly begun—because they want to avoid the incredibly negative publicity that goes hand in hand with outright layoffs.