Law Firm (highly compensated) Associates, Beware

 You can read between the lines in financial media.

You can feel the bit of jitters when interacting with law firm players.

And, you pick up that your own clients, who use high-level legal services, are less and less willing to pay $1,000 to $1,500 an hour. After all, they have a pile-on of new kinds of troubles, ranging from the conflicting ESG narratives to the circling back of COVID in China which disrupts supply chains. 

So, right on time, Abovethelaw comes up with an article warning about possible coming layoffs. So as not to hurt the law firm's business - layoffs signal a problem in financial performance - those will likely take the form of stealth layoffs. Stealth layoffs, as most know, are configured as terminations resulting from subpar performance on lawyerly tasks or simply not hitting the magic number in billable hours.

Insider documents stealth layoffs are coming.

Law.com had already warned about layoffs in general. 

Also, as associate fixed compensation - that is salaries per se - hit nosebleed levels consultants explained how those seemingly blessed junior lawyers were really sitting ducks for losing their jobs. Unlike very senior associates the newbies don't necessarily create a lot of value. They are, to put it bluntly, very expendable. 

The push points for having to lay off include:

  • As Wells Fargo documents, demand is slowing down to normal rates after the two-year pandemic boom.

 

  • The decline of M&A could be a disaster for transactional firms which don't have other lucrative practice areas.

 

  • There had been overhiring, particularly in corporate, of associates.

 

  • The multi-year contracts of guaranteed compensation for equity partners is sucking up big money.

 

  • Litigation hasn't bounced back. Predictably litigation funder Burford Capital had a loss last year. It predicts pent-up demand could change that trajectory. But in recessionary times - which some are predicting - many corporations hold back on "elective" litigation.

 

  • Clients caught in extreme uncertainty and angst are questioning the billing practices of their law firms. In a down market law firms might finally have to cave to alternates to the billable hour.

If the number of layoffs is large then there could be a glut of unemployed lawyers. That's what went down in 2009. Some never made it back into positions requiring their former legal skills.

The takeaway: Be prepared. Research other ways to make a good living inside or outside the legal sector.

Contact Editor-in-Chief Jane Genova at janetenova374@gmail.com

 

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