Associate Layoffs Spike In October

By Erin Marie Daly

Law360, New York (October 23, 2008) -- October has been the most treacherous month so far this year for associates at top-tier law firms, marked by a whopping 226 pink slips amid Heller Ehrman LLP's implosion and wide-scale layoffs at institutions like Clifford Chance LLP and Sonnenschein Nath & Rosenthal LLP, Law360's analysis shows.

With more than 230 lawyers laid off so far this month, October is shaping up to be twice as bad as the second-worst month, July, our data shows. While the closing of Heller Ehrman accounted for the bulk of the terminations, several other firms also laid off associates and staff this month.

The upward trend in associate layoffs is likely to continue, at least through the end of the year, according to Stacy Humphries, a principal at legal headhunting firm MS Legal Search.

“It is hard to know, though, whether firms are really laying off more people than in the past, or whether firms are just being less secretive about it,” she noted.

In the past, firms were reluctant to publicize reductions in force for fear of harming their reputations, Humphries said. Now, with the widespread slowdown the nation’s economy is undergoing, firms are less reluctant to admit that their business has slowed.

“The fact that firms are openly announcing that their layoffs are occurring due to economic rather than performance reasons is probably the only good news for associates who are let go in the current economy,” she said.

Paula Alvary, a principal at legal consulting firm Hoffman Alvary & Company LLC, also predicted that the layoffs would continue this fall and winter.

Most firms are experiencing continuing and deepening slowdowns in transactional work, and even in large-scale litigation, Alvary said, adding that there will be more pressure for associate layoffs as firms examine the results of this year's new hires process.

"As in past recessions, firms are finding that the acceptance rate on their outstanding offers is unusually high," Alvary said. "This means too many new lawyers will be joining the current associate cadre."

The recent fallout began on Oct. 14, when Clifford Chance disclosed that it would be laying off 20 New York and Washington, D.C., associates from its litigation and dispute resolution practice group, marking the firm's second round of layoffs in the past year. The Magic Circle firm attributed the layoffs to “sluggishness in litigation matters.”

Two days later, Sonnenschein announced a round of cuts that affected around 24 attorneys, primarily in its real estate and litigation practice groups. Sonnenschein said those cuts were necessary due to tumult in the financial markets that was affecting its clients.

Then came the colossal dissolution of the 650-lawyer Heller Ehrman, which resulted in job losses for more than 150 associates.

Other firms contributing to October's layoff tally: Katten Muchin Rosenman LLP and Dewey & LeBoeuf LLP, both of which announced associate job cuts this month.

According to our research, the uptick in layoffs comes after a period of relative calm in August and September.

Research: Abigail Rubenstein

That respite was brief, following another spell of doom and gloom in July, when 104 associates lost their jobs.

New York's Cadwalader Wickersham & Taft LLP became the main source of the July layoffs when it announced it would be letting go of 96 lawyers from its real estate finance and securitization practice in the U.S. and the U.K. because of the market slowdown. The firm didn't say how many associates that number included.

Also that month, Washington-based powerhouse Patton Boggs LLP laid off about eight associates, citing the need to tread carefully in a soft economic climate, Law360's research shows.

Prior to this summer's layoffs, however, the job landscape for associates hadn't exactly been looking rosy.

The new year kicked off with a string of pink slips handed to 35 associates in Cadwalader's global finance and capital markets practices in January due to what the firm called “unexpected and persistent volatility” in the midst of a slumping market.

While only 13 associates lost their jobs in February — due to Dechert LLP tightening its belt in the finance and real estate practice areas — March brought job losses for 26 associates at Thelen Reid Brown Raysman & Steiner LLP.

Along with those cuts, Thelen trimmed its summer associate program from 11 to eight weeks and pushed the start date for first-years from September to January.

With the exception of April, when associate jobs appeared to hold steady, the year continued on its murky path, with 42 associate layoffs in May and 70 job losses in June.

Sonnenschein led the way in May, letting go of 27 associates as part of a 124-employee job cut that also included six partners and four of counsel attorneys in response to the toll the national economic slump had taken on its litigation and real estate practices.

The 480-lawyer Sutherland also announced associate layoffs in response to the downturn that month, revealing that it had trimmed its associate ranks by asking about 15 attorneys to leave. The cuts were across experience levels and groups and were reportedly an outgrowth of Sutherland's midyear associate review in March.

Things had gotten even worse by June, when 60 associates at Thacher Proffitt & Wood LLP received layoff notices amid plummeting profits due to the firm's focus on securitization work, while about 10 associates at Powell Goldstein LLP lost their jobs, Law360's research showed.

Last year, too, was no picnic for associates. Cadwalader's move in January came after an earlier one by Clifford Chance, which axed six structured finance associates in November 2007.

Other firms resorted to buyouts in a bid to avoid layoffs. Also in November, Thacher Proffitt offered 29 first-year associates the option of four months' severance to leave the firm, while structured finance boutique McKee Nelson LLP extended a similar offer to a group of its associates.

The top 10 firms in terms of the most associate layoffs reported this year are:

1. Heller Ehrman LLP

2. Cadwalader Wickersham & Taft LLP

3. Thacher Proffitt & Wood LLP

4. Sonnenschein Nath & Rosenthal LLP

5. Thelen Reid Brown Raysman & Steiner LLP

6. Katten Muchin Rosenman LLP

7. Clifford Chance LLP

8. Sutherland

9. Dechert LLP

10. Dewey & LeBoeuf LLP, Powell Goldstein LLP and Patton Boggs LLP (each reported approximations of “less than 10” associate job losses)