A person wearing a mask walks past a sign banning visitors at the Life Care Center in Kirkland, Washington, on Monday, a nursing home that has had several confirmed cases of coronavirus. After a strong 2019, law firms across the country are grappling with concerns about the disease. (AP)
The momentum in these trends continued into 2020, some recruiters said, but the spreading impact of the coronavirus into the global economy could stall — and potentially reverse — some of the gains from last year.
"If a firm is heavily dependent on an industry adversely affected by coronavirus over a period of time, firms won't have a choice but to let go of some of the associates working on their matters," said Kenneth Young of legal recruiting firm Young Mayden LLC.
The large caveat to Young and others' prediction is the unknown length of time and scale to which COVID-19, the label for the disease caused by the virus, will be impacting law firms and the industries they service. Young said that for the virus to start causing industry layoffs, its impact would have to last four to six months, and there would have to be clear indications that clients wouldn't be sending as much legal work to firms in the coming year.
That specter, while still far from becoming a reality, is weighing heavy on many firm leaders.
Kent Zimmermann, a law firm consultant with Zeughauser Group, told Law360 on Friday that he had been in meetings with and approached by several law firm managing partners nervous about the virus' potential impact.
"The headlines coming out hour-by-hour are raising eyebrows," said Zimmermann, referring to news of law office closings overseas and canceled partner retreats.
While the top worries for law firm leaders are related to operations in affected areas, there is an undercurrent of concern that the coronavirus could hit corporate clients' bottom lines to the point that it will require law firms to scale back on recruiting or even cut staff, experts said. Goldman Sachs has predicted corporations will not see increased profits this year because of the coronavirus.
"If corporations are stagnating, there is going to be less legal work. If this actually turns into a recession, all bets are off," said Madeleine Seltzer of law firm consultancy Seltzer Fontaine LLC.
That scenario threatens to put an end to a period in which large law firms have been riding high on the winds of a strong economy, according to experts.
The number of partner promotions in the industry went from 3,431 in 2018 to 4,113 in 2019 across more than 2,400 law firms, according to Firm Prospects, which uses artificial intelligence to scrape promotion and lateral movement data from firm websites. The data, which groups together income and equity partner promotions, suggests a similar increase when looking at the top 200 law firms.
"In terms of promotion to partner, firms are so busy, they need to hang on to their senior associates and promote them because they need the work done," said Seltzer, who noted some firms had relaxed some of their benchmarks for promotions. For example, in previous years, an associate might have needed to bring in more business before a promotion.
Another driver in promotions is likely increasing pressure to have diverse sets of partners on client teams, and firms have been responding by promoting greater numbers of women and attorneys of color, Young said.
While the data does not separate out income partner promotions and equity partner promotions, recruiters suggest that they are seeing most partnerships continue to be to nonequity partnerships.
"Promotions to equity partner have gotten harder over the last couple of years," said Michelle Fivel, a partner at legal recruiter Major Lindsey & Africa.
At the lower associate levels, firms have also become more competitive in various practice areas. Firm Prospects data suggests that associate job openings have been staying unfilled longer, which recruiters say is a sign of increasing competition for these associates.
"Firms have been hiring at a pretty big clip. We had our best year ever," Fivel said of 2019.
Midlevel associates, particularly in transactional practice areas, have been a prime target, according to recruiters. Private equity, mergers and acquisitions, finance, capital markets and real estate have all been generally strong since the economy recovered, experts said.
"If I had 10 finance lawyers, I could place every one of them right now," Young said.
While Firm Prospects' data suggests corporate associate job listings — encompassing M&A, securities, corporate finance, private equity and other areas — had begun to see fewer job openings over 2019 than the previous year, it was still one of the most in-demand practice areas.
Over the last 18 months, Fivel has also seen interest in litigation associates pick up on both coasts, which is a fairly new development. Firm Prospects' data showed an approximately 17% increase in litigation job openings.
If the coronavirus kickstarts a recession, recruiters expect interest in litigation associates to continue rising, along with interest in attorneys in such areas as bankruptcy and restructuring. The trending interest in transactional associates, however, will likely stall and could drop over the next year, experts said.
Partner promotions might also suffer if the coronavirus starts impacting firms' bottom lines. While nonequity promotions are cheaper than promoting an attorney to equity partnership, having too many income partners could put undue strain on a law firm, according to Zimmermann.
"That's not always healthy either," Zimmermann said. "Although some partners are a cheaper form of leverage than equity partners, they are more expensive than associates and off-track attorneys."
Zimmermann echoed several other recruiters in highlighting that it is still too early to tell if the novel coronavirus will have a significant impact on law firms and their clients.
"It could be the biggest test that some firms have ever faced, but again, too early to know yet," he said.
Still, he has been telling concerned managing partners that if the economy and law firms do take a significant economic hit because of the coronavirus, it could force an overdue assessment of staffing. In the flush of last year's strong financial performance, many firms have been putting off hard decisions about cutting underperforming attorneys, he said.
"With storm clouds on the horizon, more partners will understand the need to act with some alacrity," Zimmermann said.
--Editing by Aaron Pelc and Kelly Duncan.
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