Law Firms Search For Creative Ways To Downsize

As the economic decline continues, major law firms across the country have been struggling with a decreased demand for lawyers. Some firms are realizing they may have offered jobs to more lawyers then they can pay. Some are trying new ways to shave their payroll costs.

Major law firms benefited from strong business growth this past decade, and many increased hiring each year to keep up with demand amid soaring profits. But when the economy crashed and demand for legal services declined drastically in the fall, some firms with already bloated staff sizes were hit hard.

The scenario was "too many lawyers chasing too little business," says Dan DiPietro, an analyst for Citigroup. He says many firms now are looking for ways to decrease their employee expenses. Some of the most profitable law firms are addressing the problem through job cuts. "I would say it's the minority of firms that have not laid off associates and staff," DiPietro says.

Several firms have announced salary cuts. But some are nervous about losing valuable employees.

"Every law firm strives to find the best and the brightest who they want to bring in and develop as associates at their firms," says Owen Pell, a partner at the Manhattan office of the law firm White & Case.

Temporary Financial Fixes

Some firms have implemented creative ways to lessen the burden on their payrolls temporarily. Many have pushed back the start dates for their incoming first-year associates. Laura Garr, who is finishing her law degree at Fordham University in New York, planned to start with White & Case this fall. Then she received an e-mail concerning her start date.

"In an economy such as this one, we have determined that it is within your and our best interest to defer a portion of the entering class from our New York, Los Angeles, Washington, D.C., and Palo Alto offices to start with us in the fall of 2010," it reads.

White & Case — and a few other firms — are giving their deferred hires a stipend that ranges from $10,000 to $75,000 for taking three months to a little over a year off. But with entry-level corporate lawyer salaries starting around $160,000, even many of those deferred with stipends have not been thrilled with the situation.

"For those that always had their heart set on [a] corporate law firm when they graduated, I know this is a really difficult time, and there are a lot of very unhappy, upset people," Garr says.

Deferral Concerns

Looming student loan bills are a big concern. But Garr says many of her colleagues are also nervous about losing valuable face time at their firms. They also worry about having a blank year on their resumes right after law school, instead of the on-the-job training and experience they expected. It seems some firms have this same concern in mind. White & Case is one of a handful of firms to offer deferred associates more money if they do legal work for a nonprofit organization during their deferment period.

"The idea is to put the year to some use, a positive use, not only for society in general because pro bono organizations need help, but also in terms of training and developing these young people as lawyers," says Pell, the partner at White & Case.

Garr has signed up to spend a year working for an international environmental and human rights group on a class-action lawsuit in Ecuador.

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