As an expert in the legal industry, I have been closely following the recent news of several large law firms laying off lawyers and professional staff members. This trend, which has been affecting big tech companies for some time now, has finally made its way into Big Law. According to reports from The Wall Street Journal, firms such as Shearman & Sterling, Goodwin Procter, Stroock & Stroock & Lavan, and Davis Wright Tremaine have all made the difficult decision to let go of employees due to a decline in demand for legal services. The reason behind these layoffs is a combination of rising business costs and a general economic slowdown. The decrease in demand for legal services has been particularly challenging for firms that had aggressively hired during the boom years of mergers and acquisitions.
When revenues decline, law firms are forced to cut costs, and unfortunately, layoffs are often at the top of the list. In some cases, even when a firm's financial results are positive, they may still follow their competitors' lead and reduce their workforce in what is known as “copycat layoffs.” Additionally, some firms may resort to “stealth dismissals” where they mask the true reason for the layoff, such as performance issues, to avoid negative press. One example of this trend is Bryan Cave Leighton Paisner, which recently laid off around 50 staff members in the United States and the United Kingdom. The majority of these cuts were made in business services, marking the second round of layoffs in less than a year. This is just one example of how the decline in demand for legal services has affected hiring and staffing decisions at major law firms. According to a new report from the National Association of Legal Employees (NALP), lateral hiring fell by 35% across all categories of lawyers in the past year.
Associate hiring saw an even steeper decline of 43%, while member moves decreased by 10%. These numbers are a clear indication that BigLaw layoffs are continuing to shake up the industry. The recent increase in associate salaries has also highlighted discrepancies within the sector, adding to the pressure on firms to make difficult decisions. Another factor contributing to the decline in demand for legal services is the changing preferences of younger generations. According to a survey, 53% of Gen Z respondents expressed interest in eventually moving to an internal, government, or non-profit position, while only 23% hoped to become a partner at a large law firm.
This shift in mindset has forced major law firms to reevaluate their hiring objectives and make tough decisions about layoffs. As someone who has been through the process of being laid off from a law firm, I understand the emotional and professional toll it can take. After passing the Virginia bar exam, I began my career in private practice at a law firm specializing in civil litigation. While many firms are still busy, particularly in countercyclical practices such as bankruptcy and litigation, they may need to reposition their current talent or restructure their junior associates. Being laid off from a law firm can be a challenging experience, both personally and professionally. In some cases, employees may be told that their name and contact information will remain on the firm's website for the duration of their firing, which can add to the mental burden of being associated with a firm that has decided to let them go.
The legal industry is at a crossroads, and firms must find a balance between their growth objectives and the realities of the market. For those who have been laid off from a law firm, it's important to stay informed about what's happening in the industry. Keeping track of law firm dismissals can provide a better understanding of the current state of the legal sector. It's also crucial to make a good first impression when meeting new people, and having time to process the situation can help with this. From Wall Street in New York to the suburbs of New Jersey and many places in between, law firm layoffs are a natural part of the business cycle for firms and the economy as a whole.
However, it's important to remember that you are not defined by your association with a particular firm. For those who have been laid off due to performance issues, it can be more complicated. However, if your firm's policy allows it, I advise associates to continue asking for recommendations to overcome any potential stigma. In light of these challenges, companies will need to reassess their strategies and consider whether aggressive hiring or equalizing higher compensation scales is sustainable in the long term. Recent law school graduates are also facing similar challenges and may need to rethink their career paths in light of these layoffs.