The financial crisis domino effect spares few companies, and the legal industry is the latest casualty as Latham & Watkins LLP, one of the largest law firms in the world, announced that it would cut about 190 lawyers and 250 paralegal and other support staff.
The Los Angeles-based Latham employs around 2,300 lawyers worldwide and counts Goldman Sachs Group and UBS among its corporate clients.
"The depth and duration of this recession is unprecedented and we expect the health of the global economy to remain weak at least through 2009," Robert Dell, managing partner at Latham, said in a statement.
The company said it would offer six months of severance pay and healthcare benefits, twice the length of the industrywide standard of three months.
According to reports, revenues at Latham declined from $2 billion to $1.9 billion in 2008 due to decreasing number of corporate transactions.
Latham’s move underscores the growing concern in the legal industry as the economic recession takes its toll on many of law firms’ largest clients.
Corporate clients have slashed legal spending as mergers and acquisitions and corporate finance activities have declined. Many companies are also looking at less-expensive legal services from smaller firms. Bottoming out of the real estate sector has also affected the amount of work related to the real estate industry.
According to a recent survey by the ABA Journal, 39 percent of lawyers polled said that they expect their firms to cut payroll, and around 20 percent expect to lose their jobs in 2009.
"I have never seen it this bad," legal consultant Bill Brennan of Altman Weil told the Philadelphia Inquirer. "Demand has been slow. Essentially the spigot of work has turned off, and law firms are working down their current inventory."
Earlier this month, six major law firms including DLP Piper and Dechert laid off 700 total employees in one day. The U.S. Department of Labor reported that 1,500 legal services jobs were lost in the month of January, which pales in comparison to other industries but nonetheless was a giant blow to a relatively small sector.
The New York Law Journal reported last week that many law firms it had surveyed would freeze salaries and bonuses this year.
According to consulting firm The Pascall Company, besides severance packages, more law firms are also providing outplacement services, a rarity among law firms in the past.
Outplacement assists terminated employees find new jobs, a courteous gesture during a turbulent economy.
"It’s like taking a vitamin pill to ensure the long term health of both the employer and employee during a difficult reduction in force," said Teddy Pierre, CEO and president of The Pascall Company. "Outplacement services help the firm to proactively preserve current assets and to convey that they are sensitive to the needs of their employees."
Instead of allowing layoffs to tarnish reputations, several law firms have used outplacement services to provide a positive transition plan for those re-entering the job market, Pscall Company said.