These last two years may have been the wildest ever in the history of BigLaw lateral hiring. Before recruiting at major law firms came to a virtual standstill In March 2020 when much of America shut down in the hope of curbing the COVID epidemic, we had been enjoying boom market conditions for about a decade since the end of the sub-prime crisis of 2008 and the resulting Great Recession. But we were ready to hit the brakes fast and so we did. An interesting indicator of the extent to which COVID-related fears impacted hiring is simply noting the number of job postings that were eliminated from law firm websites in March 2020 in comparison to the previous four-year average for March; while from 2016 to 2019, on average only 730 attorney job listings were eliminated from firm websites, almost three times that number (1857) were erased in March 2020. See Lateral Hirings Plummet Amid COVID-19 Fears. See also Lateral Hiring Fell in 2020 – You Can Probably Guess Why – The Texas Lawbook.
It is no overstatement to recall that many felt the end of the world was upon us, and law firm hiring managers were no exception; the vast and brutal devastation caused by the new deadly virus was all around us and the utter helplessness we felt in defending against it was paralyzing for all but the most steadfast law-firm hiring managers as corporate clients tightened belts, keeping more and more legal work in-house and in many cases delaying payment on law firm bills for services already rendered. But hiring freezes was just step one; most major firms reacted quickly to shed every ounce of fat possible from their overhead, many cutting into lean meat as well in order to enhance chances of survival with attorney and staff pay cuts, layoffs and reduction of real estate commitments being the primary means of preparing for the worst. See BigLaw Associate Layoffs in 2020 Were ‘Reminiscent Of 2009 And the Great Recession, see also Wake Up Call: Goodwin Unloads Associates Via ‘Stealth Layoffs’: Report (noting that some 69 law firms had announced pay cuts for associates and non-equity partners by May 2020 in reaction to the COVID pandemic), and see Skadden is latest firm to announce layoffs; experts say more law firms will follow, and see More Associate Salaries on the BigLaw COVID-19 Chopping Bloc.
But lo and behold, as 2020 progressed and business leaders proved deal hungry resulting in increased demand for legal services, law firms found themselves not only leanly staffed but busier than ever, enjoying record revenues and profits and compelling law firm hiring managers to shift gears from pedal-to-the-metal reverse to first gear forward. See Law Firm Revenue Shoots Up in Booming First Nine Months of 2021. And see Big Law Firms Prosper Despite Covid-Impaired Economy.
This dramatic shift resulted in a hiring frenzy for service attorneys accompanied with the adoption of record base-salaries and bonuses in order to effectively compete for talent. Davis Polk was the first firm to swing its wad, offering pandemic bonuses to service attorneys ranging from $7,500 to $40,000 as a function of seniority, many other elite firms quickly following suit. See Top 20 BigLaw Firm Matches Salaries That Go Up To $415K. See also Salary Wars Scorecard: Firms That Have Announced Raises (2022). And see A Quarter of U.S. Firms Raised Wages, Gave Bonuses in Covid Era. At the same time, service attorneys who had become accustomed to working remotely during the pandemic expressed their sense of heightened power vis-a-vis their law firm employers by rejecting calls to return to the office at least three days per week when the pandemic began to feel more under control: See Wake Up Call: Lawyers Reject Three Days in Office, Survey Finds.
That said, the euphoria among service attorneys and managers alike appeared extreme and it felt to market observers that many of them seemed to forget that such good times always eventually end (see, for example The legal talent war that broke out in 2021 shows no sign of slowing down) despite warnings that restraint was in order. See, for example ‘The pay rates for lawyers are unsustainable. See also Big Law’s Soaring Profits May Be Next Pandemic Darling to Falter. And see Law Firms Reverse Coronavirus Cuts, but ‘Triage’ Not Over Yet.
Then, just short of two years from the date the music stopped in March 2020, Russia invaded Ukraine and, when the invasion was met with more resistance than Putin anticipated, the unthinkable happened: he threatened the use of nuclear weapons if he alone deemed that measure necessary. While BigLaw pulled out of Russia in an expression of outrage, see, for example, Dentons, DLA Piper End Ties With Russia as War’s Toll Mounts, the thought that one irrational actor could unleash a nuclear arsenal on the West helped send deal activity and equity markets tanking, along with them all those vast paper profits, Paul Weiss reporting that in March 2022 U.S. deal count and total deal value decreased 29% and 34%, respectively among other similarly sobering statistics. See PowerPoint Presentation (paulweiss.com).
It’s still too early to tell for sure, but this legal recruiter anticipates another quick switch of the gears to reverse on the part of law firm hiring managers, law firms once again anticipating struggles to make good on compensation guarantees and other financial commitments entered into during the euphoria of COVID-era record revenue and profits and corresponding demand for legal services. At Hanover Legal, we constantly urge restraint, caution and due diligence in exploring options, reminding our clients that since the dot-com bubble burst of 2000, on average one AmLaw 100 firm has collapsed every year and a half, the most recent being LeClaire Ryan after a string including once venerable giants Brobeck, Heller Ehrman, Wolf Block, Thelen, McKee Nelson, Thacher Proffitt, Bingham McCutcheon, Dewey & LeBoeuf and Chadbourne. See, for example Law firms had another big quarter, but associate pay is taking a toll. Unfortunately, we believe that the question is not if but when a major law firm or two will be bucked off this raging bull. We also anticipate an increase in law firm merger activity as a hedge to ensure survival. Come what may, Hanover Legal remains on board to assist our law firm and attorney clients in any way.