April 09, 2020
California Law Firm Departures in the COVID-19 Era
We read the news daily of law firms – big and small – announcing cutbacks, furloughs, layoffs, reductions in salaries, and distribution freezes. Every industry has been feeling the impact of this global pandemic, and the legal industry is no different. As lawyers who inherently crave predictability, it is difficult to conceive of when and how things will return to “normal,” if everything should, or if we are living in the “new normal” now. But in an age of increasing attorney mobility, what does all this uncertainty mean for law firm departures? Will the impact of the pandemic contribute to an increase in law firm departures – directed by both law firms and lawyers? Will law firms see partners and groups departing now, or do most lawyers plan to wait out the storm? The answer to all these questions is probably, yes.
Law Firm Departures are not Always Voluntary
While we commonly think of partner departures as voluntary events, partners are often also asked to leave law firms or may be required to do so. In addition to voluntary dissociations, departures due to ejectments, requested resignations, impairment, dissolutions and mergers, retirement, disability, and death, are all departure events that must be properly managed by law firms and impact clients.
In this current legal climate, we are likely to begin seeing an unprecedented amount of departures, both voluntary and involuntary, within the next year, and possibly beyond. We are already seeing the economic adjustments that firms are making to adapt to a dramatically changing marketplace. For law firms that did not have a plan in place for managing their workforce remotely or that are not responding quickly enough to these changes, the next steps are likely to be more drastic as the disruption to their practices, and the deteriorating business climate, combine to impact the bottom line. Law firms whose business plans included a disaster response plan, embraced changing technology, and routinely analyze their business model in terms of its productivity and profitability, will likely fare much better. Either way, law firms managers and general counsel will not only be considering what members of their workforce are essential to staying afloat, but also which partners and practice groups they want to stay, and which must go.
Leaving Now or Later?
While some lawyers and groups may see the writing on the wall and quickly make plans to depart, many will try to wait out the storm, at least for a little while. Some may have no choice, since many law firms have suspended, or at least significantly curtailed, their investments in lateral partners for the current disruption period.
Many partners who were in the process of analyzing moving their practice group to a new firm are now pausing to see if, and when, would be a better time to leave. Besides the fact that stay-at-home orders have created changes to their practice group and client management issues, it has felt to many like a bad time to leave. This change among so much other change is, well, hard.
On the plus side, these changes have allowed many potential lateral movers an opportunity to see how their potential new firm has, or will, whether this storm. Departure groups may learn that their potential new firm is not as robust a platform for their practice as they once thought and may reconsider other options.
Also, many law firms who were courting, or considering, adding or expanding practice groups are looking at these plans differently now. For many, it is no longer the right time to grow; for others, it may be a golden opportunity. Law firms are also placing an increased emphasis on attracting practice groups that are self-sustaining (as oppose to those expected to offer cross-practice referral opportunities), and including or enhancing practice areas that typically thrive during challenging economic times (such as, bankruptcy, employment advice, among others.)
But whether these departures happen now, or slightly later, significant change is on the horizon. Lateral acquisitions, requested resignations, ejectments, dissolutions, and voluntary departures all present unique situations that must be properly handled to protect law firm and client interests, especially in these perilous times.
Dena M. Roche
O’Rielly & Roche LLP