Law firms are pulling the trigger on pay cuts and layoffs - and they're already rethinking tech, office space, and recruiting for the long term

• Major law firms are taking actions to prepare for a cash crunch, including conducting layoffs, furloughs and pay cuts, sources tell Business Insider.
• International law firm Reed Smith is slowing distributions to partners.
• New York-based Cadwalader Wickersham & Taft has told partners not to expect any distributions during the peak months of the crisis and is temporarily reducing pay.
• Pryor Cashman in New York, which lists more than 180 lawyers on its website, confirmed it had furloughed some associates, though declined to specify how many.
• John Alessio, the managing partner of the San Diego-based Procopio, which staffs more than 180 lawyers firm-wide, confirmed to Business Insider the firm had conducted layoffs of attorneys and staff.
• The coronavirus crisis is also causing firms to take a look at their long-term needs when it comes to tech, real estate, and associate recruiting.
• At the international law firm of Greenberg Traurig, its executive chair Richard Rosenbaum said that he believed social distancing will lead lawyers to see how client work can be done remotely.
• We spoke with more than two dozen lawyers, consultants and recruiters about how other firms are responding. Here's what we know so far.
• Click here for more BI Prime stories.

Major law firms throughout the United States are conducting layoffs, furloughs, and pay cuts to prepare for a cash crunch as the novel coronavirus hits billings, sources tell Business Insider.

And while these moved are aimed at shoring up firms in the short term, insiders that we talked to said the coronavirus crisis could also have a longer-term effect on what the workplace of the legal industry looks like in the future.

When it comes to pay and job cuts, firms this week sprung into action.

"The real goal is to build a financial war chest to carry them though what is hopefully a short period of time," said Brad Hildebrandt, a consultant to law firms.

"Each firm is approaching that in a different manner."

The international law firm of Reed Smith is slowing the distribution of pay to partners, it said in a statement, while New York-based Cadwalader Wickersham & Taft told partners not to expect any pay distributions during the peak months of the crisis and is temporarily reducing pay for employees - by 25% for those who earn more than $100,000, and 10% for those who earn less.

"Despite how busy some of us are with urgent client needs at this moment, even the most benign reasonable projections make clear that Firm revenues and billable hours are likely to be reduced during this crisis," said Pat Quinn, Cadwalader's managing partner, in an email to employees on Tuesday.

"The longer we wait to take action in response to the virus, the more difficult it will be for us to avoid much more drastic measures later on," he said, noting that the firm is putting a "high priority" on protecting the jobs of legal and non-legal staff.

That comment strikes at the tension facing many law firms in the coronavirus downturn, according to more than two dozen attorneys, consultants and recruiters Business Insider has spoken with about how firms are responding to the crisis, as corporate clients experience a dropoff in revenue.

The management decisions law firms make during the crisis are important because they affect how law students and other practicing attorneys perceive the firm as a place to work, legal experts said.

During the financial crisis in 2009, for instance, Latham & Watkins laid off 190 associates and 250 staff members in an event that has been seared into the memories of lawyers. Other firms, such as Wachtell Lipton, did not conduct these kinds of layoffs.

Some firms conduct layoffs, furloughs

This time around, some haven't been able to avoid it, though they have mostly been mid-sized firms so far.

Out in California, John Alessio, the managing partner of the San Diego-based law firm Procopio, which staffs more than 180 lawyers firm-wide, confirmed to Business Insider that it had conducted layoffs of attorneys and staff.

"Procopio is not immune from the economic realities resulting from Covid-19," he said.

"Out of precautionary measures, we were forced to lay off a handful of attorneys, some of which were foreign legal consultants and staff attorneys. This reduction amounts to less than 3% of our total attorney count and will not limit our ability to fully service our clients."

Meanwhile, Pryor Cashman in New York, which also lists more than 180 lawyers on its website, confirmed that it had furloughed some associates "whose workflow has been interrupted by the COVID-19 crisis," though declined to specify how many.

"We are hopeful and expect that we can reinstate them as soon as their work levels approach norms again."

The extent of damage to the legal workforce will ultimately depend on how long the coronavirus lasts, lawyers at large law firms said.

"It's just tough," said Tom Fitzgerald, managing partner of Winston & Strawn. "It's going to reduce our budget for sure. The deal market is not dead, but there is a lot of uncertainty and that means less deals go forward - it just does. There is no doubt about it. With the courts closed, things get pushed off."

So far, Fitzgerald continues to monitor the situation but is bullish about the firm's future, saying he is "very comfortable" with the employment of 70 or so law students who will spend their summer with the firm, though he and other leaders are assessing how to best execute it, given the social distancing restrictions.

"That is the lifeblood," he said of the program.

Lawyers start to reimagine the workplace

As firms take action, lawyers are already starting to discuss how the coronavirus could reshape the workplace at law firms.

At the international law firm of Greenberg Traurig, its executive chair Richard Rosenbaum said that he believed the social distancing component of the crisis will lead lawyers to see how client work can be done remotely, and therefore reduce the footprint of office space down the line.

It's a trend that's already unfolded at top law firms, but Rosenbaum and others said that coronavirus could accelerate it.

"I think that a lot of law firms are going to see a percentage of their lawyers, not everyone, but a percentage of their lawyers will never come back to the office full time," he said.

"They'll work remotely for a good amount of their time. They may or may not need their own exclusive office in their firm. That will change space planning at firms."

Noah Heller, CEO of Katten Muchin, also saw how his own attorneys were adapting to the work-from-home mandate by using technology and interacting with clients through webinars and teleconferences, something that he thought could continue since it's gone well.

"When we look back on this moment, they are going to call it the great reset," said Heller.

"All of us who have the privilege of running a business realize that things are going to come out of this different," he told Business Insider in an interview. "My goal is to make sure those differences will result in a better business model and a better Katten."

Outside of an increased reliance on technology, Heller also pointed to reduced real estate as a trend that had been playing out in Big Law, but may now become more culturally acceptable to implement, given that partners have been working from home.

Other lawyers said associate hiring could be affected, too.

One was Neal Katyal, the Supreme Court litigator at Hogan Lovells.

Katyal, who also teaches at Georgetown University Law Center, said that he thinks law firms may re-think their recruiting of incoming associates, given that firms have been forced to delay their on-campus interviewing at schools, pushing out recruiting from August to January.

"It's always been a little weird that law firms hire on the basis of one or two semesters of first-year grades," said Katyal, of firms' traditional hiring approach.

"The grades are not that extensive and their record outside of school isn't that extensive, so I think something like this could prompt thinking as to whether our old model makes sense, or whether we should wait longer and get more information."

As far as his own practice goes, Katyal said that he saw legal work heating up outside of his traditional Supreme Court practice, advising unnamed corporate clients on the application of artificial intelligence in determining how to allocate medical resources in the crisis.

Even the nation's top court, though, is experiencing a change of pace.

"The regular kind of appellate work has changed a bit, just because courts aren't having oral arguments," he said.

He pointed to a case where one of his colleagues, Sean Marotta, is set to argue his first Supreme Court case in 30 days, representing Ford Motor Company in a product liability case.

"The court hasn't said they are getting rid of oral arguments yet, but indications are they won't hold oral argument in a few weeks," said Katyal. "Do you keep preparing? When do you prepare? Those questions are definitely there."

--Meghan Morris contributed to this report.

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