Law Firms and Layoffs: Who Are the Most Vulnerable?

[WSJ Law Blog]

We know we’ve been busy with this Paul Hastings news in the last twenty four hours, but there’s one more point (for now) we just have to hit.

The firing of Shinyung Oh, which has been the talk of the biz this week (click here for an interview with her and here for her performance review), points up just which big-firm lawyers might be most-vulnerable in this economic malaise.

It’s not the partners with the big books of business. They’re more in demand than ever. And it’s probably not the super-junior associates, either. Firms have just spent a fortune recruiting them and still don’t know their potential. “You can’t identify that early who’s not going to be a good performer,” says Dan Weiner, co-chair of the personnel committee at Hughes Hubbard, with whom we spoke about this brouhaha yesterday. You’d be “cutting them before you know their performance capabilities, which is not good business.”

No, the most vulnerable are the folks in the middle, lawyers say. These are the junior partners, counsel and senior associates who are paid a lot and so have to be super productive to justify their salaries.

It’s an issue that was spotted earlier this year by Dan DiPietro at Citi and Brad Hildebrandt in their joint report on the industry. The report flagged a concern about the cost to firms of “income partners” and other non-equity lawyers. “Many firms are now bloated with some income partners performing mostly associate-level work while, at the same time, generating less overall profitability.”

Weiner (who was talking generally and not about current conditions at Hughes Hubbard) says that when times get tough, firms look at “expensive people who are underutilized” starting with partners and then “going down to counsel and senior associates” based on performance.

Partner demotions or firings certainly aren’t unheard of (click here for a post on partner demotions at Jenner & Block earlier this year; here for a post from last year on Mayer Brown’s decision to terminate or demote some 45 partners). But despite notions that a law-firm partnership no longer has the job security of a tenured professorship, it’s still, at least for now it seems safer to be a partner than an associate.

LB’ers: Is it? What are you seeing? What are you fearing?