An economic downturn and a decline in corporate work have led to the implementation of stealth layoffs in Biglaw. These layoffs are a toxic business practice that allows firms to reduce headcount without confirming financially motivated layoffs. Instead, they will let go of associates or give them a certain amount of time to find a new job and frequently attribute the reductions to performance issues. This approach shifts blame for the cuts to the associates themselves and can be especially harmful during an economic downturn.
One of the firms following this script is Kirkland & Ellis, the world’s richest law firm, with $6,042,000,000 in gross revenue in 2021. The firm has recently let go of multiple corporate associates in Texas following performance reviews. The firm is contending with a downturn in corporate work and overcapacity of transactional hires made in response to last year’s surge in demand. The sources with direct contact with affected individuals said trimming associate ranks is a common practice for the highest-grossing law firm in the world and other big firms, as year’s end occasions a hard look at the financial performance of various practices and the performance of individual associates. But market conditions have made certain practices more vulnerable than others. Some sources said Kirkland’s latest cuts targeted more corporate associates than other practices.
The cuts come after the firm’s standard performance review period, but sources report this year has not been as busy at the firm as 2021 was. That year’s spike in corporate work specifically led to a correlating spike in lateral hires. And now, a significant amount of associates find themselves out of work. According to one of the sources, as many as 20 to 25 associates in Kirkland’s U.S. offices could have been affected by cuts in the last several weeks. Sources said that associates who were let go had reportedly been given warnings about low billable hours and other performance issues. They were offered several months’ severance for signing a nondisparagement agreement.
It is crucial to note that this business practice is harmful to the associates that are let go, but also to the morale of the remaining associates, who may feel uncertain about their job security, and to the firm’s reputation. The practice of stealth layoffs is a toxic one and should be discouraged. Firms should be transparent and honest about their financial situation and the reasons for layoffs. Instead of shifting the blame to associates, the firms should take responsibility for their actions and be held accountable for the consequences. The legal industry should strive for a more ethical and fair way of handling economic downturns that do not harm the associates and the industry.