In case you have not seen it, the New York Times had an article yesterday regarding job loss at law firms. To be sure, the article points out that the number of lawyer layoffs is tiny when compared to job loss in banks and brokerage firms. And no doubt lawyer layoffs are tiny when compared to job loss in other sectors. Nevertheless, the article notes that such layoffs are unusual, particularly because in the past, economic downturn has translated into protracted lawsuits and thus steady work for lawyers and law firms. But this downturn appears to be different.
Here are some of the reasons, suggested by the article, why law firms are now feeling the economic strain.
1. Big company litigation has not materialized, and hence there is no need for law firms to "pit armies of associates against each other."
2. Too many lawyers with the wrong kind of expertise. What is the wrong kind of expertise? Lawyers who "worked on real estate deals or related transactions." Also, if cuts by McKee Nelson are any indicator, corporate and finance associates.
3. Increased reliance on internal lawyers.
4. Changes in billing practices. That is a movement away from hourly rates and towards negotiating "flat fees, fixed fees, or success fees." Like the lack of big company litigation, the change in billing practices reduces the need for, and/or attractiveness of, armies of associates.
As the article notes, these and other factors mean that even law firms are feeling the strain of the economic crisis. Which means that lawyers and law students entering the job market also will be feeling the strain.
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