After The Ax: As Layoffs Hit The In-House Bar, Lawyers Struggle But Stay Hopeful

By: Lauren Williamson, InsideCounsel

After The Ax: As Layoffs Hit The In-House Bar, Lawyers Struggle But Stay Hopeful

When the economy tumbles, a company usually circles its wagons to protect in-house lawyers rather than pay expensive outside counsel. In fact, most legal departments have been gradually growing during the past several years. But in this recession, many companies are cutting attorneys loose and expecting the remaining legal staff to do more with less.

“No industry has been immune from the downturn,” says Vanessa Vidal, president of ESQ Recruiting. “While the degree may be different, what’s really made this recession unique is that it’s affected [law departments in] industries across the board.”

In June, as the total unemployment rate hit 9.5 percent, the highest since 1983 according to the U.S. Bureau of Labor Statistics, the names of companies with law departments impacted by layoffs read like a who’s who of corporate behemoths: Home Depot, Ford Motor Co. and Microsoft are just a few of the corporations with reported in-house layoffs this year. And while staffs are slimmer, the workload stays the same, leading to long hours and lots of stress for the lawyers who remain.

On the following pages, InsideCounsel takes a look at in-house layoff woes, how legal departments are accomplishing more with less and signs that yes—the worst may truly be over.


The Chop

Michelle Pessah recently went to a networking event where a woman asked her, “What is your dream job?”

Pessah’s response: “I had my dream job.”

That dream job was senior counsel for Sony Electronics. But on April 2, Pessah, along with more than 20 colleagues, was laid off as the economic downturn forced Sony to trim its law department. Sony did not respond to a request for comment.

“I don’t think attorneys ever think that after getting all that education and incurring all that debt that this could happen to me,” she says. “But then you see law firms dissolving left and right, and you think, ‘Wow, maybe it could happen.’” Pessah had two months’ notice to tie up loose ends and begin looking for a new job before her final day of work in June. So far, her search has come up empty.

Pessah isn’t alone in her struggle to find work. “Hiring freeze” and “layoff” are the buzzwords of the moment when it comes to in-house employment, particularly for early- and mid-career lawyers—Pessah falls into the latter. While law firm attorneys have taken a greater hit, the percentage of in-house lawyers let go nationwide points to the severity of this recession, says Bob Graff, global practice manager for the In-house Practice Group at Major, Lindsey & Africa.

“The laid-off in-house lawyer is in a really rough boat because there just aren’t that many in-house positions to begin with, and most of them don’t want to go back to a law firm,” Graff says. “There aren’t a lot of options.”

It’s difficult to know exactly how many in-house attorneys have faced layoffs because companies typically fold the numbers into the overall employee total, Vidal says. However, she says the industries with the most in-house layoffs mirror those most affected by the recession overall. Financial services and real estate top the list, but in recent months, job losses hit legal departments for auto manufacturers, insurance providers, construction companies and retail corporations as well.

Macy’s department stores reduced staff by 7,000 employees in February, including 14 people who either retired or were laid off from the legal department, says Dennis Broderick, the company’s general counsel and secretary. The layoffs resulted from both the sagging economy and a corporate restructuring that eliminated four divisions and centralized Macy’s operating structure, he says.

“It was traumatic. Our law department has never experienced such a thing, ever,” says Broderick, a 23-year veteran of Macy’s.

 

Survivors’ Guilt

Life for attorneys who remain in a legal department after a round of layoffs can be very stressful, as an already overworked staff is forced to tackle even more.

“I don’t think there’s any magic strategy,” Graff says. “They have to triage the problems and work as many hours as they can.”

Many corporations are taking on project attorneys and temporary paralegals so as not to increase their overhead, says Charles Volkert, executive director of Robert Half Legal. “They’re able to take in those temporaries, manage the workload internally and, when those projects end, the temporaries come off the assignment,” he says.

Since law departments are so thinly staffed to begin with, letting go of just a few attorneys can have a big impact. Vidal says there aren’t too many options to fill the gaps. “It’s just old-fashioned hard work, and you have to take on more than you had in the past,” she says. “It’s a difficult proposition.”

While Macy’s new operating structure led to slightly less legal work because it no longer needed separate law offices for each operating division, Broderick says the dip is disproportionately smaller than the number of employees the department lost. The remaining attorneys are tackling the comparatively swollen workload in stride because the department’s philosophy has always been to perform as efficiently as possible. “We don’t run a sweatshop here, but we try to be as productive as we can,” he says.

When the workload stretches the in-house lawyers too thin, Broderick calls on outside counsel—but only when the department critically needs extra support.

“It’s been a fundamental truth that inside lawyers will cost the company a lot less per hour for services rendered than an outside law firm,” he says. “It’s much more economical to [keep work] inside.”

Although the recession hasn’t made much of an impact on the legal department at pharmaceutical company Gilead Sciences, General Counsel Brett Pletcher says the company is operating as though at some point it might. Gilead’s law department is tackling work internally it would normally outsource to law firms. For the work he does send out, Pletcher’s arranging a stable fee structure with law firms.

“We’re trying to go to outside counsel only when we have very strategic work … where you need someone who has vision across a bunch of different companies versus just one company,” he says.

Morale remains high as Gilead’s in-house counsel ramp up their internal workload, but elsewhere spirits fall when law departments face not only more work but also fewer colleagues. In the two months before her official end date, Pessah says the cuts at Sony cast a pall on the entire team. “The people who kept their jobs had survivors’ guilt and, for the most part, more work to do,” she says. “The amount of work isn’t getting any smaller. It’s just the people are getting fewer. It’s hard on both ends.”

Written on: 08/05/09 PDF Version