US Law Firms Also Face 'Cutthroat' Layoffs

US Law Firms Increasing Hiring on M&A Boom
Now Pushing Layoffs Amid Recession Concerns

[Asia Economy Reporter Haeyoung Kwon] Major US law firms are undergoing employee restructuring. As concerns about an economic downturn deepen, a wave of layoffs centered on big tech has also hit law firms.

According to the Wall Street Journal (WSJ) on the 13th (local time), Sherman & Sterling, a law firm headquartered in New York, announced last week that it would lay off 12 lawyers and 26 staff members.

The firm stated, "We have focused layoffs on the areas most affected by the current and future market conditions," adding, "Parting ways with colleagues is always painful. Until now, we have been able to avoid such measures, but this was an important step to align our capacity with client demand." They explained that layoffs of some employees were inevitable due to a decrease in demand for legal advisory services.

Goodwin Procter also announced last month that it would reduce its workforce by 5%, including lawyers, paralegals, scientific advisors, and professional staff, due to recent macroeconomic headwinds and demand slowdown. The firm has increased its number of lawyers by 60% since 2019 and currently employs 2,000 lawyers worldwide. The company concluded that the current staffing level is excessive relative to demand. Another law firm, Struck, also laid off 9 lawyers, corporate specialists, and 18 staff members.

Concerns over economic slowdown and weakening market demand have triggered lawyer layoffs at law firms. In the past, legal advisory demand surged due to increased mergers and acquisitions (M&A) among companies fueled by liquidity supply from the COVID-19 pandemic, but the situation has now changed. The US Federal Reserve's aggressive tightening has deflated asset market bubbles, and recession fears are rising. Law firms that once held performance parties by handing out bonuses worth hundreds of thousands of dollars (hundreds of millions of Korean won) even to junior lawyers now have to tighten their belts.

Peter Zughauser, a law firm consultant, said, "Work has sharply decreased," and predicted, "Companies that hired the most and the hardest will be the first to cut people."

However, experts expect that large-scale layoffs like those during the global financial crisis of 2008-2009 will not occur. While corporate-related work is decreasing, litigation and government-related work remain substantial.

Phil Flora, Vice President of Leopard Solutions, a law firm recruitment analysis company, stated, "Even companies that recently announced layoffs are aggressively hiring in certain areas," and added, "The overall law firm workforce is expected to continue growing."

This content was produced with the assistance of AI translation services.