Sun | Jul 12, 2020

Jerome Lee | How law firms handle the pandemic

Published:Tuesday | June 2, 2020 | 12:10 AMJerome Lee - Guest Columnist
Jerome Lee
Jerome Lee

OP-ED CONTRIBUTION: COVID & THE LAW

Lawyers and law firms are oftentimes seen as enduring fixtures in our community, whether their services are frequently used or not.

They are expected to be there when needed as, for example, wills, title deeds, agreements and other important papers are left with them and to be on call to offer solutions to difficult and intractable problems.

So even as all local businesses, including lawyers, face challenges posed by the COVID-19 pandemic, it may be useful to see how some lawyers and international law firms in our wealthier North Atlantic neighbour, as well as in Britain, have reacted in these unprecedented and unpredictable times.

To be sure, many have and are taking action in response, and much can be learnt. But, as the law firms that are many times larger and wealthier than our local ones and operate across many different state and national jurisdictions, any lessons gleaned are to be taken as indicative rather than prescriptive, and adopted or adapted only after careful consideration and compliance with local law. These are some of the measures taken by a few American and British law firms.

All describe the actions taken as being difficult and painful, but necessary, to weather the crisis so as to maintain financial stability in the face of expected reduced revenue while continuing to effectively serve clients. They have moved decisively and quickly so as not to be overwhelmed by the disruption in workflows and fall in demand for services.

Capital calls, pay cuts

Some firms have made capital calls on equity partners requiring that they bring in cash contributions to strengthen the firm’s balance sheet, while others have deferred, reduced or frozen equity partners’ distribution.

Pay cuts have been instituted for income partners, associates and general staff. These pay cuts are usually tiered, with percentage reduction increasing from general staff upwards to associates and then income partners.

Where pay has not been cut, it has been frozen and salary increases and promotions deferred. The resulting impact is an overall reduction in compensation across all categories of stakeholders.

Some firms have had to reduce staff and paid off such affected members with full entitlement. Others have frozen hiring or deferred any intake of new staff until after the crisis is over. Hiring of associates has been deferred – some until the end of 2020 or into 2021. The number of summer interns being hired has been reduced and sometimes, the number of weeks of employment were also reduced.

Some firms have temporarily laid off or furloughed staff, especially where local lockdown orders do not permit firms to be open. Often, the lawyers can work remotely where they are sufficiently tech-savvy and are not directly affected by lay-offs, but it is usually more difficult for administrative personnel and other support staff to work other than in-office.

Other firms have opted for flexible arrangements which involve adjusted hours, reduced hours and/or encouraging staff to take accrued vacation leave. One firm offered attorneys a programme of voluntary leave/sabbatical of up to three to six months off work at 30 per cent pay.

Discretionary spending, incentives

Most firms have taken the decision to freeze or reduce discretionary spending and/or undertaken a revision of the firm’s budget, including a review of certain benefits. Some firm events have been cancelled and non-business-critical projects put on hold so as to lower firm expenditure.

Interestingly, medical insurance is one of the items which have been generally retained, even for those on temporary lay-off.

With an eye to motivating enhanced performance, some firms have retained an incentive programme which offers bonus rewards for exceptional contributions, based on individual performance and economic and firm conditions. This encourages personal effort and productivity even in challenging times, and helps maintain the corporate message that business continues and helps position the firm for take-off.

These are but some of the austerity measures which different large international law firms have taken in response to the economic slowdown resulting from the coronavirus pandemic. These cost-control actions are taken with a view to putting the firm on a better footing until the economy improves. Building financial resilience seems to be an important strategy for firms, including the world’s most established and trusted names in the legal industry, to use for continuity of services now and into the other side of the crisis.

In the end, each enterprise will have to decide which actions may suit it and in keeping with the firm's culture and philosophy, and in compliance with the law.

Jerome Lee is the senior partner of law firm DunnCox.

jerome.lee@dunncox.com