HANDLING ASSOCIATE DISMISSALS AS LAW FIRMS ENTER LEAN TIMES
By Jean M. H. Fergus
New York Law Journal, April 16, 1990
Shakiness in the financial services market and the "downsizing" of corporate America, brought a good deal of the corporate M&A, LBO, and tender offer work being done by some of the major law firms to an abrupt halt. The result: large firm associates were fired.
Dismissing personnel is one of the most stressful jobs for managers. Outside the normal partnership and review cycle, law firm partners have little preparation for managing the termination process.
The problem is one that law firms around the nation will soon have to acknowledge: law business is cyclical. The tremor felt on Wall Street is likely to reverberate in the next year in Los Angeles, Washington and the other major centers. Mismanaging the termination process can result in hard feelings, loss of firm prestige, bad publicity, a decline in loyalty and morale within the firm, difficulty in attracting new talent, escalated turnover and even litigation.
Law firms are "people" driven, and personnel costs are a major factor when considering overhead. When a large client loss occurs, a reduction in the work force is a pragmatic response. However, law firms cannot simply look to the bottom line when cutting personnel. The fairness of the process and the manner of communicating to everyone involved are of vital importance.
A law firm should try to retain the good will of the people being terminated. These attorneys will not simply disappear. They may be future adversaries, on the other side of the litigation table, or maybe even potential clients. The legal profession can be a very small community. If treated unfairly, attorneys originally hired for their talent and abilities have the capacity to damage the firm by making negative statements to the press, friends, clients and competitors.
Layoffs, firings, and cutbacks are also devastating to the people who remain with the firm. If they feel the process was handled tactlessly or cruelly, they, too, may leave. The firm then takes on an air of instability. There is a perception that if a firm is not growing, it is dying. When mass terminations were reported in New York, search consultants heard from an equal number of those who were not on the dismissed list. Angered by lack of explanation, perceived unfairness and rampant rumors, these attorneys lost faith in their firm.
One of the most overlooked items on management's agenda, is what to say to the employees left behind. All employees deserve a frank presentation of the situation. Some firms chose either to deny that there were firings or claimed that the firings were part of a normal review process.
Few firms consider themselves employers, and they may not realize that they are subject to the same laws as other employers. There are several reasons that associates who have been fired don't file law suits. Some terminated associates may maintain good relations with the firm for future references and need assistance in securing another position. But in situations where there have been widespread layoffs, associates may risk maintaining these relations and suits may arise.
Law firms are covered by Title VII of the federal Civil Rights Act and by comparable state and local anti-discrimination laws. Care must be taken in selecting which personnel to layoff to avoid actual or perceived discrimination based on age, sex, race, religion or national origin. Terminating those most recently hired to the firm, many of whom may be women and minorities, may highlight a historically statistical imbalance.
The perception of clients and future recruits must also be considered. In New York, some clients were told that certain associates had decided to leave when, in fact, the firm had told them to vacate their offices. The news of layoffs travels fast, and law students who are about to begin summer associate positions may bring back tales of disaster that will affect a firm's future recruiting efforts.
The first strategy for managing the termination decision within a law firm should be to decide if it is really necessary. Some firms are cutting personnel in one department at the same time that other departments are conducting searches to hire new associates.
Before releasing an associate, a firm should seriously look at its overall plans and needs to determine if the attorney can be retrained in another practice area. Firms that value associate loyalty will find that, as well as recouping their initial investment made in hiring and training these associates, the additional retraining expense makes good business sense. This replacement will also minimize the damage to the individual lawyer.
The firm should evaluate the organization as a whole, designing long-term plans and identifying potential areas of growth. With this overall evaluation, the firm may avoid the layoffs altogether.
If terminations are necessary, management must be extremely cautious both in the process of deciding which attorneys should leave and in communicating this decision to those individuals. Terminations must be handled in a consistent manner in accordance with a well-defined policy.
The dismissal interview demands professionalism and tact. The person to be released should be spoken to directly and the partner handling the interview should be prepared well in advance. The partner should be able to answer questions regarding benefits, references, outplacement counseling, the time frame for leaving and the explicit reasons for the individual attorney's dismissal. The partner selected should have good interpersonal skills, and if he or she is not the direct supervisor of the attorney, the supervisor of the attorney being dismissed should be present. A letter outlining the details of the benefits provided should be presented at this time.
According to William J. Morin and Lyle Yorks in their book, Dismissal, there are five recommended steps to follow during the dismissal interview: 1) Get to the point; 2) Describe the situation; 3) Listen without getting defensive; 4) Discuss the support package, including references and what those references will say; 5) Specifically describe the next steps - secretarial availability, outplacement services, use of office facilities, release time for interviewing, and moving.
The goal is to be as tactful and positive as possible, highlighting the contributions of the individual to the firm. Specific instances where the attorney may have underachieved should only be mentioned if they relate directly to the termination decision.
While this is a very stressful time for the partners involved, the firm must recognize that it is even more stressful for the associates who have been asked to leave and for the attorneys who will remain with the firm. The same steps that Morin and York recommend for the terminated attorneys should also be followed for those who remain. These associates should be informed and reassured in order to minimize negative repercussions both within and outside the firm.
Departing associates are typically offered a package that includes three to six months notice, use of an office, a secretary and some form of job search assistance. Some firms do give severance pay. Each person dismissed in a general layoff must be given the same benefits and support package. Alternatively, a formula can be worked out based on years of service with the firm.
Outplacement services are available to assist employees in their job search. However, law firm managers must be prepared to spend a considerable amount of time with the associates who are being asked to leave whether or not outplacement services have been arranged.
Outplacement services should be evaluated carefully prior to engaging them. The professional outplacement services usually have had several years in the human resources and career counseling fields, and their services include career counseling, psychological support, and job search aids such as use of a private office, resume preparation, secretarial services, mail facilities, computer support, video training, job market strategies and job listings. The law firm manager should visit the offices to inspect the facilities to see first hand what is being offered. Some outplacement services offer termination counseling prior to the termination interviews.
Unless an ethical violation is involved, law firms should provide straightforward references and avoid the negatives that unnecessarily harm an individual's chances for re-employment. Instead of saying that an associate does not work well in a team situation, the reference should state in a positive manner that "he or she works best on solo assignments," for example.
After gathering evaluations from the supervising attorneys, the law firm should be well-prepared to respond to the two most frequently asked questions - "What kind of attorney was he or she?" "Why is he leaving?" It may be helpful if specific partners are assigned reference giving responsibility for each associate who is terminated. This avoids casual, and sometimes harmful, references by partners who are not fully aware of the work evaluation of the attorney who is dismissed.
A policy of no reference giving should be avoided. Professionals need and expect references and merely reciting dates of employment give rise to inferences that are not fair to the departing attorney.
When a client loss has required a readjustment in the organizational structure, the firm should develop an honest, straightforward statement that accurately portrays the situation for both internal and external use. A simple comment that business judgment required a streamlining of certain departments within the firm is sufficient. Denial will only prolong the process and undermine a firm's credibility.
The associate should be made aware of what the references will say when they are called by potential employers. The firm should also ask the associate how he or she will explain his or her departure. An explanation for the termination should be agreed upon by both sides. Negative comments about the firm, even when used to support the unfairness of the termination, ultimately reflect badly on the terminated attorney and appear unprofessional.
Small and mid-sized firms that have been priced out of the market for graduates of the top law schools now have an opportunity to hire top law firm trained attorneys.
By demonstrating sensitivity and care in the termination situation, law firms can move forward with a committed and appreciative associate work force. Though the process is never easy, the way that these difficult times are handled is a measure of the firm's character.