May and June have not been kind to legal firms. When the lockdown started in March, firms had existing WIP to keep them going and, for many, this helped them throughout April too. Now we are at the end of June and many firms report serious falls in revenues, a significant reduction in new instructions and a drop in billing. At the risk of sounding too pessimistic, it’s difficult to see things getting much better over the summer months: a time when instructions often drop off because of holidays, and the safety blanket provided by the furlough scheme will start being pulled away.
There are obvious ways to mitigate the situation and managing partners will already be on top of these: market and cross sell to your existing clients, making sure they are aware of all the services you provide; keep up to date with billing and don’t hesitate to chase outstanding bills; take advantage of the government’s Bounce Back Loans, which are interest free for the first year.
While these will help, there are still many firms thinking of re-structuring their businesses, with some talking about imminent redundancies.
But no one wants to lose good people. You may have invested significant time training some of these staff, turning them from recently graduated College of Law students into profitable lawyers. Others will have built strong relationships with your clients over the years. So, before you go down the redundancy route, why not consider other options?
Forward thinking firms may already be researching possible mergers with likeminded firms or looking to join a platform as a way to re-structure. Both these options have the benefit of cutting costs while retaining talent.
If time is of the essence, another option is a reduction in hours or pay. Such measures can be introduced on a temporary basis to give you some breathing space until things pick up or while you consider more long-term solutions.
You have to handle this carefully, of course. Imposing changes to lawyers’ employment contracts without following a fair procedure could result in claims of constructive dismissal and arguments that any restrictive covenants in the contract no longer apply.
As a starting point, try and get your staff on side. Explain the nature and the proposed timing of the change as well as your business reasons for the change. Perhaps you can offer them some incentives to sign up – extra holidays or a bonus when the firm returns to profitability, for instance. Point out the potential benefits for the staff and don’t be afraid of spelling out the likely implications for the firm if the changes are not implemented. Hopefully lawyers and support staff will appreciate that a reduction in pay or hours is better than not having a job at all.
There will be some who push back and refuse to agree to the changes. Lawyers can be an argumentative lot! If there are more than 20 objectors you will need to make arrangements for collective consultation with employee representatives and/or trade union officials, alongside individual consultation. Build in time for this.
Set a deadline for obtaining employees' written agreement to the new terms and explain that if agreement is not secured by that deadline, the partners will consider terminating employment and offering re-engagement on the revised terms. Don’t forget, if there are between 20 and 99 proposed dismissals, these can’t take effect until at least 30 days have elapsed from the start of collective consultation. (45 days if there are 100 or more proposed dismissals, but hopefully no law firm will be in that situation.)
OK, there are hoops to go through when changing terms and conditions and this is just a brief overview, but making redundancies can be even more of an obstacle course, and one you may regret when work starts picking up.
DWF, the UK’s biggest listed law firm, is to close two of its international offices and to scale back two more, in a drive for 'more profitable growth'. Around 60 people are expected to lose their jobs, including 13 partners.