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Baker McKenzie to Cut North American Workforce as Covid Persists

Sept. 1, 2020, 9:27 PM

Baker McKenzie, one of the world’s largest law firms by headcount, is reducing its North American workforce by 6% as it deals with the prolonged economic downturn caused by the coronavirus pandemic.

The reductions are part of a move to realign practices and prepare for “the next normal,” the firm said. The layoffs include lawyers, “timekeepers,” and business professionals in the U.S., Canada, and Mexico. The firm declined to provide the number of impacted workers or lawyers.

The law firm market has felt a wide range of impacts from the coronavirus, with nearly half of the 100 largest firms announcing salary cuts, furloughs, or layoffs in spring and early summer. Worst-case projections have not materialized at many firms, and some salaries are starting to be reinstated. Still, industry analysts expect the second half of 2020 will be challenging.

Baker McKenzie has 850 lawyers in the U.S. and Canada with more than 150 in Mexico, according to its website. Globally, the firm said it had 6,146 fee earners as of last August, when it reported it had $2.92 billion in fiscal 2019 revenue with profits per partner near $1.5 million.

The firm also said Tuesday that salary reductions implemented in April for U.S. and Canadian lawyers and employees will end at the start of next year. Baker McKenzie had instituted a 15% pay cut for U.S. lawyers and high-paid employees. It cut salaries by 10% in Canada, warning at the time that the cuts could last through 2020.

Employees who are let go will receive “very fair” separation packages and will receive professional outplacement services and continued access to employee assistance programs, the firm said.

“We are deeply aware of the human impact of our actions, and are treating our people fairly and with dignity,” the firm said in a statement. “Having considered the full array of options, we are confident that this is the best path forward.”

Davis Wright Tremaine on Tuesday rolled back some of its austerity measures, but also laid off some of the staff it had furloughed.

‘Turbulence’ Likely Continuing

Colin Murray, Baker McKenzie’s CEO for the North America region, said in an interview demand for lawyers in his region had fallen consistent with figures that have been reported across the broader industry.

According to recent data from Citi Private Bank, demand for lawyer time fell nearly 1% in the first half of 2020, but it was down by 4.2% in the second quarter, significantly more than compared to last year.

“The turbulence we are experiencing across the globe and that our clients are experiencing is expected to continue through the fall and well into 2021,” Murray said. “And that’s largely why we’re doing what we’re doing.”

Murray had said in April that the salary cuts were an effort to manage through the crisis with minimal impact on the firm’s workforce.

“Like many of our competitors, when we made those decisions back in April, nobody could really predict how long this crisis would last,” he said. “We were all relatively sanguine that we would be back on the road to recovery and we’d have stemmed the tide on Covid-19. But this has gone on longer than we thought.”

The firm is not eliminating any practice groups or industry teams, but Murray said some had been more impacted than others. He said the energy sector, for example, has been “very hard hit.” Other companies are reporting high profits but nonetheless engaging in austerity measures, he said.

“The financial health of Baker McKenzie is not in question,” he said. “We’re taking these steps to better prepare for our clients, their needs, and our people and their future.”

To contact the reporter on this story: Roy Strom in Chicago at rstrom@bloomberglaw.com

To contact the editors responsible for this story: Rebekah Mintzer at rmintzer@bloomberglaw.com; Chris Opfer at copfer@bloomberglaw.com

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