Morgan Stanley Back-to-Office Call Puts Law Firms in Tough Spot

Morgan Stanley chief legal officer Eric Grossman’s recent demand that outside law firms return their lawyers to the office if they want to keep the banking giant’s business poses a potential headache for firms caught between their clients and their employees.

“The law firms have no choice,” Wendy Schoen, who runs her own New York-based legal recruitment firm, told Bloomberg Law. “They have to cave to the client because the client is paying the bills. But they’re going to have to figure out something to do with their lawyers, otherwise they will have a mass exodus.”

Greenberg Traurig was the only one of a half-dozen large firms representing Morgan Stanley that responded to a request for comment about Grossman’s memo. Richard Rosenbaum, the firm’s executive chairman, endorsed Grossman’s request, praising him for having “the courage and leadership to speak out during these times.”

Schoen said most lawyers don’t expect to be able to work remotely all the time, but want at least the option of spending two or three days at home per week. A war for talent in the associate ranks could see firms potentially separate themselves from competitors by offering more liberal remote work policies.

“If there’s anyone that’s not going to change and will require people to come into the office, it’s the big New York firms because they’re dinosaurs,” said Mercedes Meyer, an intellectual property partner at Faegre Drinker Biddle in Washington. Meyer said she was speaking in her personal capacity.

Celia Catlett is a former Big Law associate who in 2019 retired from her job as general counsel for Texas Roadhouse Inc., citing work-life balance needs. She said black-and-white mandates handed down by law department leaders are difficult to enforce and ignore the realities of the modern workplace.

“What about my shining star who has proven their ability to be highly efficient, maybe more productive, certainly more engaged, with better mental health, in a flexible work environment?” Catlett said.

A back-to-office mandate could have a particularly harsh impact on some women lawyers. Bloomberg News reported in June that return-to-work mandates were forcing many working mothers to leave the workforce, due to a dearth of childcare options.

‘Powerful Demand’

Grossman’s missive marks a new step in corporate clients dictating how outside law firms’ run their businesses, observers told Bloomberg Law.

“This is a clear, firm, and very powerful demand, the likes of which I have not seen come out of a general counsel’s office in a long time,” said Jason Winmill, a managing partner and adviser to corporate law departments at consultancy Argopoint LLC. “Morgan Stanley is telling their law firms how they should be operating when providing services to Morgan Stanley, and that’s a very assertive position.”

The memo echoed what most major U.S. banks are requiring their employees to do by Labor Day—return to the office. Only Citigroup Inc. has said publicly that it will allow its flexible working arrangements to continue as it expects most of its U.S. and U.K. staff to return to the office at least part of the time by September.

In-house legal chiefs at Citigroup, Bank of America Corp., and the Goldman Sachs Group Inc. didn’t respond to requests for comment about Grossman’s back to the office edict. JPMorgan Chase & Co. general counsel Stacey Friedman declined to comment through a company spokesman, while Wells Fargo & Co. spokeswoman Jennifer Langan and general counsel Ellen Patterson said the San Francisco-based financial services company has no preference for where its outside lawyers work.

Susan Hackett, a longtime former general counsel for the Association of Corporate Counsel who is now CEO of consultancy Legal Executive Leadership, said Grossman’s memo is indicative of the pressure that some—but not all—in-house legal leaders are facing in the remote work age.

The banking and financial services industry is particularly concerned about information security with workers out of the office and cyberattacks on the rise, said Hackett, adding that information technology groups regularly question legal services vendors about their security protocols.

“Maybe firms that are not serving large financial institutions won’t feel the same kind of pressure, but I absolutely think it’s the case that firms will follow what their clients are demanding,” said Lauren Drake, a partner at legal recruiting and consulting company Macrae Inc. “If the clients are wanting them in the office, they’re going to need to be in the office.”

Potential Remote Benefits

Meyer cited what she said are several other benefits of remote work, including a reduced carbon footprint from less office space, which also helps the bottom line and reduces rate pressure on clients.

“What’s the biggest cost for any law firm and any business? Real estate,” Meyer said.

The Faegre partner said she believes lawyers should periodically get together for team-building exercises and client meetings, but flexibility is important.

“Can we stop being narrow-minded about things?” Meyer asked. “We can now hire talent from everywhere in the country, we’re not geographically limited. That’s a great boon for people who want to have a lower cost of living.”

Drake, the legal recruiter from Macrae, said she often hears from job candidates asking about remote work options. Many technology companies, including Facebook Inc., are now offering permanent remote work as an employment incentive to retain talent and recruit new job candidates.

Facebook general counsel Jennifer Newstead didn’t respond to a request for comment about her company’s preference for its outside lawyers. A former deputy, Paul Grewal, offered his thoughts.

“Every lawyer in a company or a firm has to decide what they care about. If you don’t care about where you work very much, traditional companies and firms may work for you,” said Grewal, who left Facebook last year to become the top lawyer at Coinbase Inc.

The cryptocurrency exchange plans to ditch its San Francisco headquarters next year to become a “remote first” company.

“We trust that you know what is best for you,” Grewal said.

Others say Grossman’s memo could be a sign that firms are set to return to the pre-pandemic status quo.

“There are a lot of law firms who feel strongly about the culture that being in-person creates,” Hackett said. “They’re thinking about going back, in part because it’s what they know, and that’s how they manage and how they’ve always had their success.”