At least a dozen in-house lawyers were among the 2,400 layoffs last week at the parent of co-working giant WeWork, according to individuals with direct knowledge of the matter and documents viewed by Bloomberg Law.
The WeWork layoffs followed an aborted $3.5 billion initial public offering, the departure of former CEO Adam Neumann, and a tentative $9.5 billion bailout by Japan’s SoftBank Group, which has temporarily saved the faltering company.
Two in-house attorneys at WeWork who spoke with Bloomberg Law on the condition of anonymity, citing the sensitivities of colleagues affected by the layoffs and nondisclosure agreements attached to severance packages, provided a behind-the-scenes look at how the recent layoffs hit lawyers scattered within the company.
Lawyers were let go in New York and San Francisco, two key growth markets for WeWork, but also in outlying offices, the lawyer said. For those at WeWork longer than four years—the company was started in 2010—the severance packages were extended to six months. WeWork has also committed to paying at least four months of benefits, two lawyers said, one of whom admitted to being pleasantly surprised by the payout package, which came after the capital injection from SoftBank.
Laid-off employees with vested stock in WeWork will be able to exercise those options under certain conditions should an IPO ever come to fruition, but unvested stock will be worthless, according to a severance agreement viewed by Bloomberg Law.
WeWork’s chief operating and legal officer Jennifer Berrent and global general counsel Jared DeMatteis, who previously worked together at Wilmer Cutler Pickering Hale and Dorr and remain with the company, did not return requests for comment. Nor did Katherine Rhodes, a former labor and employment partner at Epstein Becker & Green hired by WeWork four months ago to serve as its Americas head of employment law.
A WeWork spokeswoman would not discuss its process for terminating employees or a securities probe that the company now reportedly faces from federal regulators delving into its downfall.
In its core real estate business, WeWork relies upon its in-house lawyers—not all of whom hold strictly legal roles—to document letters of intent and close deals completed by internal real estate managers and outside real estate brokers.
The total number of lawyers let go by WeWork is difficult to determine because they are divided internally into two categories, “classic” and “headquarters,” which respectively refer to the New York-based company’s central co-working operations and affiliated WeWork enterprises and startups that use the co-working model, said two WeWork lawyers. Attorneys working in one group had little visibility into the operations of another.
News of WeWork’s reductions in force hit most lawyers on Nov. 21 after a company-wide meeting scheduled for earlier in the week was postponed, one in-house lawyer told Bloomberg Law. Most termination notices were delivered via email, the source said, with individuals being let go told to bring all company property, such as computers and cell phones, to designated conference rooms.
At least one in-house attorney that could have been let go was likely spared because she is on maternity leave, one lawyer said. In late October, WeWork, Neumann, and Berrent were named as defendants in a pregnancy discrimination lawsuit filed by Medina Bardhi, Neumann’s former chief of staff.
Real Estate Restructuring
As WeWork seeks to put the pieces of its business back together, the lawyers that remain with the company’s real estate group will likely be busy handling workouts with landlords looking to back out of deals, one lawyer said.
The lawyer explained that within the real estate transactions group, which will continue to be led by former Kramer Levin Naftalis & Frankel associate Pamela Swidler, outside counsel costs per transaction rarely went higher than $80,000 in the “classic,” core co-working operation. For deals for affiliated WeWork enterprises under the “headquarters” banner, outside counsel costs for deals tended to be smaller, mostly in the range of $30,000 per transaction, the lawyer said.
Those sums likely pale in comparison to the millions in outside legal fees being incurred by WeWork’s corporate and securities counsel at Skadden, Arps, Slate, Meagher & Flom. Lawyers from Weil, Gotshal & Manges and Morrison & Foerster are advising SoftBank on its bailout of WeWork, whose board of directors is being represented by Wilson Sonsini Goodrich & Rosati. WeWork announced last month that Neumann himself is now being separately advised by Paul, Weiss, Rifkind, Wharton & Garrison.
Bloomberg Law data shows that within the past five years WeWork has predominantly turned to Fenwick & West, Boies Schiller Flexner, and Debevoise & Plimpton to handle litigation matters.
Overseeing all of those outside lawyers will be a smaller in-house staff led by Berrent, who earned almost $900,000 in total cash compensation from WeWork in 2018, according to securities filings made by the company ahead of its scuttled IPO, whose underwriters turned to Simpson Thacher & Bartlett for outside counsel.
Securities filings also showed that Berrent owned 347,424 shares of WeWork stock, the value of which now hinges on the latest capital infusion from SoftBank. The latter’s belt-tightening apparently won’t include any new lawyers.
WeWork’s website currently lists no job openings in its legal group.