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CV19 Lawyer Compensation/Layoffs

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The issue with 30% cuts in revenue is most law firms have a lot of control over their revenue by deciding when to issue accounts against funds held in trust. I’m not sure how the government is going to determine whether the 30% reduction was real or artificial. 

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Wow, thanks so much to everyone on this thread for sharing. I'm a 2L and newbie to LS. This information has been very helpful in my understanding of how the legal community is being affected, and in turn, reshaped by this pandemic. 

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3 hours ago, Westsider said:

Big firms that are anticipating less than a 30% drop in revenue in the next few months are delirious, have not yet done analysis of the situation or are really out of touch with what this is doing to their clients’ businesses. 

I think it will be in the details.(the details we were supposed to get today but maybe tomorrow now?)

Yes - a 30% drop in revenue "in the next few months" is very foreseeable.

But, will it be 30% over the year?  my firm, and many like it I would assume, were having a particularly good first few months of 2020 (and a great 2019).  My April and May are likely to look grim (billed February work in March -  so March not actually bad at all from a revenue prospective).  But once I am in April and looking at what I billed in March - ick.

Plus, many firms can adapt quite quickly to new markets and opportunities. So the rest of the year is a crap shoot. 

Similarly, like TP said - you can adjust billing within a year- however, since 2017 it has been harder to adjust over the tax year as we now have to take an estimation of a portion of WIP into income in the year that the work is completed.

So it will come down to if the 30% is applied to the year or the month, a specific set of months ?

I am guessing that they will go with year as it is easier for CRA to calculate.  In which case I doubt we will rely on it to make a decision on staffing - because who knows.

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2 hours ago, Rumpy said:

 

My April and May are likely to look grim (billed February work in March -  so March not actually bad at all from a revenue prospective).  But once I am in April and looking at what I billed in March - ick.

Plus, many firms can adapt quite quickly to new markets and opportunities. So the rest of the year is a crap shoot. 

 

March billings may be good, but unless you took cash at closing or have it all in trust, you should plan for a rough ride on receivables for the foreseeable future.   We have not seen anything like this in most people’s lifetime.  Unlikely to be a quick bounce back any time soon and we know legal bills may not be paid first or may be paid at a deep discount. Firms are going to have to be very guarded on paying out cash until there is a better picture on revenue.  There will be lots of negotiating with landlords right now.  The next big spend is employee costs.  While most big firms will do what they can (or at least say they will do what they can) to avoid layoffs, if partner distributions are projected to be cut by 40 to 50% for more than a couple of months, firm management will be under pressure to revisit lay-off decisions. Let’s hope there is better news in a month or so.  
 

Mid-size firms will probably be more nimble in adapting to new opportunities.   The big guys may struggle unless they have innovative management teams. 

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regardless of firm size, which practice areas would be the most/least impacted?

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real estate deals are still happening, some contracts were signed back in 2019. 

various lenders are getting a bit anxious and demanding new appraisals though.

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Most  - M&A and Securities

Least - Insolvency, Estate Planning, Family (will boom when courts open and the divorce applications pile up after social distancing)

 

 

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Boutique firm - sub 16 lawyers downtown Toronto. 

A junior was laid off and 15% salary cuts for all remaining associates. 

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37 minutes ago, throwawaybatman said:

Boutique firm - sub 16 lawyers downtown Toronto. 

A junior was laid off and 15% salary cuts for all remaining associates. 

What practice area if I can ask?

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My husband works at a mid-sized solicitor’s firm specializing in real estate, corporate commercial, and wills & estates. All associate lawyers were called into the office today and advised that their salaries would be cut by 20% immediately. There was no warning, and the boss would not answer whether this would be a temporary reduction in pay or a permanent one.

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I can also see this introducing many novel issues in criminal law and a (potential) resulting recession could spell an uptick in some illegal activities. It will be an interesting time ahead.

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8 hours ago, throwawaybatman said:

Boutique firm - sub 16 lawyers downtown Toronto. 

A junior was laid off and 15% salary cuts for all remaining associates. 

temporarily laid off? 

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2 hours ago, feraenaturae13 said:

I can also see this introducing many novel issues in criminal law and a (potential) resulting recession could spell an uptick in some illegal activities. It will be an interesting time ahead.

There tends to be an uptick in insurance litigation during a recession due to fraudulent claims. 

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19 hours ago, Westsider said:

You can expect some law firms to fall in behind. No one wants to be first, but once the ball starts rolling, it makes it easier for others.   NRF appears to have led off on the big firm side with pay cuts over terminations.  I assume as a big firm they have done the wrongful dismissal claim risk in going that route.  I anticipate we will hear of more in the next day or two from other firms. 

As an observation only, I would guess that their analysis was they had risk regardless of which option they pursued. Assuming they are rational actors, they probably selected the option which they felt was the lowest risk to their particular circumstances. Picking the best risk profile among a set of options, though, is not the same as saying there isn't appreciable risk in that particular option. 

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Posted (edited)
1 hour ago, levin said:

temporarily laid off? 

From a legal perspective, in many industries and contractual situations, it is a distinction without a difference.

  

13 hours ago, levin said:

regardless of firm size, which practice areas would be the most/least impacted?

Least: Labour and employment lawyers .... obviously.

@Uriel: Think class action lawyers are going to be busy in the next few years? :)

Edited by Pyke
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19 minutes ago, Pyke said:

Least: Labour and employment lawyers .... obviously.

@Uriel: Think class action lawyers are going to be busy in the next few years? :)

based on his last online status i guess class action lawyers are already very busy 

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The national firm that I work for has (temporarily) laid off a large percentage of admin staff country wide; we have been told that pay reductions are coming along with partner draws being reduced. Number hasn't circulated yet but rumored to be between 15-20% for associates.

I've heard from friends at other firms in Calgary that they have followed a similar route. I've also heard of small numbers of associates being laid off at some mid-sized firms.  

Right now the message to articulating students is that we will be allowed to complete our articles, but no guarantees after that point. Obviously this is a fluid situation so this could change as well. 

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Posted (edited)

Looks like the wage subsidy will be a comparison of 3 months this year to last year. Will be more difficult for CRA to verify - but verification is probably not the point.

 

Edited by Rumpy

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5 hours ago, InsertPseudonymHere said:

There tends to be an uptick in insurance litigation during a recession due to fraudulent claims. 

Nah. An uptick in legit claims that insurance companies don't pay out.

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