Three Tips for Handling the Difficult Decision to Downsize



In a perfect world, law firms would always continue to grow and there would never be a need to reduce attorney or staff head count. However, with the changing market for legal services, many law firms have been forced to downsize in order to maintain the financial health of the firm.

When downsizing becomes necessary, it can be an extremely difficult and emotional process. However, a messy breakup benefits no one. Law firms can instead invest the time and resources to help ensure a smooth transition for the departing attorneys and staff.

Although transitions may occur in different ways, they generally involve similar concerns relating to ethics compliance and claims avoidance. Most law firms considering downsizing, therefore, will consider how to address the professional, ethical and legal obligations owed to clients, courts, and the bar. This is true whether the transition involves an entire practice group of attorneys, individual partners and associates, or nonattorney staff.

By handling all involuntary terminations with professionalism and formality, law firms can limit the potential for conflict and give proper attention to the potential ethical and legal issues. Below are three tips for handling the transition of attorneys and staff from the firm.

Define the Terms

The first step is to clearly define the terms of the departure. For partners, the terms of a transition are often defined in the law firm's partnership agreement. For nonpartner attorneys and other employees, the transition may be addressed in correspondence, an in-house manual or an agreement relating to the employment.

However, a number of other terms might have to be addressed separately from any employment agreement. For example, the law firm will usually need to determine the specific date on which the departure will be effective. This involves a wide range of considerations, including issues relating to compensation and, for partners, the accrual of receivables and the determination of distributions. The departure date should allow an appropriate amount of time for all necessary steps in the transition process to be completed in a smooth manner. Having a concrete date is helpful not only for closure but also for security, insurance and ethical purposes.

Second, the law firm may consider whether it is necessary to document any other understandings regarding the transition. Each departure may involve unique considerations or even concerns. Thus, many law firms will see that all potential sources of disagreement are addressed and resolved at the outset, prior to official departure.

For attorneys, one important issue that often arises is the manner in which the attorney's departure will be communicated to clients. However, other issues to be addressed during a departure may be more mundane, such as the moving of a partner's furniture.

To make sure that all of these issues are addressed, law firms can create a checklist of all tasks to complete prior to the departure date. A timeline may also be helpful to confirm important dates, such as when the attorney or staff will lose access to their firm email account and when coverage under the firm's health care plan will terminate. Clarity and transparency on issues big and small can help avoid disputes down the road.

Ensure Compliance With Obligations

In addition to addressing the mechanics of the attorney and staff departures, law firms also have ethical and professional obligations. The law firm, its partners and its associates each generally have a duty to take reasonable steps to ensure that the bar rules are followed. Some of the most common issues that arise during a transition relate to the duties to maintain confidences and secrets, to avoid impermissible conflicts of interests with former clients and to act consistently with the candor requirements of the bar rules.

In addition, although paralegals, assistants and other nonattorney staff may not be subject to regulation by the bar, the law firm and its attorneys have certain supervisory obligations. Law firms can thus consider reasonable protocols to ensure compliance among all individuals departing the firm, not just attorneys.

Nonattorney staff in particular might not fully appreciate the existence or significance of certain ethical or professional obligations. As a result, some written communication addressing these issues may be helpful. These communications can address the ongoing obligation to maintain client confidences and secrets and, more particularly, the obligation to not disclose anything they may have learned or discussed while at the law firm. While confidentiality obligations are often addressed at the time of hiring (and included in any employee handbook), it is arguably even more important to address the issue at the time the employee departs the firm.

Finally, law firms can consider implementing protocols for addressing the ongoing tasks previously handled by departing attorneys and staff. The risks associated with downsizing are similar to those associated with an unexpected departure: lost leadership, lost documents, missed deadlines and failure to communicate properly with clients. To ensure there are no gaps in the law firm's obligations to clients, it may mean assigning a new partner, associate, or paralegal—or all three—to an existing case to help the representation move forward.

Learn From Departures

When attorneys and staff are in the process of leaving a firm, they may be more willing to vent about the firm and to share their honest opinions. For that reason, exit interviews can be one of the most effective loss prevention tools available to law firms. The responses during the interviews may not only alert the firm to pressing issues within the firm (such as potential legal malpractice), they can also help the firm more generally improve processes and issues that affect employee morale. Law firms can approach these interviews professionally and understand that, while emotions may be high, it can also be an opportunity for the law firm to learn.

Downsizing can be very difficult for a law firm. By taking the above steps, law firms can help ensure a smooth transition that leaves the firm in the best position for the future.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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