Fired vs. A Stealth Layoff: How Law Firms End Careers

Summary: What is a stealth lay off when compared to a traditional lay off? Keep reading to find out.

 

 

• Being terminated from a job and termination from a law firm have only one thing in common: You’re no longer working and therefore you no longer have an income.
• Other than that termination from a law firm is a much different beast than a standard job.
• For instance, there’s two types of termination in law; straight up fired and stealth laid off.
• Keep reading to find out what one form of being fired has in relation or in contrast to the other.

 

There’s a certain type of imminence about being fired from a law firm job. It seems as if everyone expects it at one time or the other in their legal career, and once that termination comes, it is as if a rite of passage has been accomplished.

Law firms are strange entities. The law firm dynamic, the class system that the partners establish to keep the associates in line, even the politics and social structure of a legal establishment all play as equal a role in one’s employment as does win/loss ratios with legal cases.

Not only does this make the law office lifestyle unique unto itself, it also makes the firing of an attorney a strange event as well.

A recent article that appeared on Above The Law explores the two types of job termination an attorney can experience. This article will break down these two types, and analyze the effects of one against the other.
 

Congratulations! You’ve been fired!

Job termination is a fairly straightforward process. You and a higher up or a person from HR have a short discussion, you’re handed your final paycheck, you might sign some paperwork associated with the termination, and that’s that. Clean out your desk and you’re free to go. It works like this in most companies, including law firms.

Of course there can be many financial benefits to being fired in the traditional sense from a law firm. 

Most Biglaw shops pay sizable amounts in severance to departing attorneys. Doing this helps an attorney during their career transition, while also helping the law firm decrease their legal exposure in case an attorney wants to sue the firm. 

Although the amount of severance varies from firm to firm, many Biglaw shops typically provide three to six months of salary as severance, which can be a substantial amount of money.
 

The overall benefit of being fired from a law firm.

If you’re lucky enough to find legal work shortly after you’ve been terminated, you are more or less sitting in the catbird seat.

Now you can devote part of your severance from the previous law firm where you worked to other expenses. 

You’re doubly lucky if you work in a state that pays unemployment benefits even if someone is receiving severance. 

Indeed, if someone gets a job quickly, and devotes the lion’s share of their severance payments to student debt repayment, they could effectively pay off a sizable amount of their student loans. 

And if the job market is strong, and it is easier to find a new job, the severance offered by many firms can offer a substantial windfall that is often not obtainable by being stealth laid off.
 

Congratulations! You’ve been stealth laid off!

According to Above The Law, a stealth layoff is when a firm wants to get rid of an attorney, but they do not fire them in the traditional sense.  They instead tell the attorney that a plan is in place to terminate them, yet give the attorney some time – usually several months – to find a new job.

In short, a stealth layoff provides the fated attorney ample leeway to go on job interviews, and supervisors usually do not tell prospective employers about the nature of the attorney’s departure.
 

The advantages and disadvantages of a stealth layoff.

The problem with stealth layoffs is some attorneys do not find jobs as quickly as expected, which can then subject them to a traditional firing. 

However, in other cases attorneys are able to secure employment without being fired, and both parties gain something from the arrangement:
 

• The attorney gets to secure other employment and not blemish their career with the embarrassment and negativity associated with being terminated. 
• The firm also gets to maintain its reputation, and usually does not need to provide severance payments to the departing attorney.

 

When is it better to be fired as opposed to being laid off stealthily?

There are certain situations in which it is actually better to be fired than to be stealth laid off from a firm.

As was explained, with a standard termination there can be financial benefits because of the severance package offered to the attorney. This severance can in turn “float” the attorney for a while until they obtain new employment.

With stealth layoffs, there is no severance package. Plus between the times an attorney is told they are subject to a stealth layoff and when they are actually told to clear out their desk can have a limbo-type sensation. Some attorneys equate this to feeling like “the walking dead.”

Going to work can be a rough experience, in which an attorney who is in the process of a stealth layoff is embarrassed and frustrated. They feel shame as they interact with colleagues, and setting a discrete time by which an attorney needs to find a new job can create an impending sense of doom.

In this manner, it is almost better to be completely let go from one’s attorney job. Being fired means a lawyer can:
 

• Can use their time however they wish. 
• Make their unemployment “funemployment” in which they can (if it’s financially feasible) go on vacation or take additional time off.
• Make being fired an overall positive experience in which the lawyer may no longer want to practice law, and instead pursue another career or even a passion.

 
Needless to say, job termination varies greatly from person to person.

Just know that being stealth laid off typically binds an attorney to continue billing for the firm that wants to fire them, while being terminated outright allows attorneys more time to do as they please.
 

There are no guarantees with stealth layoffs.

As Above The Law states, stealth layoffs do not guarantee an attorney will have an easier time finding employment than if they are terminated outright. 

If an attorney is laid off in a mass reduction of force, people might understand he or she was let go not for performance issues, but because of the law firm’s financial troubles. 

However, if a firm lets its attorney go through stealth layoffs, and prospective employers discern this fact, then it appears as if the attorney was terminated because of poor work performance. 

People within the legal industry are fully familiar with stealth layoffs, and if hiring partners know of someone being stealth lay off, this could put that attorney at a greater disadvantage than an attorney who was fired due to a workforce reduction in another law firm.
 

Conclusion

In the end, stealth layoffs are common within the legal industry, and it is typically understood that this process offers benefits to both attorneys and law firms alike. 

At the same time, a stealth layoff limits an attorney’s personal time as they still continue to work for the firm that plans to fire them. As well, an attorney receives no severance pay if they are subject to a stealth layoff.

So with that point made it just might be a better deal to be fired than to go through a stealth layoff.

Or to not get fired at all.
 

What Is A Stealth Layoff?

The nature of their stealthiness makes them a bit hard to define. In essence, it is when companies decide to cut headcount without having to announce layoffs. They will likely give the associates X number of months/weeks to find a new job, and the firm may even couch the reduction in performance evaluation terms, making those let go doubt their legal skills.
 

When are they used:

Every now and then. However, they are most common during economic downturns. To avoid making a splash, a firm reduces overhead without signaling weakness.
 

Why are they awful:

You are the problem, not us. Stealth layoffs are intended to convey this message. Attorneys who suddenly lose their jobs often have never had a negative performance review before. Despite their history, the firm decided to cut them, regardless of the fact they would continue to receive good performance reviews during good economic times.
 

Are Law Firms Conducting Stealth Layoffs?

The COVID-19 global pandemic has a pretty negative economic impact. To keep their cash flow and meet the demands of the coronavirus, big law has been implementing salary cuts, partner draw reductions, furloughs, and even layoffs. Beyond the prudent financial decisions that most in Biglaw are willing to admit, there are whispers and rumors that more is going on.

Yes, it looks like Biglaw is returning to stealth layoffs. As a result of the recession in 2009, firms often used this tactic to save face and cut costs. Even though we are still hearing rumors, Above the Law felt it best to provide a refresher on stealth layoffs to help you spot them when they happen at your firm.

Although some firms assured associates that layoffs would not be purely economic, they appeared to signal that headcount reductions under the guise of performance reviews were on the table.

It is hard to confirm where they are taking place, however. The company's standard media response is that no layoffs are being made due to economic conditions (because the company is touting the fact that associates are being let go due to poor performance). Keeping the news of their stealth layoffs under wraps by refusing to acknowledge that economics outside of the attorneys' control are driving the decision to fire them, the firms create a sense of shame that keeps the news of the layoffs quiet. Firms profit from feeding that fiction since no one wants to be known as a lousy attorney.
 

What Is An Illegal Layoff?

It is generally legal for employers to lay off employees based on the economic needs of the business. However, not all layoffs are legal.

There is no law requiring employers to give notice beforehand, so most employees work at will, meaning they can be terminated without notice at any time. It is generally permissible for an employer in financial trouble to reduce jobs. However, that does not mean every layoff is legal. Certain types of layoffs may not affect employees with contracts. Employees cannot be laid off for discriminatory or retaliatory reasons.
 

In The Event Of A Contract

If you have an employment contract that changes the at-will relationship, you might not belong to the majority of employees who work at will. A contract that says that you may be fired only if you commit a crime or if you commit gross financial misconduct against the company is not at-will employment. Even if your employer's reason for firing you was perfectly reasonable, you can sue if you are terminated for reasons other than those specified in your contract.

It is possible to still have an implied contract even if there is no written or oral contract saying you can only be fired for specified reasons: a contract that is neither written nor explicitly stated but rather implied by your employment circumstances. A company's employee handbook that stipulates that employees may not be terminated without good reason, for example, might imply that such termination is non-negotiable. However, this type of implied contract will not help you much if you lose your job. Employers are generally allowed to lay off workers if they are facing financial hardship.
 

Were You WARNed?

Employers who conduct certain large-scale layoffs or plant closings are generally required to provide workers with advance notice, under the federal Worker Adjustment and Retraining Notification Act (WARN). The law allows you to be paid up to 60 days' pay if you did not receive the required notice, and your employer does not fall into one of the exceptions. WARN does not prohibit layoffs; it only requires advance notice or compensation if employers fail to provide it. There are similar laws in many states.
 

Discriminatory Layoffs

Employers may be charged with violating the law if their layoffs have a disproportionate effect on certain groups of employees, even if the layoffs are justified by economic considerations. The illegality of laying off an entire female employee or an entire worker over 60 could be a consequence of a layoff.

This can happen in several ways. Employers may include one or more protected employees in a layoff group if they intend to discriminate. If, for example, a company has one employee from Afghanistan who is included in the layoff intentionally because of prejudice, that employee could file a discrimination claim. An employee group is also capable of being discriminated against intentionally. As an example, it would be discriminatory to require managers to include all employees with disabilities in layoff groups, regardless of whether or not they qualify.

Some companies intentionally exclude members of a protected group from their layoff criteria even when they don't intend to do so. For instance, managers might screen older employees out disproportionately based on stereotypes about age if they were asked to rank their employees in terms of innovation and willingness to learn. It might result in illegal discrimination.
 

Retaliation

An employer can retaliate against one of its employees, just as it may discriminate against one of its employees by dismissing them. For instance, the manager might notify every employee who has taken FMLA to leave in the last two years that they will be laid off, or that employee who has filed a discrimination or harassment complaint will be terminated. In these circumstances, even if there is an employer's legitimate need to cut staff, the employer cannot use this as a justification to fire employees. Whether an employee loses a job as a result of exercising a legal right or complaining of illegal behavior, even when that job loss occurs in the context of a large layoff, the employee may be able to file a wrongful termination lawsuit.
 

Get Legal Help

Layoffs can be illegal for many reasons, as you can see. Regardless of whether your termination was part of a larger layoff, you should consider hiring an experienced employment lawyer if you believe your termination was illegal. It is possible to determine whether or not you have a wrongful termination claim by consulting a lawyer.
 

Do You Get Severance If You Get Laid Off?

You may be wondering what severance pay looks like if you have been let go or laid off for reasons unrelated to your performance. Or, to be more precise, when you receive it. Post-employment compensation or gap pay is not always black and white; in fact, the "rules" that govern it are rarely standardized.

Generally, employees who are laid off or fired are eligible. Essentially, it is a "payment or benefits" received upon leaving a company. Learn more about how all of this works by reading on.
 

Who Gets Severance Pay?

First of all, severance pay is not guaranteed. Although your company might be going through a layoff, just because you are losing your job and not being fired for underperformance does not mean you are entitled to any extra pay beyond salary through your last day and compensation for unused PTO days, as per your company's policies.

However, you are protected under the W.A.R.N. Act (Worker Adjustment and Training Notification). The firm you work for must give you 60 days' notice if it plans to shut down or close a major department if it employs more than 100 people. Your employer owes you severance pay if it fails to give you sufficient notice.

A fired employee may also receive severance, but it is highly discretionary. A company might offer it to you if they are willing to accept your agreement not to sue them for things such as discrimination, unemployment, or wrongful termination. You might also be offered severance pay if you sign a non-disparagement agreement. If the company is restructuring or eliminating your position due to budget cuts or other needs, and your dismissal is not the result of poor performance, then the organization may wish to offer you parting benefits.
 

How Much Severance Pay Do I Get?

Depending on the position and industry, employees receive different compensation. An individual's tenure at a company usually determines their wage.
 

How Does Severance Pay Work?

You can negotiate! As a result, your initial viewing of a number may not be accurate. When your company determines your severance package, several factors come into play: the amount of time you have been with the company, your position and rank, the size of the company, and if your employment contract stipulated severance pay. If you plan to ask for more, you can consider all of these factors.

The most common form of severance payment is monetary, delivered in one lump sum; however, it is not the only one. Suppose you asked your employer to cover your health insurance for a few months or asked to retain your laptop computer after erasing all company data from it. The downside is that if you have been fired or laid-off, you do not have much bargaining power. Still, he agrees that the statement "everything is negotiable" holds here. It does not hurt to ask for outplacement services or career coaching, even if you might not receive them. You cannot expect your boss to rescind the initial offer just because you tried to negotiate.

You usually have to sign an agreement to receive this money. You may be giving up certain rights by accepting this package, including your future employment opportunities with specific employers. You must thoroughly read and understand what you are signing. It is worth the time to have a legal professional look over the agreement before you sign, even if you want (and need) that paycheck.