Dorsey Law Firm Cuts Pay and Jobs

Dorsey Law Firm Cuts Pay and Jobs

Responding to the coronavirus pandemic, the prestigious law firm reduces expenses to match a tough economic environment.

Dorsey & Whitney, a well-established law firm that’s been around for more than a century, is laying off staff and reducing pay to deal with the financial fallout of the coronavirus.

In a statement Tuesday evening, the Minneapolis-based firm said the job cuts would be “affecting a limited number of staff and attorneys across the firm’s national and international offices.”

In 2018, the firm had 508 lawyers who generated $368 million in gross revenue, according to The American Lawyer. Dorsey did not specify how many attorneys are being cut from the payroll.

Mike ChristensonBill Stoeri, managing partner of Dorsey & Whitney

The U.S. economy contracted rapidly in March as businesses closed and stay-at-home orders took effect in Minnesota and many other states. In response to that new reality, Dorsey realigned its budget in April, which included placing limits on the payouts to attorneys who are equity partners.

But the firm’s leaders quickly recognized they needed more financial reductions. “Starting in June, pay reductions for other attorneys and certain staff range from 10 percent to 20 percent for the remainder of the year,” according to the Tuesday statement. However, staff members who earn less than $150,000 annually in base compensation will not have their pay cut.

The severity of the economic disruption caused by the virus is prompting other changes. Dorsey’s associates and certain other attorneys “will have a reduction in billable hour guidelines and have the potential to receive special productivity bonuses at year-end,” the firm said.

Calling the May cuts a “reduction in workforce,” Dorsey said the people affected by the job cuts were offered “severance or benefit arrangements.”

Attorneys who are just entering the profession also are feeling the effects of Dorsey’s cost-cutting. Dorsey is reducing its summer associate program from 10 weeks to seven weeks. It also is delaying the start date of the incoming 2020 first-year associate class to January of next year.

“After intense deliberation, we made these hard decisions so that we will continue to be a strong, efficient law firm,” Managing Partner Bill Stoeri said in the statement. He acknowledged the “emotional toll” that has resulted from the virus and tough economic times.

“We counsel our clients every day to make adjustments in anticipation of changing conditions,” Stoeri said. “Shifts in demand and an evolution in the way law firms will work into the future are clear to see on the horizon. We are taking meaningful action now to navigate this new era in alignment with our clients.”

The job and pay cuts Dorsey unveiled this week come just six weeks after it reduced expenses last month. Through an internal announcement on April 6, Dorsey spelled out several steps that it was taking. To manage cash flow, it said it would cap “monthly equity partner distributions to their current level until further notice.” It cut the 2020 employer contribution to its 401(k) plan by one-third.

In April, the announcement said it would furlough employees who could not perform their jobs remotely. The law firm said those furloughs affected “less than 4 percent of the overall workforce” across its 19 domestic and international offices.

Shortly before the coronavirus threat arrived in March, the Twin Cities legal community was starting to adapt to a different type of realignment. In early 2020, three of the 10 largest law offices in downtown Minneapolis executed mergers.

Briggs & Morgan became Taft, Gray Plant Mooty became Lathrop GPM, and Faegre Baker Daniels became Faegre Drinker.

Dorsey, which has one of the three largest law offices in Minneapolis, didn’t do a big merger. In a March TCB story that examined the merger trend, Stoeri said Dorsey was achieving healthy growth on its own.

“We just had the best [revenue] year in the history of the firm, following the prior year that had been the best year in the history of the firm,” Stoeri told TCB.

But law firms are not immune from the economic contagion sweeping across the nation. Virtually every large law firm is examining how the massive swings in the economy are affecting its operations and the services its clients need. Dorsey’s restructuring is only one example of U.S. law firms that have been cutting jobs and compensation to deal with shrinking revenue.