COVID-19 is affecting all businesses and law firms are no exception. This article offers a brief introduction to the impact of COVID-19 on the legal industry by answering 3 key questions in relation to firms’ business models, practice areas and recruitment processes.
1. How are law firms adjusting their business models in response to COVID-19?
So far, law firms have adjusted their business models in two ways: lawyers are working from home, and firms have altered their financial models.
Working from home (WFH)
Pre-pandemic, working in an office was viewed as necessary. WFH was perceived as unsustainable and was reserved for exceptional circumstances, such as sick days or working mums. Yet almost overnight, lawyers have adjusted to remote working. WFH has allowed employees to avoid busy commutes and spend more time with their families, leading to a better work-life balance. However, WFH may negatively impact the mental health of employees and make it difficult to maintain firm culture. Many firms have responded to these concerns by implementing initiatives, from informal check-ups to virtual social events, to ensure employees feel supported during this time. Consequently, numerous solicitors report feeling “more connected than ever” to colleagues.
However, firms don’t appear to be treating WFH as the new normal. Several firms, including Hogan Lovells, have started bulk-buying face masks in preparation for reopening their offices later this year. Baker McKenzie is thinking of splitting lawyers into groups, who will take turns to work in the office.
New financial models
Firms are adjusting their financial models in order to remain profitable, with different firms taking different approaches. For example, Norton Rose Fulbright has implemented a 4-day working week, with a 20% fee reduction. Simmons & Simmons delayed partner promotions and partner profit distributions. Allen & Overy has asked partners for cash injections. While this evidences that law firms are taking a financial hit, this is certainly a more optimistic response to the current economic landscape than in 2008, when mass redundancies were made across the City. This indicates that law firms believe there will be an economic bounce back as lockdown restrictions are eased.
2. How is COVID-19 impacting different practice areas?
Firstly, global M&A activity has plummeted, majorly affecting corporate lawyers. The lack of activity in the transactional sphere means that corporate and finance lawyers are undertaking more advisory work. Further, many contracts will likely be breached as borrowers default on loans, meaning banking and finance lawyers will be required to arrange new financing agreements between borrowers and lenders.
Secondly, many companies have been unable to operate during lockdown; this has led to less revenue being generated, and certain companies becoming insolvent. The government has also implemented major changes to insolvency law aiming to protect struggling businesses which were thriving before the pandemic. There is therefore increasing demand for restructuring and insolvency (R&I) lawyers. Several firms are reacting to this economic trend by strengthening their R&I departments through lateral hires. For example, DLA Piper hired Addleshaw Goddard’s James Davidson.
Other booming practice areas include employment and litigation. Following the implementation of the furlough scheme and potential mass redundancies, clients are increasingly consulting employment lawyers regarding their duties to employees.
Similarly, many insurance companies facing litigation claims are arguing that their policies were not designed to cover Covid-19 related incidences. Litigation needs to continue to go ahead in order to prevent a backlog of cases when courts reopen. This means hearings are now taking place virtually; a trend that was predicted to be years away from materialising.
3. How is COVID-19 altering the recruitment process?
It’s easy to feel disheartened about applying to law firms when recent articles suggest that the Coronavirus is going to increase competition. However, it’s important to remember that no firms have announced plans to reduce their trainee intakes.
What has changed is how aspiring lawyers can interact with firms. There has been a dramatic shift towards virtualised recruitment. Shearman & Sterling has organised a virtual open day and Macfarlanes hosted virtual assessment centres. Firms like Linklaters and Clifford Chance are holding online vacation schemes this summer. This innovative approach will allow firms to diversify their opportunities as they are less constrained by logistics. This can hugely benefit candidates, who can tailor their experiences based on their unique interests.
In the long term, the consensus is that law firms will recruit via a blend of online and face-to-face interactions. On the one hand, in-person meetings remain invaluable. On the other hand, virtual recruitment allows candidates to get to know firms without incurring the time and expenses of travelling to London, increasing accessibility and widening the talent pool for firms.