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Hughes Hubbard & Reed LLP confirmed Tuesday that it cut salaries and laid off an undisclosed number of associates and staff, despite obtaining a loan as part of the federal government’s COVID-19 relief efforts.
The New York law firm in a statement to Law360 said it had to change the way it conducts business due to “the deep impact of court closures and a slowdown in deal activity” caused by COVID-19.
The AM 200 law firm with gross revenue of $288,100,000 in 2019, was one of the 45 big law firms who applied for loans worth between $5 million and $10 million meant to save jobs during the economic standstill caused by the pandemic.
“We were one of the more than 100 firms that decided in the early stage of the pandemic to apply for the [paycheck protection program] and were approved based on the [Small Business Administration] criteria. That money was used for its intended purpose, to save jobs during the worst of the crisis.’ the firm said in a statement to ABA Journal. †“Now, more than three months into the pandemic, the deep impact of court closures and a slowdown in deal activity have given us a better-informed sense of the manner in which the pandemic has changed the way we do business. We, like other firms, have made some difficult decisions on staffing to address the current environment. We regret the hardship these steps cause as we and the industry evolve to meet this changing environment. We have confidence that the action we take today will enable us to serve our clients, to compete at the highest level, and to deploy our people effectively.”
Hughes Hubbard was not the only high-grossing law firm to make cuts and layoffs despite receiving the PPP loan.
According to an analysis of Small Business Administration data and firm announcements on expense cuts, at least eight other big law firms that received hefty sums from the Paycheck Protection Program conducted layoffs and furloughs anyway.
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Schiff Hardin received a $5 million to $10 million loan on April 6. After two weeks the firm — with $186,437,000 gross revenue in 2019 — announced that it cut salaries for both lawyers and staff, including reductions of up to 50% in compensation affecting about 6% of the Chicago-based firm’s attorneys.
Day Pitney announced that it will cut pay by 15% for all lawyers and some staff on April 8. That same day, the firm obtained a $5 million to $10 million loan.
Bremer Whyte Brown & O’Meara furloughed or laid off 15% of its lawyers and 20% of its staffers in April. The firm received a paycheck protection loan.
Smith, Gambrell & Russell announced salary cuts for attorneys and staff by 10% the same day it received the PPP loan from $5 million to $10 million.
Kelley Drye & Warren, which secured a $5 million to $10 million loan April 11, cut pay for employees making over $100,000 by 10% three days later.
The rest of the firms—Sullivan & Worcester; Ice Miller; Curtis, Mallet-Prevost, Colt & Mosle; and Pryor Cashman—instituted pay cuts or layoffs before they received the loans.
Sullivan & Worcester managing partner Joel Carpenter told LAW.com that the money from the PPP loan allowed the firm to avoid deeper cuts.
“The first thing the PPP loan enabled us to do was to limit the austerity measures to the ones described before,” Carpenter said. “We didn’t have to lay anybody off.”
Almost all of the firms that received funds from the PPP loans had revenue of more than $100 million last year, the AM data shows.
At least 40 firms received loans worth between $5 million and $10 million, and only five law firms obtained funds between $2 million and $5 million.
In total, the firms received between $205 million and $415 million.
The firms will have to pay back part or all of the loan if they lay off employees and have a reduced headcount from the number reported when the loan was originated. The recipients will have to pay part or all of the money also if they reduce salaries for employees making less than $100,000 by more than 25%.
