What is a Stealth Layoff?

Law firms don’t always love attention. When work slows down and there are too many associates to keep productive, no firm wants to be in the headlines for outright firing attorneys. Enter the “stealth layoff,” a firing practice used by Biglaw to try to trim their numbers while keeping it on the downlow. 

A stealth layoff can happen in a variety of ways, but the most typical version is when an attorney is unofficially informed that they should start seeking work outside of the firm. The firm may or may not try to assist with external placements, but the essence of the stealth layoff is to agree to move on from each other without making it look like an official layoff.

For a few weeks or even months, the attorney will continue to work for the firm (perhaps in a reduced capacity) and receive website time while searching for their next job. In the end, the separation won’t look too different than the run-of-the-mill exit from the firm.

Related: Biglaw Firm Layoff Tracker

The reasons for stealth layoffs

Law firms are constantly competing with each other. News of systematic layoffs or financial woes spread fast, and any sign of weakness will draw talent towards competitors. Stealth layoffs do not require a non-disclosure agreement but will generally create less buzz because rumors or anecdotes are difficult to confirm without official data or announcements. If enough stealth layoffs occur, the Biglaw community will typically catch on, but the full extent of the layoffs will be hard to uncover.

Biglaw firms often make sweeping changes to their headcount, whether the claim is around the pandemic, profitability, an economic downturn with plans to cut costs, hiring freezes, or general reductions in the last year to attempt to meet financial goals. It’s not always easy to get a new job, so this is why lawyers need to becoming insiders about stealth layoffs.

Firms can use stealth layoffs to slowly reshuffle or trim their associate ranks. Very few firms choose to rip the band-aid off when having to lay off associates. When Latham & Watkins laid off 400+ attorneys in the wake of the Great Recession, the term “Lathamed” became synonymous with getting laid off and the term has stuck around for over a decade now, even making it to Wikipedia and Urban Dictionary. In an industry where reputation means everything, firms have reasons to hide layoffs where they can.

Getting stealth laid off is obviously not a fun time. However, attorneys who experience stealth layoffs do benefit from the practice in that they are less likely to have a large gap on their resume, they continue to collect paychecks, and their dignity is kept relatively intact as long as they successfully move on to another employment opportunity. 

In certain practice areas, it’s very hard to find a new role in the legal industry because the resume gap makes it look like the layoff could have been your fault. For someone recently out of law school with mostly big law experience and not in-house counsel background, a stealth layoff may prompt internal questions about your practice areas or general interests in the law.

No severance pay is received for stealth layoffs, but the attorney gets to keep collecting paychecks. The nature of law firms is that work won’t be created just to keep attorneys busy. If the work is slow, so will the billable hours of the affected attorneys. In a way, termination could be the natural conclusion when law firms are struggling, and stealth layoffs can sometimes be seen as notice from the firm. Attorneys also care about reputation. 

Even when there’s an economic slowdown, the legal profession might be jumping the gun by thinning the ranks in certain practice groups or by targeting first-year associates. The important thing to keep in mind is that you should know about the possibility of legal services stealth layoffs so that you can response quickly if needed and find a new job. Checking industry reports from Above the Law and American Lawyer can clue you in to major trends in stealth layoffs, too.

Even if official layoffs were conducted firm-wide, the presumption would be that the best or most well-liked associates were not cut. Stealth layoffs allow the attorney to tell a story of wanting to leave, not getting forced out.

Like most other professions, attorneys will get laid off for their inability to produce quality work product or because of personality and fit issues. In those one-off instances, law firms won’t eat the same reputation costs, but stealth layoffs can also provide similar benefits to both sides. Whether you’re in real estate, personal injury, business law, or some other practice area, layoffs are possible. For those who worked hard to obtain an amlaw 100 or biglaw role, it can be devastating for this to happen to you.

If you want to initiate the stealth layoff process, quiet quitting or coasting can have a similar effect. By giving the firm a slight nudge in the direction of viewing you as a potential layoff, you might end up with a little more downtime and a longer job search window. In the meantime, make sure your CV and LinkedIn are up to date.

How to react to a stealth layoff

As detailed above, a stealth layoff is not the worst thing that can happen. Stealth layoffs are not as great as keeping your job but experiencing one could be a catalyst to positive change in your career. The job search begins again, and you should be talking to legal recruiters and networking. 

A stealth layoff is especially useful for lateraling to another law firm because the appearance will be that you are voluntarily seeking out a better opportunity from a vantage point. Your firm might want to help you, especially if they are conducting stealth layoffs without harboring any negativity towards you personally. 

The firm might assist with placement in another firm or even with a client, and you should try to take advantage of the network available to you through your current employer and coworkers. 

Finally, consider alternative career options outside of a law firm. While it’s possible to plan a Biglaw exit on your own terms, many people leave Biglaw because the situation calls for it. A stealth layoff might be the green light for you to pull the trigger and make a career change.

While you are getting stealth laid off, you can begin to take on less work. Since you are collecting paychecks, completely dropping all responsibilities might get you immediately booted (unless you’ve been expressly permitted to do so), but there is no reason to give your absolute and best efforts to a firm that is nudging you out. 

A stealth layoff could be as short as a few weeks or as long as a few months. Use this time to regain some work-life balance and get your life or career in order. Top-notch performance reviews and getting stealth laid off do not really mix well, so if you begin to receive negative performance reviews, don’t take them personally. 

Joseph Kim is a 3L at Notre Dame Law School. Joseph grew up in California where he developed an interest in working with music, powerlifting, and bowling. He’s been a member of the FIRE community since before law school and plans to pursue FatFIRE following graduation.