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Two of Canada’s largest law firms have reversed decisions taken in the early days of the pandemic to cut employee salaries and now say they will reimburse lawyers and other staff for the lost pay, after strong financial performance for the country’s large corporate firms.

Borden Ladner Gervais (BLG) and Norton Rose Fulbright Canada, the largest and fourth-largest firms in the country, respectively, both took steps in early April to reduce compensation for non-partner lawyers and staff. Norton Rose announced a 10-per-cent cut while reductions at BLG ranged from 10 per cent to 15 per cent. Both firms also implemented deeper cuts for partners, who are co-owners of law firms and receive regular draws of profit.

This month, the two firms told staff that they will reimburse them for the reduced wages, which have been restored to their previous levels. BLG and Norton Rose separately told The Globe and Mail that those decisions came as business has surged in many practice areas, leaving the firms on solid financial footing.

When the firms first cut salaries, the spread of the novel coronavirus was just beginning to sow extreme economic uncertainty, with many businesses shuttered. Law firms looked to slash expenses as courts only heard emergency matters, major clients put legal work on hold and fears grew that other clients would struggle to pay bills.

Still, many others decided against cutting employee salaries, including the firms known as the Seven Sisters: Torys, Blakes, Davies, Osler, Stikeman Elliott, Goodmans and McCarthy Tétrault. And in the months that followed, Bay Street law firms have been busy across many practice areas, working on debt financing, initial public offerings and other capital-markets transactions, advising private equity investors on potential acquisitions. They have also been helping distressed companies restructure their balance sheets or work through formal insolvency proceedings.

Litigation work has rebounded as courts across the country have embraced technology and heard more matters while employment lawyers have been swamped for months as businesses look for answers amid an ever-changing landscape.

Meanwhile, lawyers and support staff working from home have proved to be extremely productive and expenses are down sharply. While landlords have not offered relief on rent payments for largely empty offices in prime downtown locations, budgets for business travel, conferences, client entertainment and catering abruptly plummeted to almost zero.

Charles Hurdon, managing partner of global law firm Norton Rose’s Canadian business, said that the firm began planning its response to the pandemic in early March, first addressing the move to remote work and then meeting with partners to consider what the pandemic would mean for its clients, many of whom were also considering short-term wage cuts.

“Following that, we decided to temporarily reduce salaries by 10 per cent, which mirrored many of our clients who were being immediately impacted by the crisis. Most of our people were very supportive, but it was a very difficult decision to implement,” he said.

He said the firm ended the salary reduction in July and announced the repayment to employees this week. “As hard as the decision was, it created a real sense of all of us being in this together.”

Mr. Hurdon said long-term clients stuck with Norton Rose and as that work resumed, the impact on the firm’s finances was “materially less than we originally forecast.” And while litigation and mergers and acquisition work was initially down, it has “come back strong.”

Meanwhile, he believes the sudden shift to remote work will lead to a new reality for a profession that traditionally resists change and has placed great emphasis on face time and long hours in the office. “It took 50 days of COVID to transform 50 years of law firms' ways of working.”

BLG announced plans to repay reduced wages earlier this month, said the firm’s chief talent officer, Leanne Cherry. “We’re fortunate that we have been able to make all our people whole. Financially, it has been a solid year for us.”

BLG also implemented temporary layoffs of some support staff in April, and Ms. Cherry said the majority of those workers have now been recalled, although she added that some, whose jobs could not be moved to digital work, have been let go.

“We did what we thought was best at the time,” Ms. Cherry said. “Now, we’re pivoting to focus on our people and how we support them through this next phase of the pandemic.”

“We’re really turning our minds to trying to keep people engaged and trying to hold on to our culture and watching and supporting people’s mental health, because I think there could be some challenges there across the board throughout the winter,” she said.

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