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When Biggest is Not Best

Small businesses* often market themselves by stressing their ability to accommodate the specific needs of individual customers better than the one-size-fits-all solution generally offered by multi-national corporations. Such an appeal resonates, because it emphasizes what we know intuitively—for a business relationship to work, there must be a good fit between the buyer’s needs and the seller’s product or service. Yet when confronted with labor issues or other business litigation, these same businesses are too often seduced by the cachet of large law firms.

The appeal of the large law firm (“Mega-firm”) is understandable.  With a national or even international presence in multiple states and countries, they employ hundreds of lawyers occupying prime office space in Washington, D.C., and the skyscrapers of New York, Chicago, Los Angeles and similar centers of commerce.  Their stellar reputations are scrupulously crafted, honed and marketed through highly publicized litigation wars stretching all the way to the U. S. Supreme Court.  Their client list is sure to include several prominent multi-national corporations and a few celebrities.  They only recruit associates from the most prestigious law schools and pay top dollar for the best students, who will certainly be able to publish scholarly articles while waiting for clients.  What is not to like? 

Nevertheless, retaining Mega-firm is seldom the best solution for managing the legal needs of a small or medium sized business.  It is almost always a bad fit. 

3   Reasons Mega-firms Don’t Fit Small Business Needs

  • Mega-firm billing rates – Exceeding $1,000 per hour for partner, even less prominent associates frequently bill at $750 per hour.  It seems too obvious for comment, but high billing rates continue even when incurred on routine matters.  This firm once had a client threatened with a lawsuit from a former employee alleging violation of the Family Medical Leave Act (“FMLA”).  The claim was baseless because the company was not covered by the FMLA.  But the client wanted to really send a message, so mega-firm was brought in to respond.  The single three-page letter to the former employee’s lawyer reviewing the employee’s inexcusable attendance and explaining the inapplicability of the FMLA cost the client $10,000.  The same letter from most any competent boutique law firm practicing in the field of employment law in Los Angeles would have cost the client less than $2,000.
  • Overkill – No need for national presence. The value of Mega-firm’s national presence is its ability to access the courts of states where the client’s employees are working and to avoid travel costs.   But small businesses usually do not have employees working in multiple states, and the added expense of paying for Mega-firm’s overhead in other states is wasted.        


  • Mega-firm’s Agenda – Not necessarily the small business agenda.  In the field of labor relations, Mega-firm built its reputation as a “take no prisoners” war machine.  It represented large corporations with particular management positions on various labor-management issues, and it has adopted those positions as “best practices” to be recommended to all clients, including small businesses, whether requested or not.  Besides, obtaining acceptance from the employees for these adversarial positions is more likely to create conflict, which leads to more billable hours.  So, Mega-firm is not necessarily averse to a protracted conflict.  Mega-firm is only too willing to recommend that the employer fight to its last dime over issues the employer never thought to raise in the first place.

I know this from personal experience.  Although I now represent management, my past includes years of advocating for unionized workers, dealing with all sizes of employers ranging from single site facilities with a few employees to large, publicly traded, multi-national corporations employing thousands in multiple locations.   Most labor agreements can be negotiated in less than 2 weeks at a transaction cost (legal fees, travel expense, etc.) of less than $30,000.  I once negotiated a more complicated first-time agreement covering 35 employees in less than two days at a total transaction cost of less than $2,000 because there were no serious disputes. 

But if there is a problem—and with Mega-firm involved, there will be a problem—I have seen upwards of 30 days of negotiations strung out over 3 years, with 2 days of preparation for every day at the table.  Negotiations were followed by hearings before the National Labor Relations Board, followed by appeals to the Circuit Court of Appeals.  Legal fees cost the employer upwards of $375,000 to which were added $15,000 for Mega-firm’s travel expenses.  After factoring in the cost of management’s time plus the lost production and increased overtime costs directly attributable to bad employee morale, the total transaction costs rose above $500,000 — all because of the problem created when Mega-firm, trading on its reputation as the toughest labor law advocate in the country, convinced the employer to demand a temporary wage cut from 23 employees.  The company did not need or request economic relief.  Had Mega-firm’s wage cut been achieved, the employer would have saved only $270,000.   Instead, after spending over $500,000 in transaction costs, the employer still failed to achieve Mega-firm’s promised result.  Mega-firm’s reputation is still intact, however, and their billable hours were paid. 

Biggest is not best when it doesn’t fit.

* For purposes of this discussion, a “small business” is one employing less than 250 hourly and salaried workers, independent contractors and temporary employees.  A “medium sized business” employs more than 250 people, but less than 500.