King & Wood Mallesons (KWM) employees in London have expressed anger at the firm’s management for going back on a promise to pay staff weekly in January.
The firm cancelled salaries for more than 100 “non-essential” staff, including a number of fee-earners, last week.
The remaining staff, which includes hundreds of paralegals, associates and support workers were told by managing partner Tim Bednall just before Christmas they would be paid weekly in January to ensure some wages would be paid prior to the firm going into administration.
However wages for the first week in January have not appeared in people’s bank accounts.
In a message this afternoon, KWM EUME managing partner Tim Bednall told all staff that the firm will no longer be able to pay any salaries at all.
The internal message, seen by The Lawyer, read: “Barclays, our bankers, indicated to me on Thursday evening that they were not willing to approve the salary payments due to you. I made a proposal to the bank on Friday to counter this, asking that essential payments including salaries be paid. This proposal was rejected on Friday. I made a further proposal to ensure salary payments could be made on Sunday and this, also, was rejected. A final proposal was submitted to the bank last night and, with deepest regret, this too was rejected this morning.”
A KWM spokesperson declined to comment.
One associate said they were “shocked” by the non-payment, and described being left out of pocket during a difficult month.
Staff who wish to challenge KWM over redundancies or non-payment of salaries will have to queue up behind the firm’s other creditors, including Barclays, to claim back money once administrators are appointed.
“We’ll be way down the list,” said one staff member.
Others have described the current working environment at 10 Queen Street Place – KWM’s headquarters – this week as “depressing”.
“It’s incredibly hard to service clients. We’ve have our land registry account closed, we can’t use couriers,” said one remaining lawyer. “Our IT is outsourced as well so every morning when you log-on you’re genuinely worried it will have been shut down.”
Another added: “The office is incredibly quiet and there’s hardly anyone left. We’ve had firms like DLA Piper in this week packing everyone’s stuff into boxes for the people who are moving across.”
“[KWM’s restaurant] Stanley’s is still open but the kitchen staff are emptying the freezers and you can’t blame them. The restaurant used to be a hive of activity but now it’s pretty much closed. Stanley Berwin would be turning in his grave.”
*UPDATE: Since this story was written staff have been informed that Stanley’s has now closed.
One KWM staff member was quick to criticise management and partners who had moved to other firms without the lower ranks of their teams.
“There has been a token gesture by management of putting up job vacancies on the Intranet but not much else. Our TUPE reps are making enquiries to management and HR but getting radio silence back,” the employee told The Lawyer.
KWM’s large real estate, property and construction teams are understood to have been hit hard after a deal between KWM and DLA Piper for the latter to take on the entire 75-lawyer practice fell apart.
A number of partners, including head of the practice William Naunton,instead moved to DLA with a vastly reduced team, with a handful of others going to Greenberg Traurig.
KWM’s Europe and Middle East arm (KWM EUME LLP) filed an application to renew its notice of intention to appoint administrators today (10 January), buying it 10 more days to sell off as much of the business as possible and continue to negotiate a deal with the China partnership.
KWM China was understood late last year to be interested in buying out a number of litigation and corporate lawyers and their staff in London, plus core teams in Germany, Italy, Spain and Dubai. But internally rumours are surfacing the deal could be on the rocks.
“It’s taking a worryingly long time to negotiate,” said one source. “We’ve heard the deal will be done tomorrow [Wednesday] or that’s the end.”
KWM first filed its intention to appoint administrators in late December following a failed recapitalisation of its EUME business and several senior exits. Since then groups of partners have departed for both US and UK firms, including former senior partner Stephen Kon, who is joining Macfarlanes alongside three partners.
In total, more than 40 partners left KWM across the UK, Europe and Middle East in the last two months of 2016 as the LLP’s finances reached crisis point and an administration became inevitable. Around 90 partners left the firm in total over 2016.
How the story unfolded:
27 Oct: KWM’s recapitalisation scheme stumbles and four stars quit
28 Oct: Exclusive: KWM former managing partner Day heads for Proskauer
4 Nov: KWM energy team departs for Squire Patton Boggs
10 Nov: KWM global boss Fuller steps down
11 Nov: KWM China bail-out: Partners have a week to agree to 12-month lock-in
18 Nov: Dewey administrator adviser drafted in on KWM rescue deal
22 Nov: KWM China bail out fails and EUME arm moots merger plan
7 Dec: Exclusive: Barclays takes extra lawyer of security over KWM assets
12 Dec: KWM tells staff it cannot guarantee wage payments after January
13 Dec: It’s over: KWM partners told that takeover deals have failed
22 Dec: KWM LLP files notice of intention to appoint administrators