By ERIC YOUNG
San Francisco Business Times

As one of San Francisco's prominent law firms, Heller Ehrman LLP helped its corporate clients deal with a range of matters, including prickly labor and employment issues.

After financial troubles triggered Heller's dissolution in September 2008, the firm wound up with its own labor-and-employment predicament.

The firm laid off its 860 employees without giving 60 days notice, violating the Worker Adjustment and Retraining Notification Act, the workers claim in a pending lawsuit naming partners including former Chairman Matthew Larrabee. The firm also failed to pay for accrued vacation time, they charge.

Heller Ehrman employees - among them researchers, IT professionals, librarians and secretaries - "served Heller Ehrman faithfully for years, and they have been let go with this abrupt dismissal, and now Heller Ehrman is not holding up its end of the bargain," labor lawyer Matthew Helland said last year when he filed the lawsuit seeking $32 million on behalf of the Heller workers.

Heller is not the only law firm to get tangled up in charges that it violated the federal WARN Act. Thelen LLP, another large San Francisco law firm that toppled in 2008 due to an exodus of partners, also was hit with a WARN Act violation lawsuit. About 700 workers there are seeking $18 million for back pay. And Brobeck Phleger & Harrison LLP, which shuttered in 2003 amid financial difficulty, also was accused of jilting its workforce out of pay.

Corporate law firms, filled with attorneys who help keep businesses out of legal trouble, would seem to be the kind of places that would steer clear of alleged employment violations. But that's not always the case.

Not every law firm that has closed in recent years has been accused of WARN Act violations. And there are some likely defenses for law firms when they are accused of not following the advance-notice rules.

A law firm can claim a faltering business exemption, employee lawyers said, where giving notice might imperil a firm's ability to obtain financing from a lender. A firm can also show that it was the victim of unforeseen business circumstances or some sudden unexpected action outside of the firm's control, like a major client dropping the firm or some sudden, unexpected economic downturn, attorneys said.

Still, even if a law firm is found to have violated the WARN Act, the financial penalty is limited to the amount of wages due workers for up to 60 days.

And in some cases, law firms end up settling with employees for amounts lower than they would have paid normally. For example, Heller's estate is proposing to settle its alleged WARN Act violations and other benefit claims for about $19 million, less than the original $32 million sought. Craig Collins, the lawyer representing Heller's former workers, says he'll suggest that workers take the deal.

Taking the bankrupt firm to trial over the matter, Collins said, might result in no money at all. "We decided to settle at a discount rather than an all-or-nothing" scenario.