Monday, October 22, 2018

Tough job hunt for Puerto Rico’s young lawyers

By on May 18, 2018

Editor’s note: The following article originally appeared in the May 17-23, 2018, issue of Caribbean Business.

With a labor-force participation rate barely reaching 40 percent and the aftermath of a devastating hurricane—along with a fiscal control board that seeks to foster an attractive business environment and job creation while slashing workers’ rights—it is logical to conclude that Puerto Rico’s labor market faces one of its greatest challenges in modern history.

This new reality has affected the legal profession, which according to the most recent “Employment Summary for 2017 Graduates,” published by the American Bar Association (ABA), reveals that of the 531 graduates from Puerto Rico’s three law schools, who earned their doctorate in law, or J.D., last year, slightly more than half of them (299 or 56.3 percent) obtained some type of employment. Only about 25.1 percent work as lawyers, either in law firms or private practice.

When compared with the number of lawyers who graduated in 2016, using the same study, the data reflect a 2.2 percent decrease in lawyers’ unemployment rate, regardless of employment type, and minus-9.72 percent obtaining jobs in the legal profession.

While these figures have not raised red flags at the agencies that accredit the law schools at University of Puerto Rico (UPR), Universidad Interamericana and Pontificia Universidad Católica (PUC), the latter two were the subject of discussion because their faculties were No. 1 and No. 4, respectively, for having graduates with the highest unemployment rates among all U.S. law schools.

Too many lawyers or too few jobs in Puerto Rico?

The question that inevitably follows is whether it really is worth investing in one of the most expensive professions.

“It’s obvious there is a fiscal crisis in Puerto Rico, and that is reflected in all professions. It’s logical to think that the legal profession will also face this scenario, particularly the most recent graduates, because many of them who already had jobs before the crisis remain in their jobs. The most recent graduates are those who have faced this dramatic economic crisis that has manifested itself in all jobs, skilled or not. So, we shouldn’t be surprised that the law profession has suffered alongside other professions,” the dean of Interamericana’s law school, Dr. Julio Fontanet Maldonado, told Caribbean Business.

For the former president of the Puerto Rico Bar Association (Colegio de Abogados y Abogadas de Puerto Rico), the labor market for lawyers is undergoing a restructuring amid the fiscal crisis and the aftermath of Hurricane Maria, a process he expects will not last much longer and will result in job opportunities in the sector.

“We have no doubt this is a temporary matter and the market for lawyers will be positive both in Puerto Rico and outside of Puerto Rico,” the lawyer said. “We see it as a transitory problem that has manifested itself more dramatically with these two coincidences [the island’s fiscal crisis and recent hurricanes].”

P.R. vs. U.S. markets

Regarding the issue of unemployment among class of 2017 graduates, although Interamericana was pegged at about 35.1 percent, this figure does not consider several variables when the data were delivered to the ABA, Fontanet Maldonado explained.

“Puerto Rico is a different market from North America’s, particularly in terms of access to legal education. It is so economical to study law [on the island], compared with the United States, that many people who do not want to practice law can choose to study law as something supplementary. The investment [to pay back student loans, for example] in a period of 20 to 30 years is a nominal one,” the dean stressed as the first factor to consider when interpreting the data.

“If you are in the United States and invest $300,000 in education [he said while laughing], you better find legal work that generates enough income to finance that education and pay back that loan,” added Fontanet Maldonado, who believes the preference among students is to earn a J.D. to complement their current profession or to better position themselves within their companies, with more competitive salaries, through a nominal investment that is repaid through student loans.

The U.S. Education Department’s most recent (fiscal year 2014) three-year federal student loan cohort default rate (the percentage of borrowers who enter repayment) for Universidad Interamericana was 10.5 percent, or 2,716, who defaulted on their loan, while about 90 percent, or 25,772, were repaying their student loan.

ABA status dates need adjustment

Fontanet Maldonado and Interamericana’s Associate Dean Lin Collazo Carro said another point to consider in the equation is that the ABA’s handling of statistics does not reflect nuances in the Puerto Rico labor market, since the March 15 closing date for its unemployment report coincides with the period in which one of the island’s bar exams is administered. Historically, the highest number of graduates is registered during the September bar exam.

“The ABA’s protocol says that whoever is studying for the bar and isn’t working is unemployed and seeking a job. I think that’s unfair, particularly in…Puerto Rico, where you are employed when you pass the bar,” the dean said, criticizing the classification method, which does not take into account, given the complexity of the exam, that it is nearly impossible for a graduate to study for the bar while also holding a job.

Faced with the reality that Puerto Rico is the jurisdiction with the lowest percentage of people passing the bar, complaints have been filed by the three law schools—requesting a study be conducted of the structure, validation and reliability of the exam’s scoring and grading mechanism—which have yet to be addressed by the Puerto Rico Supreme Court for various reasons, such as the passage of Hurricane Maria.

“The percentage who pass the bar in the [mainland] United States is much higher. The examination dates on which most of the graduates take their exam are in July. That means jobs can be offered to graduates, [employers] wait for them to take the bar and [they] get the results a few weeks later. It’s very different to what happens here in Puerto Rico,” Collazo Carro said.

The university official also explained that stateside law students are hired after graduating and then take the bar while they are working, when in Puerto Rico that culture does not exist.

“It’s expected that you will look for work [in Puerto Rico] once you are sworn in and the law firms also employ you when you are sworn in,” Collazo Carro added about the phenomenon that is not considered in the methodology used by the ABA to produce its report.

“Obviously, if you have a very high percentage of unemployed people, you can make the inference that you are graduating people who are not employable, but that is not the scenario because, if you employ people with a good academic profile, who meet the standards of the profession and the bar, it’s not a problem with the graduates but with the market, the hurricane or the date by which [the ABA’s report] must be informed that you already have a job,” the associate dean said.

Lack of transparency or data comprehension?

Besides the mismatch between what the ABA requires and what is reported, the fact the “employment status unknown” figure has increased for the UPR and PUC for 2017 raises concerns because this number directly affects the final percentage figures on graduates who are either seeking a job or are employed.

Interamericana’s Law School Associate Dean, Lin Collazo Carro. (Jaime Rivera/CB)

“We have been very successful in providing those statistics in a very formal way and accessing a very significant number, almost the entire group of our graduates. If you look at these statistics at other universities in Puerto Rico and outside of Puerto Rico, you’ll see they first contact an insignificant portion of their graduates. You don’t have to be naive to realize they are contacting those who are working, and we think this is not acting with intellectual honesty,” stressed Fontanet Maldonado, who believes, given that the data determined to be provided to the ABA was established in recent years, it is possible other universities have doubts regarding the instructions.

“Furthermore, we think there are universities that haven’t read that protocol well. There are some universities—and for the record, and I won’t tell you which they are, I have information, which I suspect they are not handling right—where they have people who are studying for the bar [and are not employed]; they aren’t placed where they should be, that they are ‘unemployed-seeking’ a job. I think it’s unfair that it’s that way in the [questionnaire], but if it is laid out that way, it should be reported that way,” Fontanet said, adding that if it were modified, the 39 percent figure would decrease to 14 percent.

How does the prospect of legal work look?

Both deans believe the legal labor market is trending toward a greater number of employers looking for students and graduates to fill vacancies, which may increase their ability to repay their education loans amid dire economic straits, which has accelerated the outmigration of professionals.

“We know a lot of people have left, and law firms may want to replace a lawyer who left with a law clerk or a paralegal, and that could reflect the increase in demand for different positions to be filled with students. For graduates, the trend points to the hiring of recent graduates. The law firms, from what I’ve been able to see, are preferring to hire newly graduated people versus someone who has many more years of experience, and that, logically, one might think is because you can pay them less,” inferred Collazo Carro, who, despite this trend, feels the labor market will stabilize.

“That’s now, post-Maria. Eventually, the market is going to have to normalize because a student can’t perform all the functions of a lawyer who is admitted to the profession in Puerto Rico. It’s not a permanent situation; the hiring of students should always be assumed to be for a certain period of time because employers know that when they go to study for the bar, they will stop [working],” the associate dean assured.

Decrease in hiring multifactorial

Attorney A.J. Bennazar, co-founder of Puerto Rican law firm Bennazar, García y Millán C.S.P., attributed the decreased hiring of attorneys to various factors such as a reduced volume of litigation, which has had a significant effect on his law firm.

“We have had to reduce. Ten years ago, this law firm comprised 15 full-time attorneys. Now, it has come down to five. Things in Puerto Rico are so bad that the people do not even want to sue,” Bennazar said, whose firm used to have 18 employees in the 1990s.

As an example, the former partner at the O’Neill & Borges law firm, said that through two of his clients in the insurance industry, they represented between 160 and 180 lawsuits a year for damages, which is an amount that has been reduced to some 60 claims. In addition, the decline in commercial transactions, such as the purchase and sale of properties and businesses, has had an effect.

The decrease in commercial transactions, such as sales of real estate and businesses, had the effect of reducing the numerous notary volumes they had.

“Between 150 and 180 cases were closed a year. I did three deeds; the number sounds very dramatic,” said Bennazar, who is also former president of the Inter-American Bar Association, a worldwide organization of attorneys with headquarters in Washington, D.C., which brings together law practices in the Americas, and by affinity Spanish and French law practices as well as the Lisbon bar.

According to Bennazar, apart from O’Neill & Borges, which has been able to maintain its corporate practice thanks in part by being the main legal representatives for the Financial Oversight & Management Board at a local level, the decrease in work volumes of Puerto Rico corporate law firms has affected such renowned firms such as McConnell Valdés, Goldman Antonetti & Cordova and the prestigious firm Fiddler, González & Rodríguez, which closed its doors May 10, 2017.

Bennazar believes another factor that has contributed to the systematic decrease in hiring of Puerto Rican lawyers in the practice of the law is the significant technological accessibility of legal tools or resources through the internet.

“Many [U.S.] American corporations we have represented throughout the year used to do things in Puerto Rico and consulted local attorneys in communication with an In-House Counsel in the United States or an external American lawyer, but many of these things are being handled from over there,” Bennazar added, referring to lawyers easily finding contracts via the internet, and now understanding the intervention of local attorneys to finalize a considerable number of transactions.

The lawyer also recalled that under the second term of then-Gov. Pedro Rosselló González’s administration, legislation such as the Negotiable Instruments Law was amended to adopt the regulations contained in the Uniform Commercial Code of the United States, among other legislation on commercial transactions, to facilitate the arrival of U.S. businesses to the island.

“The Puerto Rico Legislature, in the past 10 to 12 years, has tried to turn the island into a jurisdiction that is as American as possible, and that has many effects and had a devastating effect on lawyers in Puerto Rico,” explained Bennazar, who, despite finding praiseworthy many of the changes that seek economic growth, considers that local lawyers have lost a lot of work that was previously obtained from clients such as banks, finance companies, manufacturers and large distributors, which now choose to hire an In-House official, who can fill out forms on the internet, complete and send them without needing to consult their firm in Puerto Rico.

To questions about the behavior of legal work in Puerto Rico, Bennazar coincided with statements from the deans of Universidad Interamericana on the quality of legal study in all Puerto Rico law schools.

“Puerto Rican lawyers, who graduate from law schools here, have an enormous advantage over lawyers who graduate from law schools in the United States because, over there, they know a legal system that is common law, and we have to study both common and civil law, we have to handle contracts in two languages, so there is still an enormous added value that the legal profession has to offer to the entrepreneurial community in Puerto Rico because they have a pool of firms and attorneys who are highly competent and able. Puerto Rican lawyers can handle multimillion-dollar transactions with the same ability and competence as lawyers from the United States.”

Can they work with bankruptcy cases under Title III of the Promesa law? Caribbean Business asked. “The lawyers from Puerto Rico who have experience in bankruptcy can take part in Title III cases but because Puerto Rico lacked access to Chapter 9 of the federal bankruptcy court (which is analogous to protections under Promesa), I doubt there are many Puerto Rican lawyers, save those who have worked in the United States, who would be able to say they have experience with Chapter 9, and that explains to some extent why, when Promesa arrived, all top players, such as the commonwealth, bondholders, pensioners, sought services from law firms in the United States that have experience in municipal bankruptcy, and the [fiscal control] board did the same. There is too much at stake to take chances.”

Does an attorney who obtained his or her J.D. in Puerto Rico have that ideal training? Caribbean Business asked.

“The history of Puerto Rico includes a series of events that have left a mark, and another of those milestones is before and after Promesa; therefore, I understand that law schools will have to expand their bankruptcy curriculum because, since municipal bankruptcies were not a part of the [original] menu of options, universities will have to review their curricula to include the study of Title III of Promesa and how municipal bankruptcy works in the United States,” Bennazar concluded.

 

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