New York Bar Tells Lawyers: Do Not Bill Clients for Time AI Saves

The New York State Bar Association's governing body adopted a report on Saturday restricting how lawyers bill clients for time saved through artificial intelligence tools, according to Law360. The report, issued by the association's Committee on Artificial Intelligence and Emerging Technologies, also limits billing for hours spent learning to use the software.

The decision carries direct financial consequences. Under the guidance, the cost of buying and maintaining AI software counts as an overhead expense, not a profit center. Firms may pass that cost along as a disbursement only when two conditions hold: the charge ties to a specific client matter, and the firm has disclosed the basis for the charge to the client.

What does the ruling change for billable hours?

The committee drew a line between time genuinely worked and time a machine eliminated. A lawyer who once spent ten hours drafting a document cannot, under this framework, bill ten hours when AI compresses the task to two. The client, not the firm, captures the efficiency gain.

That principle cuts both ways. Hours spent learning to use AI tools also face restrictions, a point that will sting firms investing heavily in training. The report does not spell out a precise formula for what remains billable. That silence leaves room for dispute.

When must lawyers disclose AI use?

Not always, and the boundary matters. The report states that lawyers generally need not tell clients about AI used for administrative tasks — word processing, spelling and grammar checks, calendaring, timekeeping — provided the use does not affect fees.

The caveat is doing real work here. The disclosure exemption collapses the moment fees change. A firm that bills differently because of AI use, or that passes along software charges as disbursements, steps outside the safe harbor.

Bar President Taa Grays framed the guidance in broad terms. "Generative AI is indelibly changing the practice of law," Grays said in a statement. "We are providing clear guidelines on the use of AI tools as a resource, so attorneys can use AI responsibly and ethically in their practices."

Grays also warned of specific exposure. "The guidelines can help attorneys avoid possible perils of using AI, including inadvertently practicing law in a jurisdiction where they are not licensed or failing to notify clients or the courts of AI use."

What hazards did the committee flag?

The report canvassed familiar risks alongside novel ones:

• Bias. Training data embedded with bias may deepen existing inequities, the committee cautioned.
• Confidentiality. If an AI tool learns from one client's information in a way that makes it available in another client's matter, lawyers must consult the New York Rules of Professional Conduct.
• Unauthorized practice. The report warned against building tools that deliver automated legal services in ways that could amount to unauthorized practice of law.
• Deception. Lawyers should not use AI to pass as a human with prospective clients.

The confidentiality point deserves attention. Cross-matter contamination through machine learning is a structural risk, not a one-off error. Once a model has absorbed client data, retrieval may be invisible to the lawyer who owns the duty of confidentiality.

Who bears supervisory responsibility?

Supervising lawyers, the committee reminded the profession, remain responsible for their subordinates' compliance. A law firm-approved tool or policy does not remove the need to review work on each matter. That holding rejects the emerging practice of treating institutional AI adoption as a shield against individual review obligations.

The practical consequence: partners cannot delegate verification to the firm's technology committee. Each matter still requires human review by the lawyer who signs the work.

What the report leaves unsaid

Enforcement mechanics remain unclear. The report is guidance from a voluntary bar association, not a court ruling or a disciplinary rule promulgated by the state's appellate courts. The New York Rules of Professional Conduct bind lawyers; association reports advise them. How disciplinary bodies will treat deviations from this guidance is a question the document does not answer.

Pricing models also escape precise treatment. Firms moving to flat fees or hybrid arrangements may find the billable-hour restrictions largely beside the point. The report governs time-based billing; it says less about alternative fee structures where saved time inures to the firm by design.

The Saturday adoption makes New York's bar one of the most explicit voices yet on AI billing. Whether courts and disciplinary authorities follow remains, for now, an open question.

The bottom line: lawyers in New York must treat AI costs as overhead, disclose disbursement charges, and let clients keep the time savings — or find a fee structure that lawfully changes the math.