NJ Bar Warns of AI’s Impact on Billing in Guidance for Lawyers

Lawyers using AI tools must be careful not to run afoul of rules about ethical billing practices, a New Jersey State Bar Association task force warned.

AI tools for lawyers are promising to make some legal work more efficient, which “could significantly disrupt the industry’s traditional hourly billing model,” the New Jersey task force said.

“Significant use of these technologies may conflict with current billing practices” under the American Bar Association’s model rule 1.5(a)(1), the task force added. That rule describes a reasonable fee as being based on the amount of time, work, skill and difficulty a legal service entails.

The report suggested that law firms may consider adapting their billing models “to align with client expectations regarding AI’s ability to streamline tasks that were previously time-consuming.”

State bar associations have been grappling with the implications of artificial intelligence on legal practice. The California, Florida and New York bars have issued guidance reminding lawyers about the technology’s risks, from hallucinations to compromising client confidentiality.

The California bar’s practical guidance on generative AI said lawyers can use AI to work more efficiently, but “must not charge hourly fees for the time saved by using generative AI.”

New Jersey appointed a task force late last year made up of 27 lawyers and AI experts. Their report, issued Friday, includes recommendations and is intended to serve as a “practical resource.”

The task force also called for requiring New Jersey lawyers to take CLE credits in technology, to help them understand AI’s risks.

It proposed changing current CLE requirements on ethics and diversity to a category that includes ethics, diversity, and technology, “given the ethical and social justice implications of technology in the legal system (such as safeguarding client data and understanding the potential risks associated with AI and GAI).”

The report also included a sample AI use policy for law firms, and a list of questions firms should ask as they’re vetting AI vendors. Friday’s report is the first installment of a planned series of guidance documents and resources.