- Generative AI is transforming the legal industry, but attorneys say the billable hour is here to stay.
- Instead, they said the value of a lawyer's hour is likely to increase as AI tools help automate routine tasks.
- "You'll still see billable hours, but you'll see a reduction of those billable hours," said one attorney.
Generative artificial intelligence is revolutionizing industries across many sectors, and the legal world is no different.
The AI boom has reignited the long-running debate over the potential death of billable hour — the standard method of payment in the legal profession.
And though AI-powered tools are expected to become widely adopted in the legal field in the coming years, industry experts told Business Insider that the use of the rapidly advancing technology won't kill off the billable hour payment model, but rather reinvent it.
Several attorneys said that as AI tools are used at firms to automate routine and time-consuming grunt work tasks like document review and due diligence, the number of billable hours to a client is likely to be reduced, and the value of a lawyer's individual hour is likely to increase.
"The real value that lawyers provide, whether or not that's strategic advice, whether or not it's the actual drafting of arguments, whether or not it's the arguing in court to jurors or to judges in courtrooms, or to the making of deals and negotiating terms — all those sorts of things — I think you're going to see an increasing premium on," said Michel Paradis, a partner at the global firm Curtis, Mallet-Prevost, Colt & Mosle LLP.
Paradis, who specializes in AI-related legal work and also teaches national security and constitutional law at Columbia Law School, said he doesn't believe there will ever be a "complete disappearance" of the billable hour in the law profession.
"What I think you're likely to see is a slow disappearance of the filler billable hours" that a slew of law firms depend on, Paradis said.
The same way that the introduction of word processors dramatically shifted the way law firms operated in the late 20th century, Paradis said he foresees the same thing happening with AI.
"AI is going to have a similar effect to the rise of information technology in the legal field," said Paradis, "and that is a consistent gobbling up of the bottom of the legal market."
Elisa Botero, another partner at the New York-headquartered firm, agreed, saying that the billable hour model will remain a "key metric" for at least the foreseeable future even as more law firms move to utilize AI tools to boost the efficiency of their practices.
"But what type of work will be billed out will shift and is already shifting," said Botero, explaining that more traditional, associate-type work or junior-level work will be most impacted by the use of AI.
"You'll still see billable hours, but you'll see a reduction of those billable hours for that type of routine legal work that can be automated" with AI tools, Botero said.
AI can't replace everything a lawyer does
James Gatto, a partner at Sheppard Mullin who co-leads the firm's AI industry team of about 100 attorneys, said that the billable hour isn't going anywhere for higher-level work, but that there may be a fixed-rate payment for legal services that are primarily done by AI.
"If you're using AI to produce a draft of a brief that would have taken, let's say, $5,000 of legal time to do a first draft, maybe now it's $2,500," Gatto said.
He added that AI "may accelerate the elimination or minimization of billable hours for certain types of work, but I don't think it will do it across the board."
"Not everything that a lawyer does can be replaced by AI," the attorney said, pointing to legal work involving depositions, trials, negotiations, and mediations.
Frank Gerratana, a partner at the international firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., said that he sees the integration of AI tools in law firms as a positive that can allow attorneys to spend more time on critical work.
"I can envision a scenario in which lawyers can simply charge more per hour because they're spending more time on the highest value work and things that are time-consuming — but not particularly high value — can be automated," said Gerratana, who advises clients on intellectual property issues.
With the integration of AI into law firms, Gerratana said he can picture a world where hour-based billing, subscription-type billing, and task-based billing for legal services all exist at the time.
"If I, as an attorney, can really speed up my work I might be more inclined" to bill by the task, he said.
A 2023 ABA survey found that 20% of law firms were using or considering using AI
Meanwhile, a 2023 survey by the American Bar Association found that 10.9% of firms across all sizes were using AI tools in their practices, while 9.8% were seriously considering purchasing AI tools.
Gatto said that his firm utilizes a custom AI tool that was developed in-house. The tool can be used to draft legal memos and briefs and to create initial agreements of all kinds.
"Basically any type of legal document, you can use AI to some extent, at least right now, to assist in creating a first draft," Gatto said.
Despite the use of AI, Sheppard Mullin is still currently charging clients by the hour.
"The part that's being done by AI, we're charging still just hourly. If it takes five minutes, we bill five minutes, that's it, but none of that stuff is ready to go to the client," said Gatto, explaining that an initial draft of a document created with the help of AI would be comparable to the work of a first-year law school student.
"There's still a fair amount of work that gets done between the partner and the first year to get the memo to the point where it takes everything into account and it's ready to go to a client," Gatto said.
The firms Curtis and Mintz are still in the piloting phase when it comes to the use of AI in legal work.
"Any law firm that is not currently investigating how to use AI tools in their practice is going to fall quickly behind the law firms that have figured this out," said Gerratana.
Juan Perla, another partner at Curtis, said that the firm is in the midst of developing an internal AI policy and expects to have certain AI tools integrated into the practice within months.
"Although we're proceeding carefully we're very intentional in our plan moving forward," Botero added. "We do feel that these tools will be necessary."
Richard Robinson, the CEO and founder of the legal tech startup Robin AI, which uses Anthropic's large language model Claude to help lawyers draft and edit contracts, told BI that tools like his enable attorneys to operate at the top of their game.
"We're not just revolutionizing the legal industry. We're helping businesses to grow," Robinson said. "We've helped companies do legal due diligence 10 times faster than they could without our technology."
"We are helping companies to reduce the time it takes to negotiate contracts from 90 days down to seven, in some cases," he said.
According to Robinson, Robin AI, which was founded in 2019, has 100 paying customers, including seven Fortune 500 companies, as well as thousands of users utilizing a free version of the product.
"We are seeing enormous demand ever since the release of ChatGPT," he said.