Artificial Intelligence

Viability of Billable Hours and AI

At Russell Alexander, we’ve fully embraced Artificial Intelligence (AI) to enhance our practice, enabling advancements in predictive analytics, document automation, and ultimately gaining a competitive edge. Why? Because AI represents the future, and early adoption and comprehension of its benefits are crucial for optimizing our firm’s capabilities and serving our clients effectively.

As Artificial Intelligence (AI) gains prominence in the legal field and more firms embrace its capabilities, particularly given the development of more intricate large language models improving task efficiency, a question emerges as to whether the traditional billable hour used by law firms remains a viable revenue model moving forward. This is a question that was recently explored by Danielle Braff in the ABA Journal, who provided a comprehensive discussion on the fate of billable hours. With AI capable of drastically reducing the time needed to complete tasks, there are concerns about its potential negative impact on law firms’ earnings, especially those that rely on billable hours as a means of remuneration compared to alternative forms of billing such as through contingency fee agreements. However, the integration of AI does not necessarily equate to a loss in revenue. In fact, it opens doors to new opportunities for firms to innovate their billing practices and better serve their clients.

The conventional billable hour system may see adjustments in response to AI’s efficiency. While firms may charge less for tasks completed more economically by AI, they gain the capacity to accommodate more clients within the same workday. By leveraging AI to streamline processes, firms can increase their availability and expand their clientele, ultimately balancing any potential revenue shifts.

The increased adoption of alternative billing models, such as flat fees, presents a promising avenue for legal practices. Charging a flat fee for specific tasks, such as drafting legal documents including financial statements or performing preliminary research on a point of law, ensures firms receive fair compensation for the work completed without solely relying on billable hours. This approach also provides transparency and predictability for clients. Russell Alexander Collaborative Family Lawyers has adopted this method to save clients money, expand our capacity to serve more clients in need, and ultimately enhance access to justice in our community.

While the demise of billable hours may not be imminent or even occur at all, the future of legal billing undoubtedly involves greater flexibility and innovation. Embracing AI’s capabilities and exploring alternative fee structures or even further supporting a combination of fee structures allows firms to remain competitive while upholding their commitment to client service. As the legal profession evolves, so too must its approach to billing, fostering a dynamic and sustainable future for legal practices.

This article was written by Law Student Joseph B. Cugini.

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About the author

Russell Alexander

Russell Alexander is the Founder & Senior Partner of Russell Alexander Collaborative Family Lawyers.