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AI drafts a services agreement in 5 minutes. Under New York's guidelines, a lawyer billing hourly may not charge for the hours it saved. On a flat fee, speed alone doesn't require a cut. Same draft, 2 answers. Neither says what the lawyer is selling.
What New York says about hours and flat fees
The New York State Bar Association adopted its Legal Ethics Guidelines for Lawyers' Use of Artificial Intelligence on October 31, 2026. They're guidance only: they "do not propose any amendment to the New York Rules of Professional Conduct" (approved report). Guideline 5A covers fees:
- Hourly: bill time actually and reasonably spent, including prompting and verifying outputs. A lawyer "may not bill for time that would have been expended had an AI Tool not been used," or bill the work's value instead of time.
- Non-hourly fees stay under the Rule 1.5(a) reasonableness test, and efficiency gains "do not, standing alone, require a reduction in a non-hourly fee."
New York only.
Our view: 2 models, neither of them hourly
We think the hourly model should gradually fade. An hourly rate is payment for a process. If AI did it in 5 minutes, those hours didn't happen. AI is largely a black box: we check the result but can't see how the model gets there. Billing a machine process as hours of a lawyer's intellectual work is unfair.
Standardized work should get a fixed fee covering the client's needs, template adaptation and legal review. If AI made it cheaper, the client should benefit. New York doesn't require that (5A(d)); we'd do it anyway.
Complex work (negotiations, deal structuring, buying a business) gets its value from the result, so value-based pricing, success fee included, fits better. We have seen clients offer a percentage of the deal for successful negotiations. A realtor earns a percentage of a sale. Why can't a lawyer who negotiated a favorable price and closed the deal earn a fee tied to the result? Only where the rules allow it. They vary by jurisdiction, and 5A(d) is silent on deal percentages.
AI helps carry out the lawyer's strategy. Strategy, risk assessment, negotiating position and responsibility for professional decisions stay with the lawyer. AI can produce almost any draft contract, but a client hires a lawyer to make the right decision, not just to get a text.
AI should make the legal process cheaper, but not necessarily make legal expertise cheaper. It can make expertise more valuable. We will finally start selling not our time, but the value we create for the client.
A practical rule (our suggestion)
- Standardized work: fixed fee, reasonable under Rule 1.5(a).
- Complex work: a value-based or success element, result defined in writing, where your rules allow it.
- Either way: put the fee basis in writing where required (Rule 1.5(b), 22 N.Y.C.R.R. Part 1215).