You Can't Bill Hours the AI Saved: What ABA Opinion 512 Means for Small-Firm Billing
AI can turn a three-hour task into fifteen minutes. Under ABA Opinion 512, hourly billers bill the fifteen. Here is what that means for your fees and engagement letter.
Your AI tool drafts a demand letter in fifteen minutes. The same letter used to take three hours.
What do you bill?
If you bill by the hour, the answer is fifteen minutes. That is not our opinion. It is what the American Bar Association says in Formal Opinion 512.
This post covers what the opinion says about fees, what it means for small firms, and what to change this month.
The Short Answer
Hourly means actual time. AI does not change that.
According to the ABA's guidance on generative AI, lawyers who bill by the hour "must bill for their actual time." The tool may make the work faster. The savings go to the client, not the timesheet. (Thomson Reuters summary of Opinion 512)
Opinion 512 is ethics guidance, not a statute. Your state bar may go further. Check it before you change anything.
What the Opinion Says About Fees
There are three parts that matter to a small firm.
1. Hourly billing. Bill the time you actually spent. If AI cut the task from three hours to fifteen minutes, the entry is fifteen minutes. Reviewing and editing the AI's output counts, because that is real work.
2. Charging for AI tools. The opinion draws a line between overhead and direct costs. An AI feature built into software you already use, such as spell-check or your research platform, is overhead. You cannot bill the client for it separately.
A per-use, third-party AI service tied to one client matter may be passed through as an expense. Two conditions apply: the client agreed in advance, and the charge reflects your actual cost. No markup. (Summary via Ajax)
3. Flat and contingent fees. A flat or contingent fee "may be deemed unreasonable if the lawyer can complete the case more quickly with a GAI tool." (Summary via Ajax) Speed does not excuse you from the reasonableness test. See the ABA's own discussion in The Reasonableness of Fees When Using AI.
What This Means for Your Firm
Here is the tension. AI saves time. Hourly billing pays for time. So AI can shrink your hourly revenue if you only use it to go faster.
That is not a reason to avoid AI. It is a reason to be deliberate about where the saved time goes.
Two good uses:
- Capture work you never billed. Calls, emails, and quick reviews often go unrecorded. AI can help draft time entries from your calendar and documents, so real work gets billed.
- Take on more matters. Faster drafting lets one attorney carry more files at the same quality.
What you cannot do is pad the entry. Padding is the grievance risk.
Four Billing Models to Consider
Hourly, honest entries. Bill actual time. Note AI-assisted drafting and your review in the entry. Simple and compliant.
Flat fee. Price on the value of the outcome and the risk you carry. Keep the price defensible. If AI makes the work much faster, be ready to explain why the fee is still reasonable.
Hybrid or retainer. A monthly retainer for a defined scope. Clients like predictability. You like steady cash flow. The reasonableness test still applies.
Pass-through tool costs. Only for per-use, matter-specific tools. Get written agreement first. Charge cost, nothing more.
Fix Your Engagement Letter First
This is the cheapest risk control you have. Add three things:
- A plain statement that your firm may use AI tools in your work.
- How you bill. Hourly means actual time. Flat means the fee is for the result.
- How you handle tool charges. Say whether any are passed through, and at what cost.
Expect clients to ask: "Will AI make this cheaper?" Have an honest answer ready. If you bill hourly, yes, it should. If you bill flat, explain the value you deliver.
30-Day Checklist
Week 1: Audit.
- List every AI tool your firm uses.
- Mark each as overhead or per-matter cost.
Week 2: Decide.
- Pick a billing model for each practice area.
- Check your state bar for any stricter opinion.
Week 3: Write.
- Update the engagement letter template.
- Add a short note on AI use to your billing policy.
Week 4: Build the workflow.
- Set up AI-assisted time capture from calendar, email, and documents.
- Require an attorney to review every entry before it goes out.
- Keep a record of what the tool drafted and what you changed, in case a client disputes a bill.
Questions We Hear
Can I bill for the time I would have spent? Not on an hourly matter. Bill actual time.
Can I charge for ChatGPT or CoCounsel? Only if it is a per-use cost tied to the matter, the client agreed, and you charge no more than cost. Tools you use across the firm are overhead.
Do I need client consent? For pass-through charges, get agreement in advance. For AI use generally, check your state bar and put it in your engagement letter.
Next Step: Get a Free Audit
We work with small firms on intake, follow-up, and the systems behind billing. See how we approach practice automation and AI assistants.
If you are not sure where AI touches your billing, start with a Free Audit. We will review your tools, your engagement letter, and your time-capture workflow, and tell you what to fix first.
This post is general information, not legal advice. Read Formal Opinion 512 and your state's rules before changing your fee practices.