ChatGPT Exec Says AI Will Replace $2000/Hr Paralegals... Who Wants To Tell Her?
Tell me you don't understand this industry without telling me you don't understand this industry.
Generative AI can’t replace lawyers yet — unless we count getting sanctioned as a core legal skill — but maybe it can handle some of those high-end paralegal duties. Like the ones you delegate to your $2000/hr paralegals!
Wait, what?
“Lawyers” are telling her this.
Look, inflation was bad for a few months there but it was never “paralegals billed out at $2000/hr” bad. Even if we generously assume the lawyers were talking about Biglaw junior associates instead of paralegals, they’re still topping out at around $1000/hr.
But this story also doesn’t make any sense from an industry perspective.
The lawyer creating that brief wouldn’t be paying “$1000-2000/hr” for whatever rough draft or cite check she’s describing, they’d be billing that to the client. So even if we believe this completely implausible example where a lawyer is paying $60 to replace a $2000/hr billable… that’s going to be a reason for lawyers NOT to adopt AI.
If the firm’s billable revenue significantly outpaces its costs there’s no incentive to shift and if paralegals brought in $2000/hr — which is $4 million a year at 100% utilization (which won’t happen, but you see where this is going) — there would never be a reason to automate.
The example only makes sense in the more realistic world where the lawyer bills out the paralegal for $200/hr but, with compensation and benefits, ends up underwater on paralegal work by the end of the year and GenAI allows the firm to eliminate a full-time employee. And they’re not probably not going to eliminate a full-time employee because no matter how many tasks GenAI can take off their plates, the underlying models are not going to replace the most human of tasks meaning — especially at the high price points this example supposes — the firm is just forfeiting a lot of revenue without recouping cost.
All of which is why one generative AI’s biggest impacts on the legal industry will be the transition away from the billable hour. Yeah, yeah, I know… we’ve heard that before. But this time the ethical rules governing lawyers are going to grease the wheels toward fixed fee billing.
Maybe no one is billing out the paralegal at $2000/hr, but whatever the rate there are still hours and hours of paralegal and associate work that AI will eliminate through speed and efficiency. And what then? Is the matter really the sum total of hours worked on it at every level, or the value that the senior lawyer’s professional judgment and team management provides through a finished product? If the winning brief took 300 hours or 800 hours shouldn’t change the value to the client. The hour, on its own, is meaningless… its only value to the industry is as a crude estimation of the worth of the final product. Something that takes longer to prepare, we all assume, reflected a more complicated problem to solve or a more refined final output or both. But if technology gets the same result in half the time, the hourly model can’t capture that.
And since professional responsibility doesn’t condone inventing hours to “estimate” the time saved, the only two options under the rules for integrating these efficiencies into the financial model are massively exploding hourly rates or adopting a fixed fee for certain critical tasks that can be based on value rather than hours.
So… maybe Friar has an unintentional point here. Unless you want to start charging $2000/hr for paralegals, it might be time to consider alternate or at least hybrid fee models.
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
