The State Bar of California's Updated Guidance on Generative AI Says Hourly Billing Must Reflect the Time Actually Spent on a Client's Matter

On May 14, 2026, according to its ethics news page, the State Bar of California's Board of Trustees approved updated revisions to its Practical Guidance for the Use of Generative Artificial Intelligence in the Practice of Law. The guidance comes from the Bar's Standing Committee on Professional Responsibility and Conduct. The 2026 version replaces the 2023 version, the guidance says, and, "at the request of the California Supreme Court, addresses the unique challenges presented by the use of agentic AI." It says it "clarifies how existing professional responsibility obligations apply when lawyers use or rely on these technologies in the provision of legal services." Parts of it follow, not the whole.

Responsibility Stays With the Lawyer

"Critically, any use of AI must not diminish or abdicate professional judgment," it says. "A lawyer remains fully responsible for any outputs and work product generated with the assistance of AI." The more autonomy an AI system has, the more important it is, in its words, "for a lawyer to implement supervisory controls and verification mechanisms."

On agentic capabilities, which "can enable systems to autonomously perform tasks or workflows without human prompting," the guidance says lawyers "must not deploy agentic systems in a manner that allows the system to make substantive legal determinations, communicate legal advice, prepare and file pleadings, or otherwise act in a representative capacity" without meaningful lawyer supervision and review.

Hours, Flat Fees and the Fee Agreement

Beside its section on charging for work produced by generative AI, the guidance lists Rule 1.5 and sections 6147 to 6148 of the Business and Professions Code as applicable authorities. A lawyer "may use generative AI to create work product and may charge for actual time spent," the guidance says, such as crafting or refining generative AI inputs and prompts, or reviewing and editing generative AI outputs.

"Hourly billing must reflect the time actually spent on the client's matter, recognizing that generative AI may reduce the time required for certain tasks." Lawyers may consider alternative billing structures, such as flat fees, "for more predictable assignments and building the time savings created by AI use into their competitive rates for such assignments." Regardless of the billing structure chosen, fee agreements "should clearly communicate how fees and costs are calculated and the extent to which generative AI factors into the lawyer's rates." Under an hourly fee, the time a tool saves is not billed. Under a flat fee, it may be built into the rate. The fee agreement is where the guidance says a client should be told which.

Overhead and Costs Billed Separately

The treatment of generative AI costs, the guidance says, depends on whether they "constitute general overhead or recoverable expenses incurred specifically for a client's matter." Subscription fees for generative AI tools that provide general office functionality, such as drafting assistance, research capabilities or document review, "typically constitute overhead expenses similar to library maintenance or general computer systems and thus should be absorbed within the lawyer's fee rather than charged separately to clients."

"However, lawyers may charge clients for generative AI costs that are specifically incurred for the client's matter and go beyond general office operations," the guidance says, such as per use fees for specialized AI tools or custom AI implementations developed for a particular matter. When charging such costs, the lawyer must ensure the fee agreement clearly discloses that generative AI costs may be billed separately, "the charges must reasonably reflect the lawyer's actual cost, and no markup or profit element may be added without the client's informed written consent." The line runs between a tool a firm keeps for every matter and a cost it takes on for one. Where a charge falls on that line is the firm's call first, and the fee agreement is where a client can test it.

The Bar's ethics news page says the guidance "will continue to serve as a living document that is periodically revised as the technology evolves and new issues are presented."