Billing for AI-Assisted Work in a NJ Small Firm: Is Charging Full Hourly Rate Still Ethical?

A solo attorney in Hackensack runs a brief through an AI research tool. What used to take her three hours takes forty minutes. She gets a solid first draft, checks the citations, fixes two hallucinations, and sends a polished memo to the client. Total attorney time invested: maybe an hour and fifteen minutes.

She opens her time-entry screen and stares at it.

Does she bill 3.0 hours because that's what the task "would have" taken? Does she bill 1.25 hours because that's what it actually took? Does she add a line item for the AI tool? Does she say anything to the client at all?

These are not hypothetical questions. They're the ones NJ solo and small-firm attorneys are quietly wrestling with right now, and the profession hasn't given them clean answers yet.

What NJ RPC 1.5 Actually Says (and Doesn't Say)

RPC 1.5(a) requires that a lawyer's fee be reasonable. The rule lists eight factors for evaluating reasonableness, including the time and labor required, the skill demanded, and the results obtained. Notice that the rule is written around what a task requires, not how long it historically took before AI existed.

The NJ Supreme Court has not issued a formal ethics opinion specifically addressing AI-assisted billing as of mid-2025. But the existing framework makes one thing clear: billing a client for time you did not spend, on the theory that you would have spent it without AI assistance, is a hard argument to defend under any plain reading of "reasonable fee."

The ABA weighed in with Formal Opinion 512 (2024), concluding that lawyers may not bill clients for time that AI tools saved, unless the fee agreement explicitly permits a different arrangement. While ABA opinions aren't binding on NJ attorneys, the NJSBA Committee on Professional Ethics has historically treated ABA guidance as persuasive authority. Treating Opinion 512 as irrelevant is a risk NJ practitioners shouldn't take lightly.

The Three Billing Models in Play Right Now

Attorneys handling this question in practice have settled into roughly three approaches, each with different risk profiles.

Actual time only. Bill for the hours you actually worked, period. The AI tool is absorbed as overhead, like Westlaw or your phone bill. This is the most conservative approach and the easiest to defend if a client ever challenges the invoice. The downside is that it may undervalue sophisticated AI-assisted work where the attorney's judgment, not raw hours, is the real output.

Actual time plus a disclosed AI surcharge. Some firms are adding a flat per-matter or per-task fee for AI tool use, disclosed upfront in the engagement letter. This treats AI like a disbursement rather than overhead. The key word is "disclosed." If the fee agreement doesn't mention it, adding it unilaterally to an invoice is the kind of thing that generates grievances.

Value billing. Charge a flat fee for the deliverable, agreed upon at the outset, without tying it to hours at all. If the client and attorney agree that a contract review is worth $750, it doesn't matter whether it took two hours or twenty minutes. Value billing sidesteps the time-saved problem entirely, though it requires upfront pricing discipline that many hourly-billed solos haven't developed.

The Fee Agreement Is Where This Gets Fixed (or Ignored)

Most NJ small firm engagement letters were drafted before AI tools were a billing consideration. They say something like "we bill at $X per hour for attorney time." That's it. Under that agreement, billing "phantom hours" is ethically dicey. Billing an AI surcharge without disclosure is arguably worse.

The practical fix is straightforward: update the engagement letter. A short paragraph explaining that the firm uses AI-assisted tools, that fees reflect actual attorney time plus any separately disclosed tool costs, and that the use of AI may reduce the total hours billed covers most of the exposure. It also signals to clients that you're thinking about this, which tends to build confidence rather than create anxiety.

If you're adding an AI line item as a disbursement, specify in the agreement what types of AI use trigger the charge, how it's calculated, and that the client consents. Vague language like "technology fees may apply" is the kind of drafting that looks bad in a fee arbitration.

A Note on Competence and Candor

RPC 1.1 requires competence, which the NJ courts have interpreted to include keeping up with changes in the law and in legal practice. Using AI tools is increasingly part of competent practice. But competent use also means understanding what you're billing for.

If a client ever asks "why did this take three hours when AI tools can do this in minutes?", the attorney who billed phantom time has a problem that goes beyond RPC 1.5. It touches RPC 8.4(c), which prohibits conduct involving dishonesty or misrepresentation.

The billing question isn't just an administrative detail. It's a transparency question. Get the engagement letter right, track your actual time, and decide in advance how your firm is going to treat AI tool costs. Those three steps resolve most of the ethical exposure before it starts.