Ask ChatGPT whether it thinks lawyers will be replaced by artificial intelligence, and it delivers a response that seems tailor-made to quell the fears (or hopes) of those who believe chatbots may soon dominate the delivery of legal services.
“Lawyers are increasingly using AI tools to enhance their efficiency and accuracy, focusing more on complex legal analysis, client counseling, and strategic decision-making,” it said. “So, rather than replacing lawyers, AI is reshaping how they work and improving overall legal services…it has shifted lawyers’ roles towards higher-value tasks that require human judgment, creativity, and expertise.”
But corporate counsel and law firm lawyers may be forgiven for feeling somewhat less sanguine about their job security—especially in light of recent headlines that a major tech player, Microsoft Inc., may have cut 32 in-house lawyers in a recent round of layoffs in part because of AI.
Cuts at Microsoft
In May and early July, Microsoft laid off 15,000 employees across the company—or about 7% of its global workforce.
Microsoft declined to attribute the cuts to AI, GeekWire, reported. But software engineers “bore the brunt” of many of the cuts, a “pattern that coincides with the company’s heavy investments in AI tools that automate coding tasks,” Geekwire noted.
Brad Smith, Microsoft’s president, said in a later press conference and interview that AI was “not a predominant factor” in the layoffs, blaming instead “shifting business priorities, changing market conditions, and the need to reallocate resources toward growth areas."
Smith acknowledged that AI would likely reshape jobs at Microsoft and elsewhere. But “the notion that AI productivity boosts have somehow already led to this, I don’t think that’s the story in this instance,” Smith said.
Overall, Microsoft laid off 1,135 people at its Redmond headquarters, home base for the company’s in-house legal team. The cuts represented about 2% of the overall workforce in Washington state, which is north of 50,000 employees.
Legal Department Layoffs
Thirty-two lawyers and five paralegals lost their jobs in the May and July Microsoft cuts in Washington state, Law.com reported. It was unclear if lawyers were laid off in other jurisdictions.
Microsoft did not reveal how the layoffs were distributed across the company. The in-house legal team is part of the Corporate, External and Legal Affairs (CELA) department, which includes 2,000 employees in 54 countries.
If the ratio of legal layoffs was applied evenly to the legal team, dozens of lawyers beyond the 32 identified could have lost their jobs. And it speculated that AI may have played a role. “The wild card this time around is the impact of AI, which is allowing [law] departments to automate tasks, improve efficiency and glean insights from data,” Law.com said.
Microsoft Gaming employees—many of them acquired through recent mergers—were prime targets in both rounds of layoffs. This suggests it’s unlikely the legal team suffered the broad cuts across the company.
Yet AI did have a role—albeit an indirect one—in the layoff decisions. Rather than efficiency gains from AI processes, Microsoft is cutting staff to pay for its artificial intelligence investments.
Smith, in the interview with GeekWire, said capital spending has forced the company to reduce operating costs, which is “more about the number of employees than anything else.” In the last fiscal year, Microsoft made $80 billion in capital investments, a figure “driven by the expansion of its infrastructure for training and running advanced AI models,” GeekWire reported.
A Tsunami of Regulation
Even if, as Smith suggests, AI-related job cuts are premature at this stage of the technology’s development, that day may still be on the horizon.
In 2021, Smith announced that the company was expanding the legal team to cope with growing regulatory and compliance concerns, and in an interview last year, Hossein Nowbar, the company’s chief legal officer, touted the Corporate, External, and Legal Affairs team’s efforts at integrating artificial intelligence into its workload and in coping with growing regulatory and compliance challenges.
“In the legal department, we are in inflationary times when it comes to regulation,” Nowbar said. AI, he suggested, can help rein in the potential costs and work. “We are facing a tsunami of regulation around the world. … To maximize the talent we have in the legal department to meet those challenges, we have had to think differently about the way we worked.”
Nowbar said his department has conducted “a top-down analysis of our spend with outside counsel or partners” and that the company has broken down its legal function into three broad categories—transact, comply, and advice. Microsoft, he said, is now using generative AI tools to help avoid “rebuying advice from outside counsel,” speed up the contracting process, and to streamline auditing, compliance, and data production processes.
“The timing of AI could not have been better,” Nowbar said.
‘AI Is Coming for You’
Corporate CEOs are starting to open up more about AI’s potential for wiping out jobs—particularly those held by white-collar professionals.
Ford Motor Co. Chief Executive Jim Farley said at the Aspen Ideas Festival that “artificial intelligence is going to replace literally half of all white-collar workers in the U.S., ” the Wall Street Journal noted.
Micha Kaufman, CEO of freelance marketplace Fiverr, is even more specific: “It does not matter if you are a programmer, designer, product manager, data scientist, lawyer, customer support rep, salesperson, or a finance person—AI is coming for you.”
In a column for Above the Law, Stephen Embry, a lawyer and tech law blogger, noted the CEOs’ comments and said the billable hour business model has put lawyers in a vulnerable position. “In the age of AI, there may simply be too many lawyers. We built a [business] model based on maximizing time spent,” Embry wrote. “As a result, the profession is over built and is particularly susceptible to disruption by a technology that has the potential to so substantially reduce time spent on matters.”
Bringing Work In-House
The remarks from CEOs and conclusions like those drawn by tech influencers like Embry would seem to support the much-discussed findings of a March 2023 report by Goldman Sachs on the impact of AI on economic growth. That report sent shudders through many lawyers because of its prediction that nearly half of current legal work could be handled by artificial intelligence.
A recent study, conducted by Forrester for LexisNexis, modeled the use of AI tools by the in-house legal team of a hypothetical $10 billion company. The study found that the tools, if scaled appropriately, could reduce the volume of work sent to outside counsel by 13%. Time spent on internal legal inquiries declined by 25%, and paralegals achieved a 50% time savings on administrative tasks.
The results suggest that law firms are likely to bear the brunt of cuts made by legal departments, at least in the short term. As one executive told researchers, “obscure or complex matters” that are now going to outside counsel would likely return to in-house attorneys who have access strong generative AI tools. That would potentially save his law department hundreds of thousands of dollars per year. Generative AI “presents ample opportunity for cost savings by bringing more obscure legal questions in-house,” the survey report said.
Not So Fast
Still, not all companies are convinced that artificial intelligence is ready to handle serious legal tasks. Many appear to be proceeding with significant caution, unnerved by highly publicized errors and ethical issues involving lawyers who have used AI.
Bloomberg Law reported last August that in-house and law firm leaders and legal technology experts “are adjusting their near-term expectations” about generative AI. Like Microsoft’s Smith, they see potential, but “are acknowledging that today’s AI tools are better at boosting back-office efficiency rather than redesigning how client work is handled. That takes the steam out of predicting a future without associates.”
In October, a survey by the Association of Corporate Counsel and Everlaw, an e-discovery provider, found that just 23% of in-house professionals were using generative AI and 11% believed generative AI produces tangible benefits for their departments. Lawyers surveyed said they believed gains in efficiency and effectiveness will occur as AI technology matures, but just 11% of them said they felt AI would transform the way they do their work.
Data collected by Bain Research last year may provide answers about the lack of confidence some companies have in AI. Although they have invested heavily in AI, some 43% of companies surveyed by Bain said AI could not sufficiently perform necessary tasks, and 42% were disappointed with the poor quality of AI outputs. Another 38% said their teams lacked understanding of how to use AI tools, and 29% bemoaned the lack of AI vendor quality.
A World Without Lawyers?
Bain found that, “not surprisingly, technology companies are further along in their development of generative AI use cases, and they may already have more realistic expectations” for its use. Thus, it would make sense that Microsoft, which is rapidly developing AI tools and capabilities, would be moving full-steam ahead on a transformation of the company’s legal functions.
While mass lawyer layoffs driven by AI may not be here—yet, lawyers wouldn’t be wrong to imagine a time in the not-so-distant future when the number of legal professionals contracts because of chatbots and automation. It’s certainly a prospect the gusher of recent investors in legal AI startups are counting on. In the last year, according to Crunchbase, which tracks tech investments, 79% of all legal-related startup investment—nearly $2.2 billion—has been in AI categories.
Asked recently by the Times of London how long it will be before the world has no lawyers, Eleanor Lightbody, CEO of legal AI startup Luminance, responded with a laugh: “I think we are still far out from that one,” she said. “But how many lawyers is a different question.”
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David L. Brown is a legal affairs writer and consultant, who has served as head of editorial at ALM Media, editor-in-chief of The National Law Journal and Legal Times, and executive editor of The American Lawyer. He consults on thought leadership strategy, creates in-depth content for legal industry clients, and works closely with Best Law Firms as senior content consultant.
