How AI Is Shaping the Modern Legal Department

As generative AI transforms the technology world, it is also reshaping in-house legal departments at tech companies. Here are generative AI’s top seven impacts on legal departments that general counsels should build for:

1. A cascade of AI laws demands legal team attention given their constant growth, change and fragmented development

2. Increased board interest amid pressure for rapid adoption while identifying and staying within acceptable risk tolerance

3. Legal takes on the role of company educator teaching business units how to take advantage of new AI developments while managing risk

4. Legal workflows are becoming more efficient as generative AI takes on more repetitive tasks like document review and drafting

5. Workflow efficiency creates new talent opportunities by increasing the value of legal generalists who can solve ambiguous problems across multiple domains and creating new roles that bridge the gap between legal and tech

6. Vendor procurement processes and contracts become more robust as they adapt to external AI usage and navigate risks such as data storage, IP ownership, bias and inaccuracies

7. General counsels are uniquely positioned to lead by example as they stay ahead of technological developments to fulfill professional ethics obligations and meet stakeholders’ urgency in adopting generative AI

1. A cascade of AI laws demands legal team attention

AI’s impact on legal departments arrives both through the technology pervading every aspect of business, as well as through the legal and regulatory framework attempting to make sense of it. On top of reshaping the legal department to meet an AI-forward world, legal teams must also keep pace with the flurry of legal and regulatory changes and stay nimble enough to adapt to new changes. Here is a current snapshot of AI law that the legal department needs to navigate:

• In the US, over 47 states have either proposed or enacted AI legislation, creating a maze for companies to navigate on top of the tangled network of state privacy and IP laws that can also touch AI, such as the California Privacy Protection Act (CPPA), which now governs automated decision-making technology

• Federally, the US has taken a stance of deregulation toward AI. The Senate recently rejected a moratorium on states passing AI laws in the so-called “One Big Beautiful Bill Act”, while earlier this year, the “Removing Barriers” Executive Order dismantled Biden-era AI federal regulation. Agencies whose scope may include AI, such as the SEC, FTC, CFPB, EEOC, and DHHS, have new leadership and priorities compared to 2024

• Internationally, the EU, China, Japan, Hong Kong, Singapore, and South Korea rolled out guidance about the use of AI, with the EU’s AI Act being among the most robust. The UK has taken a deregulatory stance, and Canada’s AI act, known as AIDA, is currently on hold. This increases the complexity of cross-border applications, particularly with regard to data

When both AI technology and the laws governing it are in a constant state of change, in-house legal departments must stay up-to-date on new developments, and be agile enough to pivot when needed.

2. Increased board interest amid pressure for rapid adoption

AI has risen to a board-level issue given the urgency of adoption amid rapid regulatory and technological change. According to World Economic Forum research, 88% of C-suite executives are prioritizing adoption of AI for their companies. Identifying and aligning on the company’s risk tolerance and policy frameworks requires general counsels to further elevate their role as strategic thought partners to lead the company forward and withstand competition.

The SEC has indicated that companies need to identify cross-functional experts across legal, compliance, privacy, cybersecurity, and operations to develop governance frameworks for the use of AI within the business. Further, documenting AI use in technical architecture to support marketing claims and disclosures given regulators’ heightened vigilance about “AI-washing” requires cross-functional alignment with legal guidance at the fore.

3. Legal takes on the role of company educator

As the business decides on its risk tolerance, legal plays a mission-critical role in educating cross-functional teams about how to understand and evaluate the risks that different AI use cases present. Common pitfalls include creating long policy documents that are difficult to access, read, or update. Better yet to make a short, dynamic framework that is: customized to each audience, regularly updated, has relevant examples, and contributed to by other departments including engineering, product, and compliance.

These documents or frameworks should also be supplemented by live training sessions, office hours or an open-door policy for questions. The L Suite has compiled a guide on making legal playbooks that are usable and help foster a culture of compliance and a guide on how to collaborate with product and engineering to give guidance on AI best practices.

4. Legal workflows are becoming more efficient

While AI has not yet replaced lawyers, it has made lawyers’ time more efficient. In one survey conducted by the American Bar Association, 54% of lawyers were most excited about AI because it can help with “saving time [and] increasing efficiency”. Forty-six percent of legal department members use generative AI multiple times a week, with about 200 hours of time-savings per lawyer expected in 2025. The most popular legal use cases in May 2025 were:

• Document review (74%)

• Legal research (73%)

• Document summarization (72%)

• Brief or memo drafting (59%)

• Contract drafting (51%)

• Correspondence drafting (50%)

AI is uniquely positioned to scale lawyers’ time by performing repetitive or large scale work while simultaneously reducing errors, fatigue, and time to completion. This reallocation of work then allows lawyers to focus their attention on more strategic questions that can unlock company value.

5. Workflow efficiency creates new talent opportunities

As AI takes on drafting and document review, there is less demand for individuals who will take on those specific functions. However, demand for three other areas of legal talent is expected to increase. The first growth area is for lawyers who have subject matter expertise in AI law itself, given how quickly that domain is evolving.

Second, the rise of automated workflows means that legal generalists and product counsel who can solve problems across multiple domains become increasingly valuable. Companies want their lawyers to be “translators” at the intersection of law, strategy and technology in order to advise the business. The ability to advise product and business teams on rapidly-shifting laws in intersecting areas like privacy, IP, contracts, and securities law is essential.

Finally, new roles are beginning to emerge in order to bridge the gap between legal and technology. These include: AI legal prompt engineer, AI-specific product counsel, contracts, and compliance roles, as well as legal technologists who can navigate large amounts of emerging legal data.

6. Vendor procurement processes and contracts become more robust

Commercial contracts must carefully address AI-generated materials in order to navigate risks such as data ownership, IP, bias and inaccuracies in outputs–especially when those materials are externally-facing. Particular challenges include transparency about where AI is being used by external parties, restrictions on data usage, notifications for model updates, and allocation of risk and liability between the parties. These analyses shift depending on whether AI is touching data that is internal-only, client-owned, or integrated into a product that the company will sell.

Procurement processes should include cross-functional evaluation of generative AI risk and security and may need to become more robust to tackle the new range of scenarios. Common changes include stabilizing model licensing terms, scoping vendors’ right to use inputs and outputs, navigating IP concerns, disclaiming warranties, and maintaining confidentiality. It’s critical to do a thorough legal review and risk assessment of LLMs based on whose data is involved and where the outputs will be used.

7. General Counsels are uniquely positioned to lead by example

As AI adoption accelerates, executives–including general counsels–are asked to “lead from the front” to encourage responsible adoption. This involves upskilling and investing in technology expertise in order to meet the transformation that is arriving. Fortunately, staying current with technological changes is part of lawyers’ ethical duty of competence and aligns with the goals of both investors and executive leadership. Although the legal profession often defers to precedent, embracing the AI shift that is already taking place gives general counsels a powerful opportunity to shape AI adoption and create a culture where AI is used responsibly and compliantly in both their companies and the world.

Generative AI is changing virtually all aspects of technology, including the legal departments at tech companies. The shifts in the legal departments are the result of ever-expanding use cases, an intricate and rapidly-expanding legal framework, and pressure from investors and leadership to adopt AI to maintain the company’s competitive edge. Amid this backdrop, AI has reshaped the legal department so far by: creating a new legal vertical, elevating AI to a board-level issue, shifting legal into the role of educator, increasing legal team efficiency, boosting demand for new legal roles, adding complexity to vendor procurement and commercial contracts, and giving general counsels an opportunity to lead the charge in creating a culture of responsible AI use.