The AI Disclosure Laws That Solo And Small Firms Really Need To Know About – Above the Law

Because the public launch of ChatGPT in November 2022, solo and small regulation corporations have been inundated with ethics opinions by the ABA and 20 completely different states concerning synthetic intelligence use and shopper disclosure obligations. Whereas these ethics issues are vital, the actual disclosure necessities that corporations want to fret about are rising state legal guidelines that mandate particular AI disclosures and that carry concrete penalties for noncompliance.

State AI Disclosure Legal guidelines

At present, three states—Utah, New Jersey, and Maine—have enacted laws requiring disclosure when companies, together with regulation corporations, use AI to work together with customers. What makes these legal guidelines notably vital for solo and small corporations is their potential extraterritorial attain and the precise penalties hooked up to violations.

Utah’s Synthetic Intelligence Coverage Act (AIPA) was initially handed as SB149 in 2024. The 2025 amendments by means of SB226 modified the necessary disclosures to use solely to “high-risk synthetic intelligence interactions” which embody “monetary, authorized, medical, or psychological well being recommendation or companies.” Which means that if a solo practitioner makes use of an AI chatbot or telephone receptionist to deal with preliminary shopper inquiries, schedule consultations, or present preliminary authorized data, they have to clearly disclose the AI’s involvement.

New Jersey bot regulation makes it illegal to make use of a web based bot to speak with one other particular person within the state “with the intent to mislead the opposite particular person concerning the bot’s synthetic identification” to incentivize business transactions which might embody an engagement with an lawyer. The penalties for violations are substantial: $2,500 for a primary offense, $5,000 for a second offense, and $10,000 for every subsequent violation. Equally, Maine’s AI regulation prohibits use of an AI bot to incentivize a transaction until customers are notified that they don’t seem to be interacting with a human. Civil  penalties of as much as $1000 apply for every violation.

The Extraterritorial Problem

Many solo and small corporations might assume these legal guidelines don’t apply to them in the event that they’re not bodily positioned in Utah, New Jersey, or Maine. This assumption may show expensive. Fashionable digital advertising and marketing and shopper acquisition imply that regulation corporations routinely work together with potential shoppers throughout state traces. A agency’s web site, internet advertising, or AI-powered consumption methods can attain residents of any state, probably triggering that state’s disclosure necessities.

Contemplate this sensible situation: A small immigration regulation agency in Texas makes use of an AI-powered chat system on its web site to reply frequent questions on visa purposes. If a possible shopper from Salt Lake Metropolis visits the web site and interacts with the chatbot, the agency should adjust to Utah’s disclosure necessities—despite the fact that the agency itself relies in Texas. The connection to Utah by means of the shopper’s location may set off the regulation’s utility.

The truth is that if a agency’s AI device interacts with somebody in a regulated state, the agency may face penalties no matter its personal location. That is notably difficult for small corporations which will use third-party AI companies for shopper consumption, doc evaluate, or authorized analysis with out absolutely understanding the place their potential shoppers are positioned when preliminary contact happens.

Sensible Compliance Steps

To navigate this regulatory panorama, solo and small corporations ought to implement a number of protecting measures. First, incorporate clear AI disclosure language at the start of any automated interplay, whether or not by means of chatbots, e mail automation, or telephone methods. Second, don’t depend on vendor assurances for compliance; fact-check disclosures your self. Third, preserve documentation (or insist that your vendor does) displaying when and the way AI disclosures had been supplied to guard in opposition to potential enforcement actions.

Trying Ahead

The concentrate on ethics guidelines, whereas vital, has overshadowed the extra quick authorized necessities imposed by state laws. These legal guidelines don’t merely recommend greatest practices—they mandate particular disclosures with actual penalties for noncompliance. As extra states think about related laws, the patchwork of necessities will solely turn out to be extra complicated.

Solo and small corporations should acknowledge that AI regulation extends far past bar affiliation steering. State shopper safety legal guidelines, disclosure necessities, and rising AI-specific laws create a multi-layered compliance obligation that requires quick consideration. The corporations that thrive on this new atmosphere can be people who proactively handle each the moral and authorized dimensions of AI use, making certain they meet not simply skilled requirements but additionally the rising physique of state regulatory necessities.

Carolyn Elefant is without doubt one of the nation’s most acknowledged advocates for solo and small agency legal professionals. She based MyShingle.com in 2002, the longest-running weblog for solo practitioners, the place she has revealed 1000’s of articles, sources, and guides on beginning, operating, and rising impartial regulation practices. She is the creator of Solo by Selection, broadly thought to be the definitive handbook for launching and sustaining a regulation follow, and has spoken at numerous bar occasions and authorized conferences on know-how, innovation, and regulatory reform that impacts solos and smalls. Elefant additionally develops sensible instruments just like the AI Train-In to assist small corporations undertake AI and he or she constantly champions reforms to stage the taking part in area for impartial legal professionals. Alongside this work, she runs the Regulation Places of work of Carolyn Elefant, a nationwide power and regulatory follow that handles selective complicated, high-stakes issues.