Privilege, Confidentiality, and AI: What Business Owners Should Understand
Artificial intelligence is quickly becoming part of everyday business operations. Business owners are using AI tools to draft emails, summarize contracts, brainstorm strategies, review policies, organize information, and answer legal questions in seconds.
There is no question that AI can be incredibly useful and used as a competitive advantage.
However, as more businesses integrate AI into their workflows, an important issue is emerging that many business owners have not fully considered yet:
What happens to confidential and legally privileged information when it is uploaded into AI platforms?
Understanding the difference between confidentiality and solicitor-client privilege (especially if you’re already using AI) becomes critically important.
Confidentiality and Privilege
People often use the terms “confidentiality” and “privilege” interchangeably, but in the legal context, they are distinct concepts.
Confidentiality
Lawyers owe clients a professional duty of confidentiality.
Generally speaking, this means lawyers must keep client information private and cannot disclose it without authorization, subject to limited exceptions.
This duty is broad and applies to information learned within the professional relationship, even if the information itself is not ultimately used in court proceedings or formal legal documents.
Confidentiality is part of the ethical and professional obligations lawyers owe to clients. Confidentiality is also the reason why your lawyer cannot reveal that you’re their client, unless you do so or it's already publicly known information.
Solicitor-Client Privilege
Solicitor-client privilege is different. Privilege is a legal protection that exists to encourage clients to communicate openly and honestly with their lawyers in order to obtain legal advice.
In Canada, solicitor-client privilege is considered a fundamental legal principle and one of the strongest protections recognized by law. When privilege applies, certain communications between a lawyer and client may be protected from disclosure to third parties, regulators, courts, or opposing parties.
In summary:
Confidentiality is a lawyer’s duty.
Privilege is the client’s legal protection.
That distinction matters. Privilege is why you can freely communicate with your lawyer, and to bring anyone else in the conversation you have to waive privilege (this is something only you can as the client, your lawyer does not have this right).
Where AI Complicates Things
AI tools are increasingly being used in ways that involve sensitive legal and business information.
Business owners are uploading:
contracts;
employment agreements;
shareholder agreements;
legal strategies;
dispute summaries;
demand letters;
lawyer emails;
confidential business plans; and
internal communications
into third-party AI platforms to summarize, review, revise, or analyze them. This raises important legal and practical questions.
For example:
Who can access that information?
How is the information stored?
Is the data retained?
Is it used to train future AI models?
What cybersecurity protections exist?
What happens if the platform experiences a breach?
Could uploading privileged communications affect privilege protections? (some courts in the United States have already ruled on this)
The challenge is that technology is evolving faster than legal frameworks, regulations, and court decisions can fully keep up. In other words, it's the wild west right now, each business owner must decide for themselves how and whether they want to incorporate AI into their business.
What We Know So Far
At this stage, there are still many unanswered questions surrounding AI and privilege. However, there are several things business owners should understand now.
Your Conversations With AI Are Not the Same as Conversations With Your Lawyer
Communications with your lawyer may be protected by solicitor-client privilege. Communications with AI platforms generally are not. That distinction is extremely important. When business owners upload legal advice, lawyer communications, contracts reviewed by counsel, or litigation-related information into third-party AI systems, they may be creating risks around confidentiality and privilege.
This does not automatically mean privilege is always lost in every situation involving AI. The law in this area is still developing, and outcomes may depend on the facts, the platform involved, contractual terms, privacy settings, and how information is handled.
The key takeaway is that privilege should not be treated casually.
Convenience Can Create Risk
One of the reasons AI adoption has happened so quickly is because it feels easy and efficient.
Need a contract summarized? Upload it. Need help responding to a legal email? Paste it in. Need a quick explanation of a dispute? Ask AI.
The trouble is that convenience can sometimes create a false sense of security. Many business owners assume uploading information into AI tools is no different than using internal software or emailing their lawyer.
That assumption may not always be accurate. Not all AI platforms operate the same way. Some platforms may retain information, some may process data differently, and some may offer stronger privacy protections than others. Business owners should understand the tools they (and their team members) are using before sharing highly sensitive information.
Practical Examples Business Owners Should Think About
Here are some examples where caution may be appropriate:
Uploading a Contract Reviewed by Your Lawyer
You receive legal advice from your lawyer on revisions to a contract and then upload the contract, comments, and legal analysis into an AI tool for further review or negotiation suggestions.
Uploading Litigation or Dispute Information
You paste emails, dispute timelines, or legal strategies into AI to help draft responses or summarize facts.
Uploading Internal Business Information
You upload confidential employee matters, shareholder disputes, financial information, or proprietary business strategies into AI systems without fully understanding how that information is stored or processed.
Again, the legal implications of these situations are still evolving. Business owners should, at minimum, recognize that these are not necessarily risk-free activities.
I’m Not Saying Businesses Should Avoid AI
AI is here to stay and it is rapidly evolving. It seems like every day there's a new model introduced, a new industry changed by it, and a new warning story. In many cases, AI can improve efficiency, organization, productivity, and access to information.
The issue is whether businesses are using AI thoughtfully and with an understanding of the potential legal implications involved. As with many things in business, the answer is not panic, it is awareness and good judgment.
Questions Business Owners Should Be Asking
Before uploading sensitive legal or business information into AI tools, business owners should consider questions like:
Is this information confidential or legally sensitive?
Does this involve communications with legal counsel?
Who can access this information?
Is the data stored or retained?
What do the platform’s terms say about data usage?
Is this information necessary to upload at all?
Should this instead be discussed directly with legal counsel?
What confidential data should I redact or remove before I upload this?
Final Thoughts
The intersection between AI, confidentiality, privacy, and privilege is still developing rapidly. Courts, regulators, lawyers, and businesses are all navigating new territory in real time.
AI can be a powerful tool, but business owners should understand that convenience does not eliminate legal risk.
A question to consider:
If everyone on your team were askied how they use AI in their day-to-day work, would you know their answers?
Many businesses are adopting AI faster than they're creating guidelines around it. Taking time to discuss AI use, confidentiality, and internal expectations can help your team use these tools thoughtfully while protecting your business and client relationships.
–
Mari Gutierrez is the founder of Encino Law, a virtual business law firm serving entrepreneurs across British Columbia. She helps business owners navigate legal issues with confidence through practical, accessible, and proactive legal guidance.
Disclaimer: This article is provided for educational and informational purposes only and does not constitute legal advice. If you require legal advice for your specific situation, please consult a qualified lawyer.
