Generative AI Policy Template — What to Include

Generative AI tools are already in use across most businesses — whether leadership knows it or not. A Generative AI Policy establishes how your company and its employees can use these tools appropriately: what's permitted, what's prohibited, and how to manage the legal and operational risks that come with AI-generated work.

What Is a Generative AI Policy?

A Generative AI Policy is an internal governance document that defines your company's rules for the use of generative AI tools — large language models, image generators, code assistants, and similar technologies — in the course of business. It establishes expectations for employees and contractors, protects the company from legal and reputational risk, and ensures that AI use is consistent with your obligations to customers, regulators, and partners.

When Do You Need One?

You need a Generative AI Policy when:

  • Your employees or contractors use AI tools to produce work product — written content, code, images, analysis, customer communications
  • Your business handles confidential client information that could be inadvertently entered into AI systems
  • Your contracts or industry regulations impose restrictions on automated decision-making or AI use
  • You want to establish consistent, defensible standards before an incident happens

For most businesses with any knowledge-work component, the answer is: now.

What Should a Generative AI Policy Include?

1. Scope

Define which tools and use cases the policy covers — public AI platforms, enterprise AI tools, AI-powered features within existing software, and AI used by contractors or vendors on your behalf.

2. Approved and Prohibited Uses

Specify what employees may use generative AI for — drafting, summarization, research, code review — and what is prohibited — entering client confidential information into unsecured tools, generating content that violates third-party IP rights, using AI output without human review in high-stakes decisions.

3. Confidential and Sensitive Information

Prohibit the entry of confidential business information, personal data, trade secrets, or client information into AI tools that are not covered by a data processing agreement with your company. This is the most commonly violated provision — and the most consequential.

4. Accuracy and Human Review

Require human review and verification of AI-generated output before use. Generative AI produces plausible-sounding errors — factual inaccuracies, fabricated citations, incorrect legal or financial information. Establish that AI output is a starting point, not a final product.

5. Intellectual Property Considerations

Address the IP implications of AI-generated content: training data concerns, ownership of AI output under applicable law, and your obligations when using AI to generate content that will be published or commercialized.

6. Client and Customer Disclosures

Define whether and when you are required to disclose AI use to clients or customers — either under contract, professional ethics rules (for licensed professionals), or applicable law.

Employees must not use AI tools to reproduce or circumvent copyright protections, and must comply with the terms of service of the AI platforms they use.

8. Data Privacy Compliance

AI use must be consistent with your privacy obligations under GDPR, CCPA/CPRA, and any applicable sector-specific regulations. Employees must not use AI to process personal data in ways that are inconsistent with your Privacy Policy or Data Processing Addendums.

9. Vendor and Tool Evaluation

Establish a process for evaluating and approving AI tools before employees adopt them — particularly tools that process business or customer data. Not every AI tool in an app store meets enterprise security or privacy standards.

10. Accountability and Consequences

Define who is responsible for AI governance within the company and establish consequences for policy violations.

11. Policy Review and Updates

Given the pace of AI development, commit to regular policy reviews — at minimum annually — to ensure the policy remains current.

Common Mistakes Founders Make

Assuming the policy doesn't apply to contractors. Contractors using AI tools on your behalf create the same risks as employees. Extend the policy explicitly to contractors and vendors.

Not addressing confidential data entry. The most common AI-related data breach is not a technical hack — it's an employee entering sensitive client information into a public AI tool. This is the provision that matters most.

Treating the policy as a one-time document. AI capabilities, legal frameworks, and business use cases are all evolving rapidly. A policy written in 2023 may be materially incomplete in 2025.

No practical guidance on approved tools. Prohibiting certain uses without identifying approved alternatives puts employees in a difficult position. Pair restrictions with accessible, compliant options.

Why This Matters for Founders

Generative AI creates real legal exposure — in data privacy, IP ownership, accuracy liability, and client relationships — that most businesses haven't fully mapped. A clear policy doesn't prevent AI use; it channels it toward the uses that create value and away from the ones that create risk.

It also signals to customers, partners, and enterprise buyers that your company has thought carefully about how AI fits into your operations — an increasingly important factor in B2B procurement decisions.

Get a Lawyer-Drafted Policy Without the Lawyer Bill

Generative AI Policies drafted by attorneys typically cost $1,500–$3,000, and more for regulated industries. TalkingTree gives you the same quality without the invoice.

TalkingTree's Generative AI Policy template was built by experienced business attorneys and is available through the Contract Studio. Customize it to your tools and use cases, and make it accessible to your team — all in one platform.

  • Business membership ($59.99/mo): Full access to the Contract Studio and a library of 100+ attorney-drafted templates, plus limited e-signature included. One document alone covers the cost of your first month.
  • Enterprise membership ($149.99/mo): Everything in Business, plus unlimited e-signature — built for founders and teams managing a high volume of documents.

TalkingTree is a 501(c)(3) nonprofit. Your membership is tax-deductible, and every dollar supports making professional legal tools accessible to entrepreneurs who need them most.

Get started with TalkingTree and get access to attorney-drafted policies, a built-in signing workflow, and legal tools designed to help your business operate with confidence.

This page is for informational purposes only and does not constitute legal advice. For advice specific to your situation, consult a licensed attorney.