Canadian lawyers say artificial intelligence is speeding up their work—and in an industry that charges by the hour, that’s upending the core economics of running a firm, leaving them scrambling to keep clients happy. 

Billing by the hour has always been contentious. More than 70 per cent of law firm clients surveyed by B.C.-based legal technology firm Clio prefer flat fees to hourly bills. Yet law offices in Bay Street skyscrapers remain lit well into the night, filled with lawyers pressured to both handle a client roster and bill 1,750 to 1,900 hours of legal work a year, tracked every six minutes.

It’s a punishing pace that AI is now compressing. Jackie Dinsmore, managing partner of Toronto-based Caravel Law, which has 115 lawyers across Canada, recalls sorting through rooms of banker boxes as a junior lawyer. If AI could automate those tasks, she said, lawyers would have more time for “interesting, unique work.”

The question is how those productivity gains will translate into revenue. Legal tech firm Clio expects the revenue per case could fall, forcing more lawyers to bill with flat fees instead of the number of hours worked.

When Alberta lawyer Andrew Roy launched his law firm in 2020, he experimented with presenting clients with a menu of services, like preparing non-profit launch documents for $1,500, or a shareholder agreement for $1,000.

For him, the math works. If a lawyer previously charged $600 per hour to review a contract, and can now use AI to review four contracts in the same amount of time, both client and lawyer benefit from a flat fee of $200 per contract.

“I do think that it has major implications to the economics of law going forward,” said Roy, who ran the firm working with startups until 2025 but has since moved into a general counsel role. “It is going to change the way firms bill.” 

Data suggest others are slowly edging in the same direction. The share of law firm revenue from hourly billing dropped from 85 per cent in 2016 to 81 per cent in 2023, while flat-fee revenue increased to fill the gap, according to Clio.

It’s still early days, but Monica Goyal, vice president of legal innovation at Briefly Legal Support, said AI is standardizing once-bespoke legal work like non-disclosure agreements. “Unlike maybe some other technologies before, there’s been a lot of interest from lawyers” in AI, she said.

Yet abandoning the billable hour also means retreating from a business model that’s been lucrative for half a century, lawyers say, particularly for law firms that specialize in complex transactions or negotiations. While Canadian law firms have historically offered flat fees for one-time services like traffic court, immigration filings or wills, it’s harder to estimate how long a trial will take. There’s also little incentive to move away from hourly rates when they routinely surpass $500 for mid-career lawyers at large firms, according to data from Canadian Lawyer magazine, and have been increasing at twice the pace of inflation.

Most of the large Canadian law firms The Logic reached out to declined to comment on whether AI is cutting into their revenue per case by reducing billable hours.

David Cohen, chief transformation officer at Dentons Canada, said that could change in 2026 as AI meaningfully pushes law firms toward alternative-fee arrangements (AFAs) like flat fees or contingency fees. While he doesn’t foresee a total death of the billable hour—and even thinks that each hour of legal work could become more valuable in the future— he said even high-stakes cases could be broken down into a blend of billable hours with other types of fees. 

“There’s a strong correlation between the clients that are asking us about our use of AI,” said Cohen, “and those that are asking us about AFAs.”

Scott Stevenson, CEO of legal AI company Spellbook, said he sees both strategies in play. Smaller and mid-sized firms, he said, have been more willing to test alternative fee arrangements. On the other hand, many lawyers are using AI to automate day-to-day drudgery, freeing them to do more billable work.

Firms must also manage the expectations of their existing clients, Goyal said, who might not be thrilled to see itemized bills with new tech fees tacked on to pay for AI investments. 

Legal technology company Thomson Reuters, which publishes an annual report on law firm billing rates, cautioned that firms’ expenses are now rising faster than the legal fees they charge. 

“The GenAI investments that justified premium pricing [of legal services] now demand premium spending exactly when firms should be conserving cash,” the 2026 report says. “The warning lights aren’t flashing red yet, but they’re definitely amber.” 

It’s also more than a question of the bottom line. As far back as 2018, Ontario judges began admonishing lawyers who levied steep prices for tasks that could have been expedited with AI.

Jennifer Leitch, who previously practiced in a big corporate firm and is now executive director at the National Self-Represented Litigant Project, said most middle-class Canadians can’t afford a lawyer for any extended period. A menu of flat fees or unbundled services, she argued, might help someone who would otherwise go to court without a lawyer.

Meanwhile, a bigger debate is stirring on Bay Street: the idea that AI will replace the need for some lawyers altogether. Anthropic, whose CEO has warned that AI could wipe out half of entry-level white-collar jobs, launched a legal AI product this week that sparked a sharp sell-off in related software stocks.

Sometimes clients arrive at business law firm Loopstra Nixon with AI-generated documents in hand, hoping to cut down their legal bills by doing some of the work themselves, says firm chair Allan Ritchie. That strategy often backfires, he said. Off-the-shelf AI tends to generate extraneous or incorrect information that he must sift through.

“It’s a revolution, maybe, in the way some lawyers practice. But I don’t anticipate in the near term, it’s going to be a revolution in the business model.”