There is no longer a question of whether artificial intelligence (AI) will enter the legal field. According to results from a recent Thomson Reuters survey, 70% of legal professionals say they believe AI and generative AI will have a transformational impact on the legal profession within the next five years. Some firms will move faster than others, and even within firms, the progress of adoption can be diverse. In initial phases, though, most legal defense teams and corporate legal departments will focus on cutting costs: reducing paperwork and trying to optimize labour costs. 

More transformative than this, though, is the impact that AI could have on the billable hour. Lawyers work based on units of time, which can be billed out to the client for a fee.  Law firms have historically been reluctant to adopt new technologies; the legal fee structure could be part of the reason why. As law firms shift into a professional landscape transformed by AI, moving away from the billable hour could help legal defense teams stay competitive and optimize their time. 

Billable hours and the value of time

AI claims documentation platforms and other tools are reshaping the legal industry’s idea of what counts as value. Aspects of legal administration once tied to time, such as document review, citation checking, record summarization, are being automated, which changes the nature of each hour of billable time. Generative AI and other tools may provide a catalyst for different pricing options. The less time something takes, the more money the firm earns. A 2023 study from Bloomberg suggests that a third of legal work is already being moved to alternative fee arrangements, flat rate, or blended rate terms.

An article from the Harvard Law School Center on the Legal Profession suggests that what law firms actually provide is trust, expertise, and sound legal judgement. This value is less tangible to the client than the actual hours billed. When billing structures prioritize hours worked over work performed, the value to the client erodes. The largest clients start to build in-house legal teams, and smaller clients might take advantage of disruptive legal technologies. 

Moving away from the billable hour, and towards technological shifts,  is how law firms evolve. Data from Thomson Reuters reviewed financial results of US law firms over a 10 year period; the 100 most profitable firms were astute at shifting towards market needs, spent money investing in new technologies, and were efficient at balancing both demand growth and staffing projections. AI tools don’t just ‘free up’ hours, they help firms to serve more clients, build new processes, and reinvest funds in the firm. 

AI technologies add value (and meaning) to time

The billable hour isn’t inherently bad. With no perfect metric for measuring ‘bang for your buck’ the billable hour has long been a stand-in – and it has worked well enough to survive. An hourly fee is a tangible measurement of value, both to the clients and within the profession itself. Legal hours are still used as a metric for training and skill: Canadian provinces require lawyers to article for roughly 1,500 to 1,800 hours before taking the bar exam, and US lawyers must hit billable hours thresholds to advance. 

Today, legal defense teams are seriously rethinking how they bill for their time. Removing the billable hour may actually help lawyer’s well-being, since this focus on billables can lead to a troubling lack of downtime in the legal field, with many attorneys in the mindset of “if I take a day off, I’ll have to make up 8 hours somewhere else”. 

With AI legaltech solutions, firms can eliminate low-value administrative bottlenecks that trickle down to the client, and help firm leaders and lawyers spend more time training, making strategic decisions, and executing high-value legal expertise that wins them clients. With less time spent doing document review, today’s lawyer has a variety of profitable choices when charging for their time, and is able to spend more of it delivering defensible outcomes. The end result is a legal profession that holds more, not less, value for clients – and lawyers themselves.