It really seemed like we had the billable hour on the ropes.
You didn’t need to buy the most extreme threads of artificial intelligence hype to think the technology would at least take a modest bite out of hourly work and leave attorneys either agreeing to accept less money — ha — or shift to a value-based billing regime to keep the gravy train rolling.
But the hours haven’t really gone down.
The latest SMB Law Billing and Payments Report, drawn from more than 60,000 small and mid-size firms using 8am products MyCase and LawPay, reveals that the flat-fee revolution has not only failed to materialize, but the industry actually went into reverse. Flat fees made up 15 percent of all bills sent, which is down from 16 percent a year ago. That’s not a huge retreat, but with AI adoption numbers surging, the fact that flat fees aren’t headed to the moon suggests that the technology isn’t having the impact we expected. Nearly half of firms still bill entirely by the hour, while only one in ten billed purely on flat fees. Firms with 11 or more employees cut back on flat fees the most, sliding from about 16 percent to 14 percent.
The report doesn’t bury the lede:
For most of the past decade, the legal industry has been predicting a shift away from the billable hour, because clients want predictability. The data showed firms making a different choice.
It wasn’t just predictability. Lawyers can’t bill for time that doesn’t happen (well, they can, it’s just an ethical violation…), so we assumed the time had finally arrived for the billable hour to disappear. So what’s going on?
Back in March, the 8am 2026 Legal Industry Report found individual generative AI use more than doubling to 69 percent, with a majority of users reporting that the tools saved them hours every week. At that point, 22 percent of respondents predicted a broader move to flat fees. Then in July, 8am’s billing data showed hours per case climbing in nearly every practice area.
Those reports drew from different pools, but that’s a genuine disconnect. Lawyers answering surveys believe they’re saving time, and the software compiling billable hours is here to say, “no, you aren’t.” While clients whine about wanting time savings passed on to them, it’s time to confront the fact that AI — at least as it presently exists — does not save time across a matter.
Sure, it can turn out a first draft in seconds, but then a human lawyer has to spend a good chunk of the afternoon making sure the cited cases actually exist, say what the AI claims they say, and haven’t been overruled.
But the less cynical issue is that AI doesn’t do the work faster so much as finds more of it. Ask an AI tools to pressure-test an argument, and it’s handing back three angles the lawyer hadn’t thought of, and two lines of cases that would never have been pulled because there wouldn’t have ever been time. A Biglaw team has always had the resources to hurl bodies into a brainstorm like that, but for someone working alone or with a lean team, these tools are opening up work that couldn’t be done before.
Human work that couldn’t be done before.
This is what Jevons paradox looks like for law. When steam engines got more efficient in the 19th century, William Stanley Jevons noticed Britain actually burned far more coal than before. The availability of cheaper travel made finding new uses for the fuel worth pursuing. Make it cheaper to explore a research avenue and lawyers explore more research avenues.
The report doesn’t dive into the AI aspect of flat fees, opting for a more straightforward explanation:
Before choosing between flat fee and hourly, consider whether a given matter is predictable and bounded enough to price up front. If it is, a flat fee makes sense. If it isn’t, hourly protects the firm.
But that’s still an AI issue. If AI does what its most enthusiastic supporters swear it does, it compresses time spent on the matter and allows firms to cut back on expenses — and if the firm is able to do both of those things, it provides reliable baseline pricing data. Practice areas are all not created equal, but the promise of AI included smoothing out costly unpredictabilities.
Instead, AI is kicking up work lawyers didn’t have the luxury of pursuing before. Having a tireless idea generator just makes the scope of every engagement bigger.
Billing per month grew 5 to 8 percent across firm sizes, and three of the four sizes didn’t raise their hourly rates at all. That means the growth came from lawyers billing more. That doesn’t necessarily mean the lawyers are working more. It could just be capturing more worked time that went unbilled in the past. Firms with 11-plus employees billed nearly 12 percent more hours while logging fewer, pushing the share of tracked time that made it onto a bill from 44 percent to 49 percent. But at least some of that reflects time lawyers used to leave off the bill because they felt it wasn’t truly productive time, and they now seem to believe it’s worth billing.
Since this is a vendor’s data about its own customers, it’s “not representative of every law firm in the U.S. legal market.” But that also means it’s showing what’s happening at a group of firms that have self-selected into technology.
And the trend is showing up at the other end of the market too! Citi found demand for Biglaw lawyers’ time grew 4.2 percent in the first half of the year, nearly triple the normal pace. As Bloomberg Law’s Roy Strom put it, “Clients insist that AI is saving time on legal work. And yet, they are paying for more hours than ever.”
You’ve got to hand it to the billable hour. We invented a technology that put an ethical barrier on the billing model and it managed to come out as powerful as ever.
SMB Law Billing and Payments Report [8am]
Earlier: Small Law Firms Billing More Hours Per Case — The Opposite Of What AI Promised — But At Least They’re Getting Paid!
Law Firms Prepare To Automate Themselves Out Of Their Own Business Model
Billable Hour Dying So Slowly, You’d Think It’s Billing By The Hour
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news.
