As artificial intelligence continues to reshape industries across Canada, businesses are increasingly faced with a critical question: what are the legal obligations around AI use in 2025? The short answer? It’s complicated. While there’s no standalone federal AI law currently in force, that doesn’t mean companies are operating in a legal vacuum. Here’s what you need to know about the fragmented yet evolving landscape of Canadian AI regulation — and how to prepare your organization for what’s coming next.
Canada’s Federal AI Law: On Hold, But Not Forgotten
In early 2025, Bill C-27 — which included the Artificial Intelligence and Data Act (AIDA) and the Consumer Privacy Protection Act (CPPA) — was shelved due to Parliament’s prorogation. As a result, Canada currently lacks a unified federal AI framework.
That said, the spirit of AIDA hasn’t vanished. Its focus on risk-based governance, transparency, and accountability continues to shape voluntary frameworks and provincial efforts. For now, businesses must turn to existing laws and soft guidance to manage AI responsibly.
Provincial AI & Privacy Laws: Where the Action Is
Some provinces are stepping in where the federal government left off:
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Québec: Under Law 25, Québec has imposed rigorous data privacy and automated decision-making disclosure obligations. Organizations must now notify individuals when decisions are made “exclusively through automated processing.”
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Ontario: Starting January 1, 2026, job postings must disclose if AI is used in the hiring process. This move toward mandatory transparency hints at broader workplace AI regulation on the horizon.
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Alberta: While more focused on health data and public sector use, Alberta’s privacy commissioner has released AI guidelines emphasizing accountability, risk assessment, and explainability.
Voluntary Codes & Sector Guidelines: Filling the Gaps
In the absence of enforceable federal rules, the Canadian government and regulators have issued several non-binding frameworks to help businesses use AI responsibly:
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ISED’s Generative AI Code of Conduct (2023): Encourages organizations to follow principles like fairness, safety, and human oversight when deploying generative AI systems.
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OSFI’s Model Risk Management Guideline: Financial institutions must assess and manage risks associated with AI-based models, promoting internal governance and transparency.
These resources don’t carry the weight of law, but they offer best practices that regulators may soon codify.
What Businesses Should Do Now: Proactive AI Governance
Even without a binding federal statute, businesses are expected to demonstrate responsible AI use. Here’s how:
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Map your AI systems across operations
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Conduct risk assessments for each use case
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Prepare clear, plain-language disclosures — especially for decisions affecting employment, credit, or services
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Develop internal governance structures for monitoring AI outcomes
These steps not only mitigate legal exposure but also build public trust, a growing differentiator in the era of intelligent automation.
Final Thoughts
While Canada’s federal AI law is still in limbo, that doesn’t give businesses a pass. From provincial mandates to sector-specific guidelines, AI governance is fast becoming a business imperative. Forward-thinking organizations will use this time to adopt ethical, transparent, and risk-based AI frameworks — staying ahead of the curve while earning consumer and regulator confidence. Considering AI use in your business? Give us a call. Keep in mind that a blog post isn’t legal advice and you should speak with a lawyer before taking any action on the information contained here.
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