Locum Tenens Contract Red Flags: What Physicians Should Never Sign

Most locum tenens contracts are written by agency or facility legal teams whose job is to protect the agency or facility — not you. That is not a criticism; it is just how contracts work. The problem is that physicians are trained to read clinical data, not contract language, and the clauses that carry the most risk are often the ones that sound the most routine. This guide covers the specific language patterns that create the most exposure for locum physicians, what clean alternatives look like, and which items are worth refusing outright versus negotiating.

1. Why Locum Contracts Deserve More Scrutiny Than Most

A locum tenens contract is not an employment offer letter. It is a legally binding agreement that governs your compensation, your liability exposure, your ability to work at that facility or in that market in the future, and in some cases your obligation to pay money back to the agency or facility under defined conditions. The stakes are higher than most physicians assume when they skim a contract and sign.

Locum contracts also have specific structural features that create risk patterns not present in standard employment agreements. You are often contracting through an agency that has its own agreement with the facility — meaning you may not know the terms of the underlying facility contract that governs your assignment. You may be working in a state with specific laws on non-competes, tail coverage, or indemnification that differ materially from the state where the agency is incorporated. And you are often under time pressure to accept an assignment quickly, which is exactly when contract review gets skipped.

The five categories below cover the clauses that generate the most disputes, the most financial exposure, and the most career-limiting outcomes for locum physicians. For a broader overview of the contract review process, see the LPG contract review guide.

2. Indemnification — The Clause That Can Cost You the Most

Indemnification clauses require one party to defend and financially protect the other from claims, losses, and legal costs. In a well-drafted locum contract, indemnification is mutual and fault-based — each party is responsible for losses caused by their own acts or omissions. In a problematic contract, the indemnification clause shifts enormous risk onto the physician, including for conduct that is not the physician’s fault.

What a red flag indemnification clause looks like: Broad catch-all language using phrases like “any and all claims,” “defend, indemnify, and hold harmless,” and “arising out of or related to your services” — with no limitation to the physician’s own acts or omissions. The most dangerous version makes the physician responsible for claims arising from the facility’s or agency’s own negligence, administrative failures, or conduct. Watch for clauses that extend to “attorney’s fees, settlements, judgments, and expenses of any kind” without a clear fault standard — this language can make you financially responsible for the other party’s legal costs even when you did nothing wrong.

What a cleaner clause looks like: Indemnification limited to losses caused by your own material breach, willful misconduct, or negligence. No coverage of the other party’s own negligence or gross negligence. Explicit exclusion of claims arising from facility operations, administrative decisions, or conduct outside your clinical role. Mutual indemnification obligations — if you are indemnifying them, they should be indemnifying you on the same terms.

What to do: Before signing any indemnification clause, ask three questions: Does this cover the other party’s own negligence? Is there a cap on my liability exposure? Is the obligation backed by insurance coverage? If the answer to the first question is yes, negotiate the language before signing. Have a physician contract attorney review any indemnification provision that uses broad catch-all language.

One critical point physicians consistently miss: standard malpractice insurance does not cover contractual indemnification obligations. If you agree to indemnify a facility for “any and all claims” and a loss occurs that falls outside your clinical care — a slip-and-fall in the facility, an administrative error, a billing dispute — your malpractice carrier has no obligation to defend or pay that claim. Broad indemnification language creates personal financial exposure that no insurance policy covers. This is the primary reason to strike or narrow overbroad indemnification clauses rather than simply accepting them.

3. Tail Coverage — The Silent Liability Trap

Tail coverage is the extended reporting endorsement that covers claims filed after a claims-made malpractice policy ends. In locum tenens, where assignments are by definition temporary, the question of who pays for tail coverage when an assignment ends is one of the most financially significant contract terms — and one of the most frequently left ambiguous.

What a red flag tail coverage clause looks like: “Physician shall be solely responsible for obtaining and paying for any tail coverage.” This language places the full cost of tail on the physician, even when the malpractice policy structure is controlled entirely by the agency or facility. Also watch for contracts that are simply silent on tail coverage — a clause that addresses malpractice coverage for the assignment period but says nothing about what happens at termination leaves you exposed. And watch for clauses that let the contract end without confirming whether tail coverage survives termination, because coverage that terminates with the agreement is not coverage at all for future claims.

What a cleaner clause looks like: Explicit statement of who is responsible for tail coverage, matched to the party that controls the malpractice policy. If the agency provides occurrence coverage, tail is a non-issue — occurrence policies cover claims regardless of when they are filed. If the agency provides claims-made coverage, the contract should clearly state whether the agency or the physician pays for tail, and the tail period covered. If the physician is responsible for tail, the cost should be disclosed before signing — tail premiums can run 150-200% of the annual premium for a claims-made policy.

What to do: Confirm in writing before accepting any assignment: is the malpractice coverage occurrence or claims-made? If claims-made, who pays for tail and what is the estimated cost? Do not assume — get it documented. When comparing agencies, malpractice coverage structure is a legitimate negotiation point. If one agency offers occurrence coverage and another requires physician-paid tail on a claims-made policy, that difference has real dollar value — use it explicitly in the conversation. See the LPG malpractice guide for the full framework on coverage types and tail coverage mechanics.

4. Cancellation Provisions — Asymmetry Is the Red Flag

Cancellation clauses define what happens when an assignment ends early — by either party. For locum physicians who have arranged travel, housing, and schedule commitments around an assignment, a late cancellation by the facility can be a significant financial and logistical problem. Problematic cancellation clauses protect the facility at the physician’s expense.

What a red flag cancellation clause looks like: The facility can cancel at any time with little or no notice and no financial consequence. The physician, by contrast, must provide 30 or 60 days’ written notice and may owe repayment of expenses or a cancellation fee for early departure. This asymmetry is the core red flag — one side bears all the cancellation risk. Also watch for “reasonable notice” language without a defined number of days, which almost always favors the party with more leverage in a dispute. And watch for clauses that allow the facility to cancel a booked shift late in the process with no obligation to reimburse travel or housing costs already committed.

What a cleaner clause looks like: Symmetrical or near-symmetrical cancellation terms — both sides provide similar notice, typically 30 days, with clearly defined exceptions for urgent circumstances such as license revocation, facility closure, or documented emergency. A minimum shift guarantee or cancellation fee if the facility terminates an assignment after the physician has committed travel and housing. Clear reimbursement language for non-refundable costs incurred in reliance on the assignment.

What to do: Negotiate cancellation symmetry explicitly before signing any assignment agreement. If the facility requires 30 days’ notice from you, you should have 30 days’ notice from them — or a financial remedy if they do not provide it. Get minimum commitment guarantees in writing for any assignment that requires significant travel or relocation cost.

5. Restrictive Covenants — Non-Competes and Non-Solicitation

Restrictive covenants in locum contracts come in two main forms: non-compete clauses that restrict where you can practice after the assignment ends, and non-solicitation clauses that restrict your ability to contact the facility directly in the future. Both are common. Both are negotiable. And both carry state-specific enforceability rules that are actively changing.

Non-compete red flags: Geographic scope that covers a broad radius around the facility — anything beyond 5-10 miles for a locum assignment is aggressive. Duration beyond one year is difficult to justify for a temporary assignment. Language that restricts you from practicing your specialty rather than just from working at that specific facility. Any non-compete in a state that has enacted healthcare-specific non-compete bans — Utah (HB270, effective May 6, 2026) and several other states have recently restricted or eliminated non-competes for healthcare workers, making such clauses unenforceable in those jurisdictions regardless of what the contract says.

Non-solicitation red flags: Non-solicitation clauses are generally more enforceable than broad non-competes and more likely to survive legal challenge. The red flag is scope — a clause that prevents you from ever working at a facility again, even years later, is different from a reasonable restriction on directly circumventing the agency relationship. Duration beyond one to two years and geographic scope beyond the specific facility are the primary negotiation targets.

The current federal landscape: The FTC’s proposed broad non-compete ban remains stalled in litigation as of 2026 and is not in effect. Enforceability of non-competes continues to turn on state law, which varies significantly and is actively evolving. A clause that is enforceable in one state may be void in another. Do not assume your contract’s choice-of-law provision resolves this — courts in the state where you actually worked may apply their own law regardless of what the contract says. Have any restrictive covenant reviewed by a physician contract attorney familiar with the specific state before signing.

6. Compensation Traps — Holdbacks, Clawbacks, and Vague Payment Terms

Compensation clauses in locum contracts look straightforward — an hourly rate, a payment schedule — until you read the fine print. Holdbacks, clawbacks, and vague payment terms are common mechanisms that can delay, reduce, or eliminate compensation you have already earned.

Holdback red flags: A portion of your compensation is retained pending “approval,” “chart completion,” or “quality review” — with no defined timeline for release and no defined standard for what constitutes completion. Holdbacks are not inherently improper, but a holdback without a clear release trigger and timeline gives the facility or agency indefinite leverage over earned compensation.

Clawback red flags: Previously paid compensation can be reclaimed if you leave before a defined period ends, without prorated forgiveness. The most aggressive version requires full repayment regardless of how far into the commitment you are. Also watch for clawback triggers tied to events outside your control — a clause that demands repayment if you exit due to facility-initiated schedule or location changes is a red flag. You should not owe money back because the facility changed the terms of the assignment.

Vague payment terms: “Payment will be made promptly” or “in a timely manner” without a defined number of days is unenforceable in any practical sense. A clean compensation clause specifies exact payment timing — Net 15 or Net 30 from invoice submission — document submission deadlines, and a defined remedy for late payment. If the contract does not specify a payment timeline, negotiate one before signing.

Productivity-based compensation: If any portion of your compensation is tied to productivity, the formula, measurement period, and any retroactive adjustment mechanism must be written out explicitly. Vague productivity language — “additional compensation based on volume” without defined metrics — is a recurring source of compensation disputes.

7. Exclusivity and Right-of-First-Refusal

Exclusivity clauses restrict your ability to work with other agencies or facilities during the assignment period. Right-of-first-refusal clauses give the facility or agency priority claim on your future availability. Both can significantly limit your income and flexibility if the language is broad enough.

Exclusivity red flags: “Exclusive services,” “may not provide services to any other facility,” or “no outside work without prior written consent” — language this broad can block moonlighting, additional locum assignments, and other professional activities without a clear business justification. Watch for exclusivity language that applies to your entire specialty rather than just the specific facility or assignment.

Right-of-first-refusal red flags: A ROFR clause that requires you to offer all future shifts or assignments to the facility first, with a long acceptance window and vague trigger conditions, gives the facility a de facto veto over your schedule without committing to any minimum engagement. A ROFR is most problematic when combined with a non-solicitation clause — together they can create a situation where the facility has first claim on your time but no obligation to use it.

What to negotiate: Exclusivity limited to the specific facility and assignment hours rather than your entire practice. ROFR windows limited to 48-72 hours rather than open-ended. Explicit carve-outs for pre-existing agency relationships and ongoing commitments.

8. Intellectual Property and Work Product

IP and work product clauses have become more common in physician contracts, particularly in consulting-adjacent arrangements and telemedicine agreements. The risk is that broad work-for-hire language can sweep in materials you created independently — clinical protocols, educational content, templates, lectures, or other professional work — and assign ownership to the facility or agency.

Red flag IP language: “All work product conceived, developed, or reduced to writing during the term of this agreement is the exclusive property of the facility.” Language this broad can cover materials you developed on your own time using your own resources, based on your pre-existing clinical methods. “Work for hire” designations and blanket assignment language that applies to everything you create during the engagement period — not just specific deliverables commissioned under the contract — are the most aggressive versions.

What a cleaner clause looks like: IP ownership limited to specific deliverables created at the facility’s direction and paid for under the agreement. Explicit carve-out for pre-existing materials, general clinical knowledge, and work created independently of the assignment. No claim on materials developed on your own time without the facility’s resources.

What to do: If you produce any external content — articles, protocols, educational materials, app concepts — confirm before signing that the IP clause does not reach those activities. Add a pre-existing IP carve-out if the contract does not already include one.

9. The Bottom Line on Contract Review

No locum contract should be signed without reading it in full. The clauses above are where the most significant financial and career risk is concentrated — but they are not always labeled clearly, and the most dangerous language is often buried in boilerplate that looks routine.

The practical checklist before signing any locum contract: confirm tail coverage responsibility in writing. Verify cancellation symmetry. Read every indemnification clause for coverage of the other party’s own negligence. Check any restrictive covenant against the law of the state where you will be working. Get payment timing defined explicitly — Net 15 or Net 30, not “promptly.” And if any clause is unclear, ambiguous, or unusually broad — have a physician contract attorney review it before you sign.

A contract review attorney who specializes in physician agreements typically charges $300-$500 for a flat-fee locum contract review — a benchmark figure for 2026, not a guaranteed quote. At the income levels locum physicians earn, that cost is trivial relative to the financial exposure a single problematic clause can create.