Locum Tenens Contract Review: What to Read Before You Sign

A locum tenens contract review is not optional — it is the single step between a good assignment and an expensive mistake. This guide covers what to read, what to negotiate, and what to walk away from before you sign any locum agreement.

Most locum physicians spend more time evaluating a facility’s EMR than they spend reading their contract. That’s a mistake. The contract governs everything that matters if something goes wrong — your malpractice coverage, your payment if an assignment is cancelled, your ability to work with other agencies, and your tax treatment as an independent contractor. Reading it carefully before you sign is not excessive caution. It’s basic professional practice.

This guide walks through the sections of a locum contract that carry the most risk and the most negotiating leverage — in the order you’re most likely to encounter them.

Independent Contractor Classification

The foundation of every locum arrangement is the independent contractor relationship. You are engaged as a 1099 contractor, not an employee — which is why your rate is higher, why you cover your own taxes, and why the S-Corp election is worth analyzing. But the 1099 label in the contract does not, by itself, protect the arrangement.

Courts and the IRS evaluate contractor status based on the real working relationship, not the paperwork. A contract that says “independent contractor” while the facility controls your schedule, your methods, and your day-to-day work like an employer is a misclassification risk regardless of what the document says. Recent physician-focused legal commentary confirms this: misclassification is most common where the locum arrangement looks like regular employment in practice even when the contract says otherwise.

The factors that support legitimate contractor status in a locum context are assignment-based work with defined start and end dates, limited facility control over clinical methods and scheduling, contractor responsibility for taxes and benefits, and a contract structure consistent with a temporary non-employee engagement. If a contract you’re reviewing gives the facility unusual control over how you practice — not just what you practice, but how — that’s worth flagging with an attorney before you sign.

Malpractice Coverage

Malpractice language is the most consequential section in any locum contract and the one most physicians skim. The two questions that matter are what type of coverage the contract provides and who pays for the tail.

Occurrence versus claims-made. Occurrence coverage protects you for any incident that happens during the coverage period, regardless of when a claim is filed. Claims-made coverage only protects you if both the incident and the claim occur while the policy is active. For locum work — where you rotate through multiple assignments and agencies — occurrence coverage is significantly cleaner. Claims-made coverage requires a tail policy when the coverage lapses, which adds cost and administrative complexity.

Tail coverage. If the contract provides claims-made coverage, confirm explicitly who is responsible for purchasing the tail when the assignment ends. Some agencies cover this automatically. Others expect the physician to purchase their own tail. A contract that is silent on tail responsibility is a contract that may leave you exposed. Do not assume coverage continues after the assignment ends — verify it in writing. The malpractice guide on this site covers the full mechanics in detail.

Coverage limits. Confirm the per-occurrence and aggregate limits the contract provides. Standard locum malpractice coverage runs $1 million per occurrence and $3 million aggregate, but this varies by agency and specialty. High-acuity specialties — emergency medicine, surgery, anesthesiology — may warrant higher limits.

Payment Terms and Cancellation

Payment terms in locum contracts are more variable than most physicians realize, and the cancellation provisions are where many physicians lose money they were counting on.

Payment structure. Confirm how and when you are paid — weekly, bi-weekly, or per assignment. Confirm what documentation is required to trigger payment (timesheets, facility sign-off, credentialing completion) and what happens if documentation is delayed on the facility’s end. Some contracts tie your first payment to credentialing completion regardless of who caused the delay.

Cancellation by the facility. What happens if the facility cancels your assignment after you have already committed time, turned down other work, or relocated? Cancellation provisions vary enormously. Some contracts provide a kill fee — a payment for reserved time if the assignment is cancelled within a defined window. Others provide nothing. Watch for asymmetry in notice requirements: it is common for contracts to require a physician to give 30 days notice to cancel while allowing the facility to cancel with as little as 24 hours notice. That imbalance is negotiable — push for parity or something close to it, particularly on longer assignments where your opportunity cost is significant.

Cancellation by you. Understand your obligations if you need to cancel or shorten an assignment. Contracts often include notice requirements and may include financial penalties for early termination. Know what you’re agreeing to before you commit.

Travel and housing. Confirm whether travel and housing are provided, reimbursed, or stipended — and what the tax treatment is. Housing stipends are tax-advantaged only if you maintain a primary residence elsewhere and are working away from home on a temporary basis. If the contract’s stipend structure doesn’t reflect this, the tax benefit may not apply. The locum pay structure guide covers stipend mechanics in detail.

Non-Compete and Non-Solicitation Clauses

Non-compete and non-solicitation clauses are among the most misunderstood provisions in locum contracts — and among the most state-dependent. There is no uniform national rule. Enforceability depends entirely on where the contract is governed and whether your state has physician-specific restrictions.

Non-competes. A non-compete clause attempts to prevent you from working for a competing agency or directly for the facility for a defined period after the assignment ends. These are not broadly enforceable nationwide. Some states ban them outright or restrict them heavily. Others allow only narrow, reasonable restraints. California is especially hostile — courts there routinely invalidate non-competes and many non-solicitation clauses unless they are tightly tied to trade-secret protection.

In 2025, Texas enacted SB 1318, a significant shift in physician contract law. Effective September 1, 2025, a physician non-compete in Texas is void and unenforceable if the physician is involuntarily discharged without good cause. The law also strictly caps physician non-competes to a maximum one-year duration and a five-mile radius from the primary practice location, and limits any buyout clause to no more than the physician’s total annual salary and wages. Notably, these protections extend beyond physicians to nurses, PAs, and dentists — making Texas one of the more protective states for locum practitioners under current law. This reflects a broader trend in state legislatures toward limiting physician restrictive covenants, particularly where they are overly broad in duration, geography, or post-termination effect.

Before signing a contract with a non-compete clause, identify which state’s law governs the agreement — it’s usually specified in the contract — and check whether that state has physician-specific restrictions. Do not assume the clause is unenforceable just because you’ve heard non-competes are hard to enforce. It depends entirely on the governing state.

Non-solicitation clauses. Non-solicitation clauses are generally more enforceable than full non-competes in most states, but they are still vulnerable if they function as a disguised restraint on practice. A reasonable non-solicitation clause protects the agency’s client relationships for a defined period. An unreasonable one effectively prevents you from working in your specialty in any market the agency serves. Know the difference and push back on scope that goes beyond what’s defensible.

Exclusivity and Agency Relationship

Most locum agencies will not submit you to a facility through multiple agencies simultaneously — they typically have exclusive relationships with specific clients. But the contract language around exclusivity is worth reading carefully.

Some agency contracts attempt to claim exclusivity over your locum work more broadly — restricting you from working with other agencies during the term of the agreement or for a period afterward. This goes beyond protecting a specific placement and begins to look like a restraint on your independent practice. Push back on broad exclusivity language that isn’t tied to a specific facility or assignment.

Working with multiple agencies across different assignments is standard practice and a legitimate way to build market knowledge and rate benchmarks. A contract that restricts this without clear justification is worth questioning.

Credentialing and Start Date Provisions

Credentialing delays are a common source of friction in locum arrangements and one of the least-discussed contract provisions. If a facility’s credentialing process runs long — which is common — the contract should specify who bears the cost of that delay.

Provisions that tie your first payment to credentialing completion without addressing who is responsible for delays can leave you in a gap where you’ve reserved time, turned down other work, and have no income while the facility processes paperwork. Ask how credentialing delays are handled before you sign. If the contract is silent, negotiate language that addresses it or get a clear written commitment from the agency on how they handle this situation.

Supervision and Scope of Practice

If the assignment involves supervising or collaborating with advanced practice providers — NPs, PAs, or CRNAs — that responsibility should be explicitly defined in the contract. Supervision adds liability exposure and administrative time that is not captured in a rate negotiated for direct patient care.

Similarly, if the assignment involves clinical responsibilities beyond what was discussed during recruitment — call coverage, procedures outside your typical scope, or solo coverage at a critical access hospital — those expectations should be in the contract before you arrive, not disclosed on your first shift.

Agency Contract Versus Facility Contract

Most locum physicians sign contracts with their agency, not directly with the facility. This is the standard structure — the agency is your employer of record for the engagement, and the agency has a separate contract with the facility. You are generally not a party to that facility contract and may not be able to see it.

This matters because the agency contract governs your rights and obligations, while the facility contract governs what the agency has committed to deliver. Discrepancies between what the recruiter described and what the facility expects — in scope, schedule, supervision, or clinical environment — are a function of this structure. The agency contract is what protects you when those discrepancies arise. Read it accordingly. Understanding how agencies make money and structure their client relationships gives useful context for evaluating what an agency contract is actually designed to protect.

Before You Sign: A Practical Checklist

Before signing any locum contract, confirm the following in writing:

Malpractice: Coverage type (occurrence or claims-made), per-occurrence and aggregate limits, and tail coverage responsibility if claims-made.

Payment: Rate, payment schedule, documentation requirements, and what triggers payment release.

Cancellation: Facility cancellation notice requirements and any kill fee for reserved time; your cancellation notice requirements and any early termination penalties.

Travel and housing: Whether provided, reimbursed, or stipended, and the tax treatment of any stipend.

Scope: Clinical responsibilities, call expectations, supervision duties, and site type — in writing, not just verbal assurances from a recruiter.

Non-compete and non-solicitation: Governing state law, duration, geographic scope, and whether physician-specific restrictions apply in that state.

Credentialing: How delays are handled and whether payment is contingent on credentialing completion regardless of cause.

Exclusivity: Whether the contract restricts your ability to work with other agencies beyond the specific placement.