How to Negotiate a Locum Tenens Contract: 10 Clauses That Cost Physicians Thousands

A locum tenens contract is not a formality. It's the document that determines whether you get paid when a hospital cancels your assignment three days before you fly out, whether you're covered if a patient sues you two years after your last shift, and whether you can accept a permanent offer from a facility that loves your work.

Most physicians read the rate, skim the dates, and sign. This guide covers the 10 clauses that actually matter — and the specific language that costs physicians thousands.

1. Pay Structure: What "All-In" Actually Means

Your hourly rate is not your compensation. Your total compensation is what hits your bank account after every expense is accounted for.

All-In Rate vs Base + Stipends

An "all-in" rate bundles your pay, travel, housing, malpractice, and agency overhead into one number billed to the hospital. A lower hourly rate with agency-covered housing in an expensive market can net more than a higher headline rate where you cover your own expenses.

The $50/hr "premium" on the self-covered rate mostly evaporates. And you're doing more administrative work.

What Agencies Actually Keep

Agencies typically bill the facility 30–50% above what they pay you. If you earn $300/hr, the hospital may be paying the agency $390–$450/hr. Physicians who contract directly with hospitals report earning 20–25% more — but lose credentialing support, malpractice, licensing coordination, and housing logistics. For most physicians the agency cut is worth it, but you should know what you're paying for. For a full breakdown of how agency markups work, see our guide on how locum tenens pricing works.

1099 vs W-2: The Math

A 1099 rate should be at least 10–15% higher than an equivalent W-2 rate to compensate for the full self-employment tax burden, lack of employer benefits, and administrative overhead. If you're earning $250K+ as 1099, an S-Corp election can cut your self-employment tax significantly. Our tax guide covers this in detail.

Holiday and Weekend Premiums

There is no statutory overtime for 1099 locums. If you want premium pay for holidays, weekends, or extra shifts, it must be explicitly written into the contract. Standard premiums when negotiated: holidays 1.25x–1.5x, weekend call 1.25x–1.5x, night shifts 1.1x–1.25x. If the contract doesn't specify a premium, you're working Christmas at your regular rate.

2. Cancellation Clauses: Where Physicians Lose the Most Money

This is the single most important non-rate clause in your contract.

The Asymmetry Problem

A common contract structure: the physician must give 60 days notice to cancel a shift, while the agency or hospital can cancel with no advance notice. One documented case: a physician lost close to $20,000 because the facility cancelled shifts with zero notice under exactly this arrangement.

What to Negotiate

Mutual notice periods. If you owe 60 days notice, the facility owes 60 days notice. Period.

Cancellation fees. If the facility cancels within the notice period, you should receive payment equal to the cancelled shifts, reimbursement for non-refundable travel already booked, and compensation for other assignments you turned down to hold those dates.

Guaranteed minimum hours. A weekly or monthly floor (e.g., minimum 36 hours/week) so low-census days don't destroy your income.

Mid-assignment termination. If the hospital ends your assignment early without cause, the contract should specify remaining guaranteed shifts paid out, return travel covered, and the notice period honored or compensated.

Red Flag Language

"Either party may terminate this agreement at any time with or without cause upon written notice." This sounds balanced but it's not — you've uprooted your life and turned down other work. Push for a minimum notice period and financial protection on both sides.

3. Malpractice and Tail Coverage: The $450,000 Clause

This is the clause that costs the most money when physicians get it wrong.

Occurrence vs Claims-Made

Occurrence-based: Covers any incident during the policy period regardless of when the claim is filed. More expensive annually, but no tail needed. If you performed a procedure in March 2026 and get sued in 2029, you're covered.

Claims-made: Only covers claims reported while the policy is active. If you leave and someone files a claim after your policy ends, you have no coverage unless you purchased tail. Standard locums malpractice limits: $1M per claim / $3M annual aggregate.

What Tail Coverage Costs (Real Numbers)

Tail coverage is a one-time payment — typically 150–300% of your last annual premium — to extend claims-made coverage indefinitely after it ends.

Who Pays in Locums

Most reputable agencies provide either occurrence-based malpractice (no tail needed) or claims-made with tail coverage included at no cost to you. But "standard" doesn't mean guaranteed. Some agencies bake the tail cost into your rate — your hourly rate is lower to cover it. Others don't include it at all.

Before you sign, confirm in writing: Is the policy occurrence-based or claims-made? If claims-made, is tail included at no cost? What are the coverage limits? Does coverage extend to all states where you'll practice?

Why This Is the #1 Missed Clause

A physician who works a 3-month locums assignment under a claims-made policy without tail coverage can be sued years later for an incident during that assignment and have zero coverage. No insurer to defend you. No one to pay a judgment. Your personal assets are exposed. This happens most often with physicians who switch agencies or take a gap between assignments.

4. Travel and Housing: Tax Traps and Negotiation Points

Three Models

Agency-arranged housing: The agency books and pays directly. No tax event — housing isn't reported on your 1099. Simplest, but less control over quality and location.

Housing stipend: The agency gives you a fixed dollar amount. May be reported on your 1099 as taxable income unless structured as an accountable plan reimbursement.

Self-arranged with reimbursement: You find housing, submit receipts, get reimbursed. If added to your 1099, you deduct it on Schedule C — you're taxed only on net income, but you're doing the paperwork.

GSA Per Diem Rates (FY 2026)

If you use per diem deductions instead of tracking actual receipts: Standard CONUS M&IE is $68–$92/day depending on locality. High-cost cities like NYC allow up to $342/night lodging + $92/day M&IE. Incidental expenses: $5/day flat. FY 2026 rates held flat vs FY 2025.

The One-Year Rule

If your assignment is temporary (expected to last less than one year), you can deduct travel, housing, and per diem for every day you're away from your tax home. If an assignment exceeds one year at the same location, it becomes your "tax home" and all travel deductions evaporate. This is a hard IRS rule. If you're approaching 12 months at one facility, take a break or switch locations.

What to Negotiate

Flights: booked and paid by agency (standard). Confirm who pays for changes and cancellations. Rental car: covered for remote assignments — get it in the contract. Mileage: reimbursed at IRS standard rate (67 cents/mile for 2024; confirm the current year). Parking and tolls are often forgotten — include them explicitly.

5. Non-Compete, Non-Solicitation, and Conversion Fees

Non-Compete Clauses in Locums

Typical locums non-compete: 1–2 years duration after your last shift, covering the specific facility and often affiliated facilities within the same health system.

Are they enforceable? The FTC issued a final rule banning non-competes in April 2024. A district court blocked enforcement in August 2024. The FTC moved to dismiss its own appeal in September 2025. The ban is NOT currently in effect. Non-competes remain enforceable under state law. Non-solicitation clauses and NDAs remain enforceable regardless.

Conversion Fees: The Hidden Barrier

If a hospital wants to hire you permanently after a locums assignment, the agency charges a conversion/placement fee:

The fee is paid by the hospital, not you — but it can prevent the hospital from making an offer. Some contracts include a declining scale (full fee within 6 months, 50% at 6–12 months, zero after 12 months). Negotiate this upfront. Ask what the conversion fee is and whether it declines. Some physicians negotiate a buyout clause where the fee drops to zero after a defined number of worked shifts, such as 120.

6. Credentialing Timelines: Get Financial Guarantees

Typical Timelines

What to Negotiate

Guaranteed start date. If credentialing isn't complete by the agreed date, who compensates you for the gap? Don't assume the answer is "the agency" — get it in writing.

Credentialing gap pay. A per diem or flat fee for each day the start is delayed beyond the contracted date. Agencies rarely offer this proactively, but it's negotiable — especially for in-demand specialties.

Kill provision. If credentialing exceeds a defined threshold (e.g., 90 days), either party can cancel with no penalty. This protects you from being locked into an assignment that never starts.

Parallel processing. Ensure the agency runs credentialing, licensing, and privileging simultaneously — not sequentially. Sequential processing can add 30–60 days unnecessarily.

Keep a "credentialing-ready" file updated at all times: current CV with no gaps over 30 days, board certification copies, all state license copies, DEA registrations, malpractice claims history, annual NPDB self-query, immunization records, professional references, and case logs for procedural specialties. Do not turn down other assignments while waiting for credentialing unless you have a written financial guarantee for the gap.

7. Shift Structure: Define Everything in Writing

Call Requirements

On-call coverage is often part of locums duties but must be explicitly defined with separate compensation. If call is bundled into your base rate at no extra pay, you're giving away shifts for free.

Negotiate: a defined hourly or per-shift rate for call (e.g., $75–$150/hr for phone availability, full hourly rate if called in); callback pay as a separate line item when called in from home; maximum call frequency (e.g., no more than 1 in 4 weeknights, 1 in 3 weekends); and a post-call day off for 24-hour call assignments.

Patient Census Caps

For hospitalist, EM, and primary care assignments: define maximum patients per shift or per day. If census consistently exceeds the cap, negotiate additional compensation or the right to decline admits. Get the average daily census from the facility before accepting.

Documentation and EMR

Clarify the EMR system (Epic, Cerner, Meditech) before accepting. Confirm whether orientation and training time is paid. Understand chart completion deadlines and consequences for delinquent charts. Some facilities fine physicians for late documentation — confirm this isn't in your contract.

8. Licensing and Certification Reimbursement

What Agencies Typically Cover

Important: Even if the agency covers your state license cost, the license belongs to you. It stays with you after the assignment ends — it's a permanent asset of your career, not just a one-assignment cost.

Tax Deductibility

Any licensing or certification costs NOT reimbursed by the agency are fully deductible on Schedule C as business expenses if you're 1099. This includes state licenses for all states (not just assignment states), DEA registrations, board certification and MOC fees, CME courses and materials, medical society memberships, and journal subscriptions.

9. Payment Terms: When You Actually Get Paid

Payment Cycles by Agency

The typical cycle: submit timesheet → facility approves → agency processes on next pay cycle.

The Real Bottleneck

Payment delays are almost always caused by the facility being slow to approve timesheets, not the agency being slow to pay. A facility that takes 2 weeks to approve timesheets pushes your payment out a full month from when you worked.

What to Negotiate

Maximum approval window. The contract should state the facility must approve timesheets within a defined period (e.g., 3 business days) or payment proceeds automatically.

Late payment penalties. Not common in standard agency contracts, but negotiable — especially for direct hospital contracts. Standard: 1.5% monthly interest on balances past 30 days.

Direct deposit timing. Confirm the exact payment schedule and whether there's a "startup delay" — some agencies hold the first payment for an extra cycle.

10. Red Flags: Language That Should Stop You From Signing

Indemnification / Hold Harmless

"Physician shall indemnify and hold harmless the Agency and Facility from any and all claims, damages, losses, and expenses arising from Physician's performance of services."

This makes you financially responsible for ANY claim involving your care — even if the agency or facility shares fault. Worst case: unlimited liability exceeding your malpractice coverage. Remove entirely, or cap indemnification at your malpractice policy limits.

"Reasonable" Without Numbers

Every instance of "reasonable" in a contract is a future argument you'll lose. Replace each one with a specific number:

Assignment of Rights / IP Clauses

Some contracts claim ownership of any intellectual property, educational materials, care pathways, or research you create during the assignment. For routine clinical work, the hospital has no legitimate claim to your IP. Push back or remove entirely. If you're doing any academic or research work, negotiate IP terms explicitly before signing.

Force Majeure (or Lack Thereof)

A force majeure clause protects you if external events — pandemic, natural disaster, regulatory changes — prevent you from fulfilling the contract. It's often absent because it protects the physician, not the facility. Without it, you could be held liable for breach of contract during events completely outside your control. Request its inclusion.

Asymmetric Termination

"Facility may terminate without cause upon written notice. Physician must provide 60 days written notice."

This is extremely common and extremely unfair. If you owe 60 days notice, the facility owes 60 days notice. Make termination rights symmetric — the same notice period, the same consequences for early exit, on both sides.

Scope Creep

"Physician shall provide clinical services and other duties as assigned."

"Other duties as assigned" can mean committee work, administrative tasks, coverage of additional service lines, or anything the facility decides after you've signed. Define your scope precisely: specialty, specific procedures, patient population, call expectations — and nothing else. If it's not written in, it can be added later.

Auto-Renewal

Some contracts auto-renew unless you terminate in writing within a specific window — often 60 days before expiration. Miss the window and you're locked into another term at possibly outdated rates. Calendar the termination deadline the day you sign, not the day before it's due.

Frequently Asked Questions

What is tail coverage in a locum tenens contract?

Tail coverage is a one-time payment — typically 150–300% of your last annual malpractice premium — that extends your claims-made insurance coverage indefinitely after it ends. Without tail, you have no malpractice coverage for claims filed after your policy lapses, even for incidents that happened while you were covered. Costs range from $5,000 (family medicine) to $450,000 (neurosurgery). Most reputable locums agencies include tail coverage or provide occurrence-based malpractice that doesn't require it.

Can a hospital cancel my locums assignment without notice?

Yes, if your contract allows it — and many do. A common asymmetry: the physician must give 60 days notice while the hospital can cancel with none. One documented case resulted in a physician losing nearly $20,000. Always negotiate mutual notice periods and a cancellation fee equal to lost shifts if the facility cancels within the notice window.

What is a conversion fee in locum tenens?

A conversion fee is what the agency charges the hospital if the facility wants to hire you permanently after a locums assignment. Fees range from $10,000 to $75,000+ depending on specialty. The fee applies for 1–2 years after your last shift. The hospital pays the fee, not you — but it often prevents hospitals from extending permanent offers. Negotiate a declining scale or buyout clause upfront.

Are non-compete clauses enforceable for locum tenens physicians?

Yes, as of 2026. The FTC issued a rule banning non-competes in April 2024, but a federal court blocked enforcement in August 2024 and the FTC dismissed its own appeal in September 2025. Non-competes remain enforceable under state law. Typical locums non-competes last 1–2 years and cover the specific facility plus health system affiliates. Non-solicitation clauses and NDAs are enforceable regardless of the FTC rule.

How long does it take to get paid on a locum tenens assignment?

Most agencies pay weekly or biweekly via direct deposit. The typical cycle: you submit a timesheet, the facility approves it, and the agency pays on the next cycle. Delays are almost always caused by slow facility approval. Negotiate a maximum approval window (e.g., 3 business days) and automatic payment if the facility doesn't respond in time.

Should I negotiate my locum tenens rate?

Yes. Agencies build negotiation room into their initial offers. Key leverage points: in-demand specialty, hard-to-fill location, last-minute coverage needs, multi-state licensing, and willingness to take call. Beyond rate, negotiate the total package — housing, travel, malpractice, licensing reimbursement, and call premiums often add more value than a $10/hr rate increase.

What should I look for in a locum tenens malpractice policy?

Confirm three things in writing: (1) whether the policy is occurrence-based or claims-made, (2) if claims-made, whether tail coverage is included at no cost to you, and (3) the coverage limits (standard is $1M/$3M). Occurrence-based is preferred because it covers incidents that happen during the policy period regardless of when claims are filed — no tail needed.

How do I know if my locums contract has red flags?

The biggest red flags: unlimited indemnification clauses, asymmetric termination (they can cancel freely but you can't), "reasonable" without specific numbers, intellectual property assignment clauses, scope creep language ("other duties as assigned"), missing force majeure provisions, and auto-renewal without clear opt-out deadlines. If you see any of these, negotiate changes before signing or consult a healthcare attorney.

*Need help evaluating a locum tenens contract? At Locums One, we provide transparent agreements with occurrence-based malpractice, mutual cancellation protections, and no hidden clauses.*

*For a full breakdown of how agency markups affect your pay, see our guide on how locum tenens pricing works. For the financial benefits of locum work beyond the contract, see our locum tenens benefits guide. Heading to your first assignment after signing? See our complete packing guide.*