Locum Tenens Contracts & Agencies: What Every Clinician Should Know

The agency profits on the spread, not by skimming an already-agreed number off your check. It bills the facility a 'bill rate' for every hour you work and pays you a lower 'pay rate'; the gap is the agency's markup (margin). The markup is commonly expressed against the pay rate using a formula such as (Bill Rate − Pay Rate) ÷ Pay Rate × 100, though some sources state markup as a percentage of the bill rate — always confirm which base your recruiter is quoting. Most placements land in a 30-50% markup band, with a fuller observed range of about 15-60% (and some sources report higher figures for scarce specialties or urgent fills), widening with specialty scarcity and how urgently the facility needs a body.

That margin is not pure profit — it pays for real services the agency bundles: agency-provided malpractice insurance, credentialing, state licensing fees the agency fronts, booking your travel and housing, per diem, recruiter and sales overhead, hospital contracting, and the risk the agency absorbs when a facility pays late or cancels an assignment at the last minute. For a transparency-first clinician, the point is not that markup is bad — it is that it is the biggest single lever on your take-home, and opacity around it is exactly what to question. Ask your recruiter how your rate is built and what the markup is. We unpack the math and how to use it as leverage in the agency markup deep guide.

Start by checking NALTO membership. The National Association of Locum Tenens Organizations, founded in 2001, is the industry's self-regulatory body; member firms commit to a published Code of Ethics plus best-practice and credentialing guidelines and submit to an ethics committee and dispute process. As of mid-2026 NALTO reports roughly 90 U.S. member firms (confirm the current count, as it changes). Membership is the fastest first-pass screen — but it is voluntary self-regulation, not a government accreditation, so treat it as a signal of commitment, not a guarantee.

If an agency is not a NALTO member, ask for three clinician references from prior placements and actually call them. Beyond that, weigh years in business, the quality and responsiveness of the credentialing and licensing team, willingness to be transparent about rates, peer recommendations, and how the firm handles cancellations. Working with more than one agency is normal and increases your leverage — just be aware it interacts with the non-presentation clause (below). The full screening checklist lives in choosing a locum tenens agency.

Treat 'almost everything is negotiable before you sign' as the operating principle — and get each reimbursable expense named in the contract, not promised verbally. Standard agency-covered expenses are flights/airfare, rental car or mileage, lodging (an extended-stay hotel for short assignments, a furnished apartment for longer ones), state licensing fees, credentialing costs, and the malpractice premium. Variable, must-negotiate items include per diem (meals and incidental expenses), meals, parking, baggage fees, and whether the agency pays for a new license versus only a renewal. Per diem is not universal — confirm whether your assignment offers it.

There is a tax wrinkle worth flagging but not developing here: a reimbursement is different from an expense you deduct yourself on Schedule C. Because locum clinicians are typically 1099 independent contractors, anything the agency does not reimburse falls on you — and if you drive your own car and are not reimbursed, the 2026 IRS business standard mileage rate is 72.5¢/mile (Notice 2026-10, effective January 1, 2026). For how reimbursements, deductions, and worker classification interact, see 1099 vs W-2 for locums and locum tenens tax deductions. For how to actually run the negotiation, see agency negotiation.

Five clauses carry the most risk; the granular language is in key contract clauses, but orient on these.

Cancellation / termination notice is typically 30 days' written notice from either side, often with a waiver for clinician health or emergency. Watch for asymmetric notice — the facility can drop you with little warning while you owe 30-plus days.

Indemnification / 'hold-harmless' clauses are usually one-sided (you indemnify the agency or facility). The subtle landmine: a broad indemnification can be an excluded contractual liability under your malpractice policy, meaning the insurer can deny the claim. Push for mutual language limited to gross negligence, willful misconduct, and criminal acts, capped at your insurance limits — or removal.

Restrictive covenant / non-presentation is the locum 'non-compete': if Agency A presents you to a facility, you typically cannot be presented there by another agency or take a direct job there for a set period — commonly 12 months from the date of presentation or your last date worked. It should not exceed roughly two years.

Conversion / buyout fee applies if the facility wants to hire you permanently. Often the hiring facility pays it (buyouts commonly run $30,000 or more), and some agencies reduce the buyout if you keep working locums for a set period first.

Finally, read evergreen (auto-renew) and force-majeure terms carefully — force majeure can let the agency escape obligations while leaving you unable to enforce.

No. The FTC's federal Non-Compete Rule is not in effect. A federal court in Texas (Ryan, LLC v. FTC) issued a nationwide vacatur in August 2024, and on September 5, 2025 the FTC voted 3-1 to dismiss its appeals (in the Fifth Circuit, Ryan, and the Eleventh Circuit, Properties of the Villages v. FTC) and accede to the vacatur — formally abandoning the rule, while signaling it will still pursue individual non-compete enforcement actions under its existing antitrust authority. So do not assume any federal ban protects you.

Enforceability of your contract's restrictive covenant is therefore state-by-state. California, North Dakota, and Oklahoma broadly void physician non-competes; many other states permit reasonable restraints, and several have enacted health-care-specific limits. Because the non-presentation/direct-hire restriction in your locum contract turns on the law of the state where you work, verify the rule for that state rather than relying on a national rule. This is also why the same clause can be fully enforceable in one assignment and unenforceable in the next. Restrictive-covenant detail by state is covered in key contract clauses.

This is the most important thing on the page. Most agencies provide malpractice coverage, commonly at $1M per claim / $3M aggregate limits — but 'the agency provides malpractice' does not automatically mean your tail is covered. The structure of the policy is the whole ballgame.

An occurrence policy covers any incident that happens during the policy period, whenever the claim is later filed — so no tail is needed. A claims-made policy covers only claims reported while the policy is active (for incidents occurring on or after the policy's retroactive date), which means a tail (extended reporting endorsement) is required once that coverage ends — and a tail commonly costs roughly 100-200% of the annual premium (some carriers and brokers quote 2-4x, so price it for your situation). Many agencies carry a continuously renewed blanket claims-made policy that covers all current and past locums back to a retroactive date, so the agency effectively owns the tail as long as coverage stays continuous. But this is not universal: some agencies leave the 1099 clinician to buy the tail.

Before you sign, confirm in writing: (1) occurrence or claims-made? (2) if claims-made, who pays the tail? (3) what are the limits ($1M/$3M is typical)? (4) is the carrier A-rated? (5) are you covered between assignments and after you stop working with that agency? The full breakdown is in malpractice and tail coverage.