> ## Documentation Index > Fetch the complete documentation index at: https://mso.getlemma.com/llms.txt > Use this file to discover all available pages before exploring further. # Draft clinician employment agreements > Who employs the clinicians, compensation models and their compliance edges, malpractice and tail coverage, and the fast-moving state law on physician non-competes. Clinicians are employed by the **PC**, not the MSO. Their employment agreements set compensation, malpractice coverage, duties, and restrictive covenants, and the last of those is governed by state law that changed materially in 2025 and 2026. ## Prerequisites * The PC formed and able to employ * State employment tax registrations complete * Malpractice coverage arranged * Counsel confirmation of current noncompete law in the state **In CPOM states, only the PC may employ clinicians to practice.** An MSO that employs physicians to deliver care is the prohibition itself. This is not a technicality to work around with a secondment or a staffing arrangement. ## Compensation models | Model | How it works | Compliance edge | | -------------------------------------- | ----------------------------------------------- | -------------------------------------------------- | | **Straight salary** | Fixed base | Cleanest | | **Base plus productivity** | Base plus a per-wRVU or per-encounter amount | Fine for the clinician's **own personal services** | | **Collections-based** | A percentage of the clinician's own collections | Common; verify it doesn't reach ancillaries | | **Base plus bonus on quality metrics** | Fixed plus quality incentive | Fine if metrics are clinical, not referral-based | | **Percentage of practice profit** | A share of PC net income | Rare here; the PC runs near break-even by design | **The edge to watch is compensation tied to ancillary services the clinician orders.** Paying a clinician based on their own personal services is generally workable. Paying them based on the imaging, labs, or therapy they refer to is where Stark and AKS exposure concentrates. See [Stark and anti-kickback](/concepts/compliance/stark-and-anti-kickback). ## Malpractice coverage The provision clinicians read first and administrators most often get wrong. | | Occurrence | Claims-made | | ------------------- | ------------------------------------------------------------------------ | ------------------------------------ | | **Covers** | Incidents occurring during the policy period, whenever the claim is made | Claims made during the policy period | | **After departure** | Covered | **Not covered** without tail | | **Cost** | Higher premium | Lower premium, plus tail cost later | | **Tail needed?** | No | **Yes** | **Tail coverage** (an extended reporting endorsement) covers claims made after a claims-made policy ends for incidents that occurred while it was in force. It can cost a substantial multiple of the annual premium. The agreement must state **who pays for tail**, and under what circumstances: * The employer pays on termination without cause * The clinician pays on voluntary resignation * Split, or waived after a vesting period * Some agreements have the employer pay in all cases **Unaddressed tail is a common and expensive dispute.** A departing clinician facing a five-figure tail bill they didn't expect is a clinician who becomes adversarial, and if that clinician is your friendly owner, the dispute is over the entity holding your payer contracts. Address it explicitly. ## Restrictive covenants, the law moved The federal picture: the FTC's Non-Compete Rule was vacated in 2024, the FTC dropped its appeals on September 5, 2025, and the rule was formally removed from 16 C.F.R. Part 910 effective February 12, 2026. Noncompete regulation is now **primarily a state matter**, with the FTC pursuing case-by-case enforcement.1 State law is moving fast and in one direction: | State | Status | | -------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | **Oregon** | SB 951 (2025) voids most physician noncompetes | | **California** | Long-standing general prohibition; SB 351 makes noncompete and non-disparagement clauses in provider agreements unenforceable, with narrow exceptions for sale-of-business covenants and confidentiality | | **Utah** | Healthcare-worker noncompete ban effective May 6, 2026 | | **Tennessee** | Wage-floor threshold effective July 1, 2026 | | **Virginia** | Severance-or-void rule effective July 1, 2026 | | **Washington** | Near-total ban signed, effective June 30, 2027 | | Many others | Physician-specific limits, notice requirements, or wage thresholds | **Check current law in every state before including a noncompete.** An unenforceable covenant is not merely useless — in some states including one can itself create liability, and in all states it damages recruiting. Verify at drafting time; this table will age. Alternatives that generally survive where noncompetes don't: * **Non-solicitation** of patients and employees, reasonably limited * **Confidentiality** and trade secret protection * **Notice periods** — a genuine period of required notice is often more valuable than an unenforceable noncompete * **Repayment of signing bonuses or relocation** on early departure, where lawful ## Steps State withholding and unemployment insurance in the state of practice. Benchmark against specialty survey data. Confirm nothing varies with referrals. Including that clinical judgment rests with the clinician, consistent with the MSA's carve-out. Carrier, limits, occurrence or claims-made, and **who pays tail under which circumstances**. Then draft state-specific variants rather than one national form. With and without cause, notice periods, and immediate termination for license loss or exclusion. Their employment agreement and their transfer restriction interact — termination of employment is typically a transfer trigger. ## Verify it worked * [ ] The **PC** is the employer on every clinician agreement * [ ] Compensation benchmarked and documented * [ ] Nothing varies with referral volume or value * [ ] Malpractice coverage specified, with tail responsibility stated * [ ] Restrictive covenants checked against current state law * [ ] State-specific variants used for multi-state groups * [ ] Termination for license loss or exclusion is immediate * [ ] The friendly owner's agreement cross-references the transfer restriction * [ ] Annual review calendared ## Common failure modes | Failure | Consequence | | ------------------------------------------------ | ---------------------------------------------- | | MSO listed as employer | Direct CPOM violation | | Tail responsibility unaddressed | Expensive dispute on departure | | One national noncompete form | Unenforceable or unlawful in several states | | Compensation tied to ordered ancillaries | Stark and AKS exposure | | No immediate termination on exclusion | Continued employment of an excluded individual | | Friendly owner's agreements not cross-referenced | Termination without a share transfer | ## Sources 1. FTC, [Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule](https://www.ftc.gov/news-events/news/press-releases/2025/09/federal-trade-commission-files-accede-vacatur-non-compete-clause-rule) (Sept. 5, 2025); removal of 16 C.F.R. pt. 910 effective Feb. 12, 2026, [Federal Register](https://www.federalregister.gov/documents/2026/02/12/2026-02866/revision-of-the-negative-option-rule-withdrawal-of-the-cars-rule-removal-of-the-non-compete-rule-to). State status summarized from Katz Banks Kumin, [Noncompete Agreements: What's the Status of Laws Restricting Them Nationwide?](https://katzbanks.com/employment-law-blog/noncompete-agreements-whats-the-status-of-laws-restricting-them-nationwide-march-2026-update/) (March 2026). **Verify current state law before drafting.** ## Related topics - [Structure friendly-owner compensation](/guides/formation/structure-friendly-owner-compensation.md) - [Draft the stock transfer restriction agreement](/guides/agreements/draft-stock-transfer-restriction.md) - [Credential each new provider you hire](/guides/enrollment/credential-new-providers.md) - [Stark, AKS, and why comp design is constrained](/concepts/compliance/stark-and-anti-kickback.md) - [What an MSO can and can't do](/concepts/model/what-msos-can-and-cant-do.md) - [Oregon — CPOM & MSO reference](/reference/legal/states/oregon.md) - [The complete agreement stack (checklist)](/reference/legal/agreement-stack-checklist.md)