Legally, the most important question about residents and fellows is whether they are licensed to practice in the state where they are training. A resident who does not have either a personal license or an institutional license has no legal right to exercise independent medical judgment. This is often the case for first-year residents in states that require one year of postgraduate training for licensure. Since these residents are part of a properly supervised training program, there are seldom legal questions about their status.

The legal status of residents and fellows becomes an issue when an academic appointment is used to shelter the practice of an improperly trained or unlicensable individual: foreign medical graduates with questionable credentials, physicians with substance abuse problems, or physicians who have been disciplined by the board of medical examiners in another state. Juries and boards of medical examiners take a jaundiced view of subterfuges that allow unqualified physicians to practice on unsuspecting patients. Such personnel are not proper candidates for standard training programs. They should be accommodated in programs that explicitly recognize their disabilities and provide close supervision.

A physician receiving postgraduate training may be practicing under an institutional license, either formal or informal. Most states allow or tolerate limited medical practice by residents and fellows within a formal teaching system and under supervision. The terms of this institutional licensure are very limiting. The practice must be under genuine supervision and be limited to the institution. Institutional licensees frequently get into trouble by writing prescriptions for outpatients. Although state law may allow the physician to write medication orders on inpatients, this privilege seldom extends to outpatients. When such physicians work in a clinic, their prescription must be signed by a fully licensed physician with appropriate state and federal drug licenses.

Physicians and organizations outside the teaching institution should be careful to confirm that residents are practicing within the law before accepting them into a practice. If there is any question about the scope of the institutional licensure, practitioners should allow only independently licensed residents in their private practices and then only to the extent approved by their malpractice insurance carrier.

Besides externships, many residents accept short locum tenens, weekend call, or emergency room coverage to make extra money. Candidates for such jobs should be treated like any other physician seeking work. They must have an independent license to practice medicine and privileges that are extensive enough to cover foreseeable circumstances at any hospital at which they practice. The employing physician should ensure that they have adequate malpractice insurance coverage for the job. If a physician or hospital routinely uses moonlighting residents to provide emergency coverage, it is also a good idea to limit the amount of time the resident works in the combined programs. If the residents look upon the moonlighting as a paid rest, they are not going to be able to provide proper emergency coverage. Eventually, an overtired resident will face a major emergency with unfortunate results.