{ "type": "practice-guide", "canonical": "https://openagreements.org/practice-guides/non-compete/us/south-dakota", "links": [ { "rel": "self", "href": "https://openagreements.org/practice-guides/non-compete/us/south-dakota.json", "type": "application/json" }, { "rel": "alternate", "href": "https://openagreements.org/practice-guides/non-compete/us/south-dakota", "type": "text/html" }, { "rel": "alternate", "href": "https://openagreements.org/practice-guides/non-compete/us/south-dakota/markdown", "type": "text/markdown" }, { "rel": "alternate", "href": "https://openagreements.org/practice-guides/non-compete/us/south-dakota/json", "type": "application/json" } ], "data": { "topic": "non-compete", "state": "south-dakota", "frontmatter": { "title": "Non-Competes in South Dakota", "description": "A question-by-question summary of South Dakota non-compete law under SDCL chapter 53-9, including employee covenants, customer non-solicits, healthcare practitioners, sale-of-business covenants, an owner non-compete exception for transfers of ownership interests in business entities (HB 1180), independent contractors, and trade-secret alternatives.", "state": "South Dakota", "lastReviewed": "2026-07-01", "license": "CC BY 4.0", "authors": [ "steven-obiajulu" ], "summary": { "enforceability": "reasonable", "bottomLine": "South Dakota voids restraints on a lawful profession, trade, or business unless they fit a narrowly construed statutory exception, and SDCL 53-9-11 permits an employee non-compete only within its two-year, geographic, existing-customer, and like-business limits.", "keyLaw": "S.D. Codified Laws §§ 53-9-8 and 53-9-11", "exceptions": "Sale-of-goodwill (§ 53-9-9); partnership dissolution (§ 53-9-10); captive insurance agent contractors (§ 53-9-12); healthcare practitioner restrictions voidable for contracts on/after July 1, 2023; owner covenants on transfer of an ownership interest in a business entity, up to three years (HB 1180, effective July 1, 2026)", "courtNarrowing": "rewrite", "appliesToContractors": "no", "extendedForBreach": "Not addressed by statute", "maxLength": "Two years or less for employee covenants (SDCL 53-9-11)", "noticeRequirement": "None", "incomeThreshold": "None", "saleOfBusiness": "Allowed — § 53-9-9; owner covenants up to 3 years from July 1, 2026", "customerNonSolicit": "Allowed within existing-customer limits", "employeeNonSolicit": "No-hire with customer/vendor can be void" }, "about": [ "South Dakota non-compete agreements", "SDCL 53-9-8", "SDCL 53-9-11", "South Dakota employee restrictive covenants", "South Dakota customer non-solicitation agreements", "South Dakota healthcare practitioner non-competes", "South Dakota sale-of-business non-competes", "South Dakota trade secrets" ], "translations": [ { "language": "中文", "status": "planned" }, { "language": "Español", "status": "planned" }, { "language": "Português", "status": "planned" }, { "language": "Deutsch", "status": "planned" } ], "relatedForm": { "slug": "openagreements-restrictive-covenant-south-dakota" } }, "questions": [ { "slug": "employee-non-compete-enforceability", "label": "Are employee non-competes enforceable?", "heading": "Are employee non-compete agreements enforceable in South Dakota?", "answerText": "Sometimes, but only inside the statutory exception. SDCL 53-9-8 voids restraints on a lawful profession, trade, or business except for the chapter 53-9 exceptions, and SDCL 53-9-11 allows an employee covenant only within its time, geography, customer, and like-business limits.", "sources": [ { "id": "sdcl-53-9-8-void-baseline", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "S.D. Codified Laws § 53-9-8", "citation": "S.D. Codified Laws § 53-9-8.", "url": "https://sdlegislature.gov/Statutes/53-9-8", "proposition": "S.D. Codified Laws § 53-9-8 supports South Dakota's baseline rule voiding contracts that restrain a lawful profession, trade, or business except for statutory exceptions.", "verbatimQuote": "Any contract restraining exercise of a lawful profession, trade, or business is void to that extent, except as provided by §§ 53-9-9 to 53-9-12, inclusive.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-sdcl-53-9-8-void-baseline" }, { "id": "sdcl-53-9-11-employee-exception", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "S.D. Codified Laws § 53-9-11", "citation": "S.D. Codified Laws § 53-9-11.", "url": "https://sdlegislature.gov/Statutes/53-9-11", "proposition": "S.D. Codified Laws § 53-9-11 supports the employee non-compete and existing-customer non-solicit exception, including the two-year, geographic, and like-business limits.", "verbatimQuote": "Except as otherwise provided in § 53-9-11.2, an employee may agree with an employer at the time of employment or at any time during employment not to engage directly or indirectly in the same business or profession as that of the employer for any period not exceeding two years from the date of termination of the agreement and not to solicit existing customers of the employer within a specified county, first- or second-class municipality, or other specified area for any period not exceeding two years from the date of termination of the agreement, if the employer continues to carry on a like business therein.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-sdcl-53-9-11-employee-exception" }, { "id": "american-rim-narrow-exception", "authorityType": "case-law", "tier": "primary-source-backed", "title": "American Rim & Brake, Inc. v. Zoellner", "citation": "American Rim & Brake, Inc. v. Zoellner, 382 N.W.2d 421, 424 (S.D. 1986).", "url": "https://www.courtlistener.com/opinion/1585102/american-rim-brake-inc-v-zoellner/", "deepLink": "https://www.courtlistener.com/opinion/1585102/american-rim-brake-inc-v-zoellner/#:~:text=In%20reading%20the%20exception%2C%20we,against%20general%20restraints%20on%20trade.", "proposition": "American Rim supports narrow construction of the employee exception to promote South Dakota's general policy against restraints on trade.", "verbatimQuote": "In reading the exception, we must construe it narrowly so as to promote the proscription against general restraints on trade.", "date": "1986-02-26", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-american-rim-narrow-exception" }, { "id": "dolly-narrow-exception", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Farm Bureau Life Ins. Co. v. Dolly", "citation": "Farm Bureau Life Ins. Co. v. Dolly, 2018 S.D. 28, ¶ 13, 910 N.W.2d 196.", "url": "https://www.courtlistener.com/opinion/4479790/farm-bureau-life-ins-co-v-dolly/", "deepLink": "https://www.courtlistener.com/opinion/4479790/farm-bureau-life-ins-co-v-dolly/#:~:text=As%20such%2C%20SDCL%2053%2D9%2D12%20%E2%80%9Cmust,contracts%20in%20restraint%20of%20trade.%E2%80%9D", "proposition": "Dolly supports narrow construction of chapter 53-9 exceptions and treats the baseline rule as a legislative public-policy expression.", "verbatimQuote": "As such, SDCL 53-9-12 “must be construed narrowly so as to promote the prohibition against contracts in restraint of trade.”", "date": "2018-04-11", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-dolly-narrow-exception" } ] }, { "slug": "customer-nonsolicits", "label": "Are customer non-solicits enforceable?", "heading": "Are customer non-solicitation agreements enforceable in South Dakota?", "answerText": "Yes, if they are true solicitation restrictions within SDCL 53-9-11. They cannot be expanded into a ban on accepting unsolicited business from former customers.", "sources": [ { "id": "miller-unsolicited-business", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Miller v. Honkamp Krueger Financial Services, Inc.", "citation": "Miller v. Honkamp Krueger Fin. Servs., Inc., 9 F.4th 1011, 1019 (8th Cir. 2021).", "url": "https://www.courtlistener.com/opinion/5040408/cara-miller-v-honkamp-krueger-financial/", "deepLink": "https://www.courtlistener.com/opinion/5040408/cara-miller-v-honkamp-krueger-financial/#:~:text=None%20of%20the%20enumerated%20statutory,not%20to%20accept%20unsolicited%20business.", "proposition": "Miller supports the rule that an employee non-solicit under SDCL 53-9-11 cannot prohibit accepting unsolicited business.", "verbatimQuote": "None of the enumerated statutory exceptions allow for agreements not to accept unsolicited business.", "date": "2021-08-24", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-miller-unsolicited-business" }, { "id": "dolly-solicit-not-sell", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Farm Bureau Life Ins. Co. v. Dolly", "citation": "Farm Bureau Life Ins. Co. v. Dolly, 2018 S.D. 28, ¶ 10, 910 N.W.2d 196.", "url": "https://www.courtlistener.com/opinion/4479790/farm-bureau-life-ins-co-v-dolly/", "deepLink": "https://www.courtlistener.com/opinion/4479790/farm-bureau-life-ins-co-v-dolly/#:~:text=The%20circuit%20court%E2%80%99s%20conclusion%20that,reasonable%20interpretation%20of%20that%20statute.", "proposition": "Dolly supports distinguishing a permitted agreement not to solicit from an impermissible agreement not to sell to existing customers.", "verbatimQuote": "The circuit court’s conclusion that SDCL 53-9-12 permits an agreement not to solicit—rather than not to sell to—an insurer’s existing customers is the only reasonable interpretation of that statute.", "date": "2018-04-11", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-dolly-solicit-not-sell" } ] }, { "slug": "independent-contractors", "label": "Can independent contractors be bound?", "heading": "Can South Dakota independent contractors be bound by non-competes?", "answerText": "Usually not under the employee exception. In Aqreva, South Dakota's Supreme Court refused to apply SDCL 53-9-11 where the agreement said the worker was an independent contractor and not an employee.", "sources": [ { "id": "aqreva-employee-exception-limited", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Aqreva, LLC v. Eide Bailly, LLP", "citation": "Aqreva, LLC v. Eide Bailly, LLP, 2020 S.D. 59, ¶ 32, 950 N.W.2d 774.", "url": "https://www.courtlistener.com/opinion/9507869/aqreva-llc-v-eide-bailly-llp/", "deepLink": "https://www.courtlistener.com/opinion/9507869/aqreva-llc-v-eide-bailly-llp/#:~:text=Per%20the%20plain%20language%20of,to%20compete%20with%20his%20employer.%E2%80%9D", "proposition": "Aqreva supports the rule that SDCL 53-9-11 is limited to an employee covenant with an employer and did not apply to an independent consultant.", "verbatimQuote": "Per the plain language of SDCL 53-9-11, the Legislature has limited the provisions of this statute to an “employee’s covenant not to compete with his employer.”", "date": "2020-10-28", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-aqreva-employee-exception-limited" }, { "id": "sdcl-53-9-12-captive-agent", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "S.D. Codified Laws § 53-9-12", "citation": "S.D. Codified Laws § 53-9-12.", "url": "https://sdlegislature.gov/Statutes/53-9-12", "proposition": "S.D. Codified Laws § 53-9-12 supports the separate captive-insurance-agent independent-contractor exception.", "verbatimQuote": "Any independent contractor who is an insurance producer as defined in subdivision 58-1-2(16) and is a captive agent who is not an independent agent and who works exclusively for a single insurance company or an affiliated group of insurance companies, even if the single insurance company allows its captive agents to market the products of another insurance company pursuant to contract, may agree with an insurer at the time of contracting or at any time during the term of the contract:", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-sdcl-53-9-12-captive-agent" } ] }, { "slug": "no-hire-third-party", "label": "Can a no-hire deal with a customer bind a worker?", "heading": "Can a no-hire agreement with a customer or vendor restrict a South Dakota worker?", "answerText": "Not as a backdoor employee restraint. A no-hire or no-recruit clause between two businesses is enforceable only where it supplements an employee covenant that is itself valid under SDCL 53-9-11; an employer cannot bind its own worker through a contract with a third party.", "sources": [ { "id": "densmore-third-party-restraint", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Communication Technical Sys., Inc. v. Densmore", "citation": "Communication Technical Sys., Inc. v. Densmore, 1998 S.D. 87, ¶ 27, 583 N.W.2d 125.", "url": "https://www.courtlistener.com/opinion/1882124/communication-technical-systems-inc-v-densmore/", "deepLink": "https://www.courtlistener.com/opinion/1882124/communication-technical-systems-inc-v-densmore/#:~:text=Instead%2C%20CTS%20sought%20to%20bind,this%20it%20may%20not%20do.", "proposition": "Densmore supports the rule that an employer cannot restrain its own employee through a no-hire agreement with a third party where the employee has signed no valid SDCL 53-9-11 covenant.", "verbatimQuote": "Instead, CTS sought to bind its employee through an agreement with a third party. As we have stated, this it may not do.", "date": "1998-08-05", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-densmore-third-party-restraint" } ] }, { "slug": "healthcare-practitioners", "label": "What rules apply to healthcare practitioners?", "heading": "What special non-compete rules apply to South Dakota healthcare practitioners?", "answerText": "For contracts entered into on or after July 1, 2023, covered practitioner restrictions are voidable if they restrict the practitioner from practicing or otherwise providing professional services after the relationship ends.", "sources": [ { "id": "sdcl-53-9-11-2-practitioner-voidable", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "S.D. Codified Laws § 53-9-11.2", "citation": "S.D. Codified Laws § 53-9-11.2.", "url": "https://sdlegislature.gov/Statutes/53-9-11.2", "proposition": "S.D. Codified Laws § 53-9-11.2 supports the voidable rule for covered practitioner restrictions entered into on or after July 1, 2023.", "verbatimQuote": "Notwithstanding § 53-9-11, a provision of a contract, entered into on or after July 1, 2023, is voidable if it restricts a practitioner, as defined in § 53-9-11.1, from practicing or otherwise providing professional services in accordance with the applicable scope of practice, after the conclusion of the practitioner's employment or after the dissolution of a partnership or other form of professional relationship.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-sdcl-53-9-11-2-practitioner-voidable" }, { "id": "sdcl-53-9-11-1-practitioner-list", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "S.D. Codified Laws § 53-9-11.1", "citation": "S.D. Codified Laws § 53-9-11.1.", "url": "https://sdlegislature.gov/Statutes/53-9-11.1", "proposition": "S.D. Codified Laws § 53-9-11.1 supports the broad statutory definition of practitioner — enumerating physicians, physician assistants, emergency medical personnel, and many other licensed clinical roles — for section 53-9-11.2.", "verbatimQuote": "For purposes of § 53-9-11.2, a practitioner means: (1) A physician licensed in accordance with chapter 36-4; (2) A physician assistant licensed in accordance with chapter 36-4A; (3) A paramedic or emergency medical technician licensed in accordance with chapter 36-4B; (4) A respiratory care practitioner licensed in accordance with chapter 36-4C; (5) A chiropractor licensed in accordance with chapter 36-5;", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-sdcl-53-9-11-1-practitioner-list" }, { "id": "sdcl-53-9-11-2-practitioner-exceptions", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "S.D. Codified Laws § 53-9-11.2", "citation": "S.D. Codified Laws § 53-9-11.2(1)-(2).", "url": "https://sdlegislature.gov/Statutes/53-9-11.2", "proposition": "S.D. Codified Laws § 53-9-11.2 supports the sale-of-practice and compliant solicitation exceptions for practitioner contracts.", "verbatimQuote": "This section does not apply to any contractual provision that: (1) Is effective upon the sale of a practice or interest in a practice; or (2) Restricts a practitioner or community services provider from soliciting current patients or clients of the former employer, partnership, or other professional relationship, provided the solicitation complies with the geographic and temporal limitations as referenced in § 53-9-11.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-sdcl-53-9-11-2-practitioner-exceptions" } ] }, { "slug": "sale-of-business", "label": "What about sale-of-business covenants?", "heading": "Are sale-of-business non-competes enforceable in South Dakota?", "answerText": "Yes, when they fit the sale-of-goodwill exception and stay within its limits. SDCL 53-9-9 allows a seller of goodwill to refrain from carrying on a similar business in a specified area while the buyer or successor carries on a like business there.", "sources": [ { "id": "sdcl-53-9-9-goodwill-exception", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "S.D. Codified Laws § 53-9-9", "citation": "S.D. Codified Laws § 53-9-9.", "url": "https://sdlegislature.gov/Statutes/53-9-9", "proposition": "S.D. Codified Laws § 53-9-9 supports the sale-of-goodwill exception for a similar-business restraint in a specified area.", "verbatimQuote": "Any person who sells the good will of a business may agree with the buyer to refrain from carrying on a similar business within a specified county, city, or other specified area, as long as the buyer or person deriving title to the good will from the seller carries on a like business within the specified geographical area.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-sdcl-53-9-9-goodwill-exception" }, { "id": "franklin-overbroad-goodwill", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Franklin v. Forever Venture, Inc.", "citation": "Franklin v. Forever Venture, Inc., 2005 S.D. 53, ¶ 14, 696 N.W.2d 545.", "url": "https://www.courtlistener.com/opinion/901375/franklin-v-forever-venture-inc/", "deepLink": "https://www.courtlistener.com/opinion/901375/franklin-v-forever-venture-inc/#:~:text=Therefore%2C%20to%20the%20extent%20that,void%20as%20against%20public%20policy.", "proposition": "Franklin supports narrowing sale-of-goodwill covenants that exceed the statutory purpose of preventing similar detrimental competition.", "verbatimQuote": "Therefore, to the extent that the agreement may restrain Franklin from activities which could not fairly be characterized as \"carrying on a similar business,\" it is void as against public policy.", "date": "2005-04-27", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-franklin-overbroad-goodwill" }, { "id": "franklin-similar-business", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Franklin v. Forever Venture, Inc.", "citation": "Franklin v. Forever Venture, Inc., 2005 S.D. 53, ¶ 13, 696 N.W.2d 545.", "url": "https://www.courtlistener.com/opinion/901375/franklin-v-forever-venture-inc/", "deepLink": "https://www.courtlistener.com/opinion/901375/franklin-v-forever-venture-inc/#:~:text=We%20conclude%20that%20a%20determination,are%20isolated%2C%20insubstantial%2C%20or%20non%2Ddetrimental.", "proposition": "Franklin supports the similar-business analysis for sale-of-goodwill covenants.", "verbatimQuote": "We conclude that a determination of what constitutes \"carrying on a similar business\" in SDCL 53-9-9 should not include businesses or activities that are isolated, insubstantial, or non-detrimental.", "date": "2005-04-27", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-franklin-similar-business" }, { "id": "sdcl-53-9-10-partnership-dissolution", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "S.D. Codified Laws § 53-9-10", "citation": "S.D. Codified Laws § 53-9-10.", "url": "https://sdlegislature.gov/Statutes/53-9-10", "proposition": "S.D. Codified Laws § 53-9-10 supports the partnership-dissolution exception, limited to the same municipality where the partnership transacted business.", "verbatimQuote": "Partners may, upon or in anticipation of a dissolution of the partnership, agree that none of them will carry on a similar business within the same municipality where the partnership business has been transacted or within a specified part thereof.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-sdcl-53-9-10-partnership-dissolution" }, { "id": "hb-1180-owner-entity-transfer", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "S.D. House Bill 1180 (2026)", "citation": "2026 S.D. House Bill 1180, § 1 (to be codified at SDCL ch. 53-9) (eff. July 1, 2026).", "url": "https://sdlegislature.gov/Session/Bill/27031", "proposition": "House Bill 1180, enacted in 2026 and effective July 1, 2026, supports a new statutory exception validating an owner covenant tied to the transfer of an ownership interest in a business entity, within the entity's specified geographic area and for up to three years from the date of transfer.", "verbatimQuote": "In any governing document of a business entity, or as part of a contract for the purchase, sale, or transfer of an ownership interest in the entity, the parties may agree that an owner, after the transfer of the interest in the entity, may not engage, directly or indirectly, in the same or similar type of business conducted by the entity during the owner's period of ownership, within the specified geographic area in which the entity conducts business, for a period not exceeding three years from the date of transfer.", "date": "2026-03-12", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-hb-1180-owner-entity-transfer" } ] }, { "slug": "overbroad-covenants", "label": "Will courts narrow overbroad covenants?", "heading": "Will South Dakota courts narrow an overbroad non-compete?", "answerText": "Sometimes. South Dakota recognizes partial enforcement, but that does not let a drafter ignore the statute; the court modifies only to conform the covenant to statutory limits.", "sources": [ { "id": "franklin-partial-enforcement", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Franklin v. Forever Venture, Inc.", "citation": "Franklin v. Forever Venture, Inc., 2005 S.D. 53, ¶ 15, 696 N.W.2d 545.", "url": "https://www.courtlistener.com/opinion/901375/franklin-v-forever-venture-inc/", "deepLink": "https://www.courtlistener.com/opinion/901375/franklin-v-forever-venture-inc/#:~:text=Yet%2C%20despite%20the%20covenant%20being,not%20invalidate%20the%20entire%20provision.", "proposition": "Franklin supports South Dakota's partial-enforcement rule for an overbroad non-compete provision.", "verbatimQuote": "Yet, despite the covenant being overbroad in its restraint, we need not invalidate the entire provision.", "date": "2005-04-27", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-franklin-partial-enforcement" }, { "id": "rezatto-divisible-nda", "authorityType": "case-law", "tier": "primary-source-backed", "title": "1st American Systems, Inc. v. Rezatto", "citation": "1st American Systems, Inc. v. Rezatto, 311 N.W.2d 51, 57 (S.D. 1981).", "url": "https://www.courtlistener.com/opinion/2193337/1st-american-systems-inc-v-rezatto/", "deepLink": "https://www.courtlistener.com/opinion/2193337/1st-american-systems-inc-v-rezatto/#:~:text=The%20trial%20court%20erred%20in,a%20general%20restraint%20on%20trade.", "proposition": "Rezatto supports divisibility between invalid non-compete restraints and enforceable nondisclosure restrictions.", "verbatimQuote": "The trial court erred in completely voiding the instant contract since it is divisible and paragraph 7 is not a general restraint on trade.", "date": "1981-08-19", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-rezatto-divisible-nda" }, { "id": "miller-no-new-exception", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Miller v. Honkamp Krueger Financial Services, Inc.", "citation": "Miller v. Honkamp Krueger Fin. Servs., Inc., 9 F.4th 1011, 1019 (8th Cir. 2021).", "url": "https://www.courtlistener.com/opinion/5040408/cara-miller-v-honkamp-krueger-financial/", "deepLink": "https://www.courtlistener.com/opinion/5040408/cara-miller-v-honkamp-krueger-financial/#:~:text=We%20will%20not%20read%20into,Dakota%20legislature%20did%20not%20adopt.", "proposition": "Miller supports refusing to read a non-statutory unsolicited-business exception into SDCL 53-9-11.", "verbatimQuote": "We will not read into the statute an exception that the South Dakota legislature did not adopt.", "date": "2021-08-24", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-miller-no-new-exception" } ] }, { "slug": "consideration-termination", "label": "Does consideration or termination matter?", "heading": "Does continued employment or termination status matter for South Dakota non-competes?", "answerText": "Yes, but carefully. SDCL 53-9-11 permits an employee to agree at the time of employment or during employment, while older case law treats continued employment as sufficient consideration in that setting.", "sources": [ { "id": "sdcl-53-9-11-during-employment", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "S.D. Codified Laws § 53-9-11", "citation": "S.D. Codified Laws § 53-9-11.", "url": "https://sdlegislature.gov/Statutes/53-9-11", "proposition": "S.D. Codified Laws § 53-9-11 supports allowing an employee covenant at the time of employment or during employment.", "verbatimQuote": "Except as otherwise provided in § 53-9-11.2, an employee may agree with an employer at the time of employment or at any time during employment not to engage directly or indirectly in the same business or profession as that of the employer for any period not exceeding two years from the date of termination of the agreement and not to solicit existing customers of the employer within a specified county, first- or second-class municipality, or other specified area for any period not exceeding two years from the date of termination of the agreement, if the employer continues to carry on a like business therein.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-sdcl-53-9-11-during-employment" }, { "id": "zakinski-continued-employment", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Central Monitoring Service, Inc. v. Zakinski", "citation": "Central Monitoring Serv., Inc. v. Zakinski, 1996 S.D. 116, 553 N.W.2d 513.", "url": "https://www.courtlistener.com/opinion/899991/central-monitoring-service-inc-v-zakinski/", "deepLink": "https://www.courtlistener.com/opinion/899991/central-monitoring-service-inc-v-zakinski/#:~:text=That%20the%20Non%2DCompete%20and%20Confidentiality,to%20be%20binding%20and%20enforceable.", "proposition": "Zakinski supports the older South Dakota rule that continued employment can be sufficient consideration for a non-compete signed during employment.", "verbatimQuote": "That the Non-Compete and Confidentiality Agreement executed by Zakinski on June 9, 1992, required no additional consideration to be binding and enforceable.", "date": "1996-09-18", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-zakinski-continued-employment" }, { "id": "zakinski-fired-no-fault", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Central Monitoring Service, Inc. v. Zakinski", "citation": "Central Monitoring Serv., Inc. v. Zakinski, 1996 S.D. 116, 553 N.W.2d 513.", "url": "https://www.courtlistener.com/opinion/899991/central-monitoring-service-inc-v-zakinski/", "deepLink": "https://www.courtlistener.com/opinion/899991/central-monitoring-service-inc-v-zakinski/#:~:text=However%2C%20if%20an%20employee%20is,whether%20the%20agreement%20is%20reasonable.", "proposition": "Zakinski supports added reasonableness review when an employee is fired through no fault of the employee.", "verbatimQuote": "However, if an employee is fired for no fault of his own, the court needs to go further to determine whether the agreement is reasonable.", "date": "1996-09-18", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-zakinski-fired-no-fault" } ] }, { "slug": "choice-of-law", "label": "Can another state's law save a covenant?", "heading": "Can an out-of-state choice-of-law clause save a South Dakota non-compete?", "answerText": "Not if applying the other state's law would contravene South Dakota public policy. Miller applied South Dakota law despite an Iowa choice-of-law clause because the challenged non-solicit violated South Dakota policy in part.", "sources": [ { "id": "miller-choice-law-public-policy", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Miller v. Honkamp Krueger Financial Services, Inc.", "citation": "Miller v. Honkamp Krueger Fin. Servs., Inc., 9 F.4th 1011, 1018 (8th Cir. 2021).", "url": "https://www.courtlistener.com/opinion/5040408/cara-miller-v-honkamp-krueger-financial/", "deepLink": "https://www.courtlistener.com/opinion/5040408/cara-miller-v-honkamp-krueger-financial/#:~:text=Under%20South%20Dakota%20law%2C%20courts,contravene%20South%20Dakota%20public%20policy.", "proposition": "Miller supports refusing an out-of-state choice-of-law clause when the restrictive covenant violates South Dakota public policy.", "verbatimQuote": "Under South Dakota law, courts honor contractual choice-of-law provisions unless they contravene South Dakota public policy.", "date": "2021-08-24", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-miller-choice-law-public-policy" } ] }, { "slug": "trade-secrets-ndas", "label": "Are trade-secret and NDA tools available?", "heading": "Are trade-secret and confidentiality protections still available in South Dakota?", "answerText": "Yes. South Dakota non-compete limits do not eliminate confidentiality and trade-secret tools, and the South Dakota Uniform Trade Secrets Act includes fee-shifting and a three-year limitations period.", "sources": [ { "id": "rezatto-confidentiality-public-policy", "authorityType": "case-law", "tier": "primary-source-backed", "title": "1st American Systems, Inc. v. Rezatto", "citation": "1st American Systems, Inc. v. Rezatto, 311 N.W.2d 51, 57 (S.D. 1981).", "url": "https://www.courtlistener.com/opinion/2193337/1st-american-systems-inc-v-rezatto/", "deepLink": "https://www.courtlistener.com/opinion/2193337/1st-american-systems-inc-v-rezatto/#:~:text=Because%20this%20dialectic%20exists%2C%20covenants%2C,employer%E2%80%99s%20interest%20in%20confidential%20information.", "proposition": "Rezatto supports enforceability of narrowly tailored nondisclosure covenants protecting confidential information.", "verbatimQuote": "Because this dialectic exists, covenants, like paragraph 7, are strictly construed and enforced only to the extent reasonably necessary to protect the employer’s interest in confidential information.", "date": "1981-08-19", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-rezatto-confidentiality-public-policy" }, { "id": "sdcl-37-29-4-fees", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "S.D. Codified Laws § 37-29-4", "citation": "S.D. Codified Laws § 37-29-4.", "url": "https://sdlegislature.gov/Statutes/37-29-4", "proposition": "S.D. Codified Laws § 37-29-4 supports attorney-fee shifting in specified South Dakota trade-secret disputes.", "verbatimQuote": "If (i) a claim of misappropriation is made in bad faith, (ii) a motion to terminate an injunction is made or resisted in bad faith, or (iii) willful and malicious misappropriation exists, the court may award reasonable attorney's fees to the prevailing party.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-sdcl-37-29-4-fees" }, { "id": "sdcl-37-29-6-limitations", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "S.D. Codified Laws § 37-29-6", "citation": "S.D. Codified Laws § 37-29-6.", "url": "https://sdlegislature.gov/Statutes/37-29-6", "proposition": "S.D. Codified Laws § 37-29-6 supports the three-year statute of limitations for South Dakota trade-secret misappropriation claims.", "verbatimQuote": "An action for misappropriation must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-sdcl-37-29-6-limitations" } ] }, { "slug": "survival-drafting", "label": "What drafting issue did Wilbur-Ellis flag?", "heading": "What survival-drafting issue should South Dakota non-compete templates avoid?", "answerText": "If the agreement has a fixed term, restrictive covenants need clear survival language. In Wilbur-Ellis, the Eighth Circuit held that the covenants ended with the agreement because they did not expressly survive its termination.", "sources": [ { "id": "wilbur-ellis-no-survival", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Wilbur-Ellis Co. v. Erikson", "citation": "Wilbur-Ellis Co. v. Erikson, 103 F.4th 1352, 1357 (8th Cir. 2024).", "url": "https://www.courtlistener.com/opinion/9511796/wilbur-ellis-company-v-kevin-erikson/", "deepLink": "https://www.courtlistener.com/opinion/9511796/wilbur-ellis-company-v-kevin-erikson/#:~:text=Here%2C%20however%2C%20Erikson%20and%20Wilbur%2DEllis,as%20did%20the%20Restrictive%20Covenants.", "proposition": "Wilbur-Ellis supports the drafting rule that restrictive covenants in a fixed-term agreement need express survival language if they are to continue after the agreement ends.", "verbatimQuote": "Here, however, Erikson and Wilbur-Ellis performed the obligations they owed each other, and thus, the Agreement terminated on March 31, 2019, as did the Restrictive Covenants.", "date": "2024-06-12", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-wilbur-ellis-no-survival" }, { "id": "wilbur-ellis-statutory-context", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Wilbur-Ellis Co. v. Erikson", "citation": "Wilbur-Ellis Co. v. Erikson, 103 F.4th 1352, 1356 (8th Cir. 2024).", "url": "https://www.courtlistener.com/opinion/9511796/wilbur-ellis-company-v-kevin-erikson/", "deepLink": "https://www.courtlistener.com/opinion/9511796/wilbur-ellis-company-v-kevin-erikson/#:~:text=This%20gives%20Wilbur%2DEllis%20time%20to,leave%20during%20the%20specified%20duration.", "proposition": "Wilbur-Ellis supports treating acquisition-related restrictive covenants as a drafting tool to transition and protect purchased goodwill.", "verbatimQuote": "This gives Wilbur-Ellis time to transition the business and protects the goodwill it purchased should an employee leave during the specified duration.", "date": "2024-06-12", "anchor": "https://openagreements.org/practice-guides/non-compete/us/south-dakota#src-wilbur-ellis-statutory-context" } ] } ] } }