South Dakota protects trade secrets, offers protection from unfair competition, and protects existing customers. However, there are specific restrictions in the use of a non-compete. South Dakota law states that the contract must be for two years or less and it must have a specific geographic scope. These factors are considered in very specific circumstances.
In 2018, the South Dakota Supreme Court limited the enforceability of non-competes in Farm Bureau Life Insurance Co. v. Dolly. Ryan Dolly, a captive insurance agent, worked for Farm Bureau and signed a non-compete stating that he would not solicit a policyholder for 18 months after his contract with Farm Bureau was terminated and he began working for another insurance company. A trial court enforced the part of the non-compete that stopped Dolly from reaching out to policyholders directly but did not prohibit Dolly from working with policyholders from his former employer who contacted him directly. The South Dakota Supreme Court affirmed this ruling.
Non-compete agreements also may not cause undue hardship to the former employee. These agreements should also be careful not to engage in the restraint of trade, as that would make the entire agreement void. This highlights the importance of seeking legal advice.
Protect your South Dakota business by also using a South Dakota non-disclosure agreement form. Download a South Dakota non-disclosure agreement form now!
To write a South Dakota non-compete agreement, review the South Dakota laws. Include the following clauses:
Both the employer and the employee should sign the non-compete. The signatures should be dated. Each should receive a copy of the finalized document for their records.