Make a South Dakota Non-Compete Agreement

Applicable State Laws - § 53-9-8 

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!

How to Write a South Dakota Non-Compete Agreement

To write a South Dakota non-compete agreement, review the South Dakota laws. Include the following clauses:

• Purpose. This clause explains the purpose of the non-compete: to protect the legitimate interests of the business. The parties and their roles should be identified. The effective date should also be included.
• Non-compete. This clause explains the restrictions the employee is bound to follow: time period, geographic scope, working with general or specific competitors, general or specific business activities, and non-solicitation of customers, clients, and employees.
• Time period. This clause explains when the time restriction begins, either at the beginning of the employment relationship or when it terminates.
• Purchase option. This clause states whether the employer will allow the employee to buy out the contract. If so, the amount of the payment is listed.
• Jurisdiction. This clause states that South Dakota law will be used to govern the agreement.
• Confidential information. This clause defines "confidential information" as any and all technical and non-technical information provided by the employer including, but not limited to, any data or other proprietary information related to products, inventions, plans, methods, processes, developmental products, experimental products, intellectual property, software, databases, customer lists, vendor lists, supplier lists, marketing information, reports, business plans, financial information, or other information related to your business or any of your customers, clients, or consultants that is or may be disclosed to the employee under the terms of the agreement.
• Permitted disclosure. This clause explains when it is acceptable for confidential information to be released and it isn't considered a breach of the agreement. For example, the employer provides written consent to release specific information to the public, the employee discovers certain information on their own without a breach of another party, or information is released without any fault of the employee.
• Confidentiality. This clause states that the information the employee has access to is confidential. They agree they will not directly or indirectly communicate it to another party without the written consent of the employer. They also agree that they will only use the information to further the business.
• Consultants and employees bound. This clause states that both consultants and employees are bound by the non-compete agreement to keep the information under the strictest of confidence. They are also on a need-to-know basis for information.
• Return of materials. This clause states that when the relationship is terminated or requested by the employer, the employee must promptly return all documents and other tangible materials that represent the confidential information of the business and any copies that exist. It also states that the employer will notify the employee of any loss of confidential information.
• Remedies. This clause explains the legal remedies the employer is entitled to pursue if the former employee does not uphold their obligations. Examples include the recovery of court costs and reasonable attorney fees, the award by a South Dakota trial court of a temporary restraining order or preliminary injunction against the unauthorized use of information, and any other remedy available under South Dakota law or as a matter of equity.
• Choice of law. This clause states that the parties agree to choose South Dakota law to govern the agreement and any issues that may arise.
• Entire agreement. This final clause of the entire agreement states that the parties may amend the non-compete in writing if the parties sign the amendment.

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.