Non-Compete Agreements in South Dakota
Written in plain language for general understanding. This is educational content, not legal advice. Content is researched from federal statutes, state codes, and official government sources. Each article is reviewed for accuracy before publication. Our editorial process
What is this right?
A non-compete agreement is a contract clause that restricts you from working for a competitor or starting a competing business after you leave your employer. These agreements are common in tech, sales, healthcare, and executive positions — but they are increasingly controversial and several states have banned or severely limited them.
There is no single federal law governing non-competes. The FTC proposed a nationwide ban in 2024, but a federal court struck it down (Ryan LLC v. FTC, N.D. Tex., August 2024). Whether your non-compete is enforceable depends almost entirely on your state's law. Some states (California, Minnesota, North Dakota, Oklahoma) ban them outright. Others enforce them only if they are "reasonable" in duration, geographic scope, and the activities restricted.
When does it apply?
This issue applies when:
- Your employer asks you to sign a non-compete as a condition of employment or continued employment
- You are leaving a job and your former employer claims you cannot work for a competitor
- You want to start a business in the same industry as your current or former employer
Factors courts consider when enforcing non-competes:
- Duration: Most courts consider 6 months to 2 years reasonable. Anything beyond 2 years is harder to enforce.
- Geographic scope: Must be limited to areas where the employer actually does business. Nationwide restrictions are often struck down unless the employer operates nationally.
- Scope of activities: Must be narrowly tailored to protect legitimate business interests (trade secrets, client relationships) — not just prevent competition generally.
- Consideration: In many states, continued employment alone is not sufficient consideration for a non-compete signed after you were already hired. You may need additional compensation or benefits.
Common misconceptions:
- "I signed it, so it must be enforceable" — Many non-competes are overly broad and unenforceable. Courts frequently refuse to enforce them or narrow their scope.
- "Non-competes are illegal now" — The FTC's proposed ban was blocked in court. Non-competes remain legal in most states, though the trend is toward restricting them.
- "My employer can stop me from earning a living" — Courts balance employer interests against your right to work. An agreement that effectively prevents you from working in your field is less likely to be enforced.
What to Do If You Signed a Non-Compete
Step 1: Read the agreement carefully before signing. Note the duration, geographic scope, and what activities are restricted. If it seems overly broad, negotiate — employers often agree to narrow the terms.
Step 2: Check your state's law. If you are in California, Minnesota, North Dakota, or Oklahoma, non-competes are generally void. Several other states (Colorado, Illinois, Oregon, Washington) ban them for workers below certain income thresholds.
Step 3: If you have already signed and want to leave, consult an employment attorney before your last day. An attorney can assess whether the agreement is enforceable in your state and advise on how to proceed.
Step 4: If your former employer threatens legal action, do not panic. Many employers use non-competes as a scare tactic but never actually sue. However, take any cease-and-desist letter seriously and get legal advice.
Step 5: Document any evidence that the non-compete lacks consideration (e.g., you were asked to sign it years after being hired with nothing in return) or that it is broader than necessary to protect legitimate business interests.
What should you NOT do?
Don't assume a non-compete is unenforceable without checking. While many are overly broad, some states enforce them strictly. Get a legal opinion specific to your state and situation.
Don't sign without reading. Non-competes are often buried in broader employment agreements. Know what you are agreeing to before you sign.
Don't ignore a lawsuit or cease-and-desist letter. Even if you believe the non-compete is invalid, failing to respond to legal action can result in a default judgment against you.
Don't take trade secrets or client lists with you. Even if the non-compete itself is unenforceable, misappropriating trade secrets is a separate legal violation under the federal Defend Trade Secrets Act (18 U.S.C. § 1836) and state laws.
How South Dakota differs from federal law
South Dakota enforces non-compete agreements under a specific statute that is more restrictive than most states:
- SDCL § 53-9-8 et seq. (non-compete statute): South Dakota has a statutory framework governing non-compete agreements that is more restrictive than most states. Non-competes are generally disfavored and are enforceable only in limited circumstances.
- Sale of business: Non-compete agreements are most readily enforceable in the context of a sale of a business. A seller can agree not to compete with the buyer within a specified geographic area and time period (SDCL § 53-9-9).
- Employee non-competes: For employees, non-competes are enforceable only to protect the employer's legitimate business interests, and South Dakota courts require that the restriction be reasonable in scope, duration, and geographic area. The statute (SDCL § 53-9-8) generally prohibits contracts that restrain someone from exercising a lawful profession, trade, or business — with narrow exceptions.
- Agent/employee exception (SDCL § 53-9-11): An employee or agent may agree not to solicit the employer's customers or use trade secrets after leaving employment, but these restrictions must be narrowly tailored.
- No blue-pencil doctrine: South Dakota courts have generally been reluctant to reform overly broad non-compete agreements. An unreasonable restriction may be voided entirely rather than narrowed by the court.
- At-will employment: South Dakota is an at-will employment state, meaning employers and employees can end the relationship at any time. Non-competes in this context must be supported by adequate consideration.
Additional Steps in South Dakota
Consult an employment attorney before signing or challenging a non-compete. Contact the State Bar of South Dakota at (605) 224-7554. Dakota Plains Legal Services: 1-800-658-2297.
Relevant Law: SDCL § 53-9-8 (restraint of trade — general prohibition), SDCL § 53-9-9 (sale of business exception), SDCL § 53-9-11 (agent/employee solicitation restrictions)
Common Questions
When does non-compete agreements apply?
This issue applies when:Your employer asks you to sign a non-compete as a condition of employment or continued employmentYou are leaving a job and your former employer claims you cannot work for a competitorYou want to start a business in the same industry as your current or former employerFactors courts consider when enforcing non-competes:Duration: Most courts consider 6 months to 2 years reasonable. Anything beyond 2 years is harder to enforce.Geographic scope: Must be limited to areas where the employer actually does business. Nationwide restrictions are often struck down unless the employ...
What should I do if my employer is trying to enforce a non-compete agreement?
Step 1: Read the agreement carefully before signing. Note the duration, geographic scope, and what activities are restricted. If it seems overly broad, negotiate — employers often agree to narrow the terms.Step 2: Check your state's law. If you are in California, Minnesota, North Dakota, or Oklahoma, non-competes are generally void. Several other states (Colorado, Illinois, Oregon, Washington) ban them for workers below certain income thresholds.Step 3: If you have already signed and want to leave, consult an employment attorney before your last day. An attorney can assess whether the agreemen...
What mistakes should I avoid with non-compete agreements?
Don't assume a non-compete is unenforceable without checking. While many are overly broad, some states enforce them strictly. Get a legal opinion specific to your state and situation.Don't sign without reading. Non-competes are often buried in broader employment agreements. Know what you are agreeing to before you sign.Don't ignore a lawsuit or cease-and-desist letter. Even if you believe the non-compete is invalid, failing to respond to legal action can result in a default judgment against you.Don't take trade secrets or client lists with you. Even if the non-compete itself is unenforceable,...
Legal Resources
We may earn a commission if you use these services — at no extra cost to you. This supports our mission to make legal information free for everyone.