South Dakota Non-Compete Agreement Template

Create a high quality document online now!

Updated June 29, 2022

A South Dakota non-compete agreement allows an employer to prohibit an employee from engaging in the same business for a period of up to 2 years. A non-compete must include the specific jurisdictions the employee must refrain from working in the same business. Licensed health care providers are not allowed to enter into a non-compete.

Legally Enforceable?

Yes, a non-compete is legally enforceable in South Dakota except for licensed health care providers (defined under § 53-9-11.1) and attorneys.

Source: § 53-9-11, § 53-9-11.1, Rule 5.6 (Restrictions on Right to Practice)

Balance Test (applicable)

A non-compete must follow the balance test for terminated employees:

“A covenant is reasonable only if it (1) is no greater than required for the protection of the employer, (2) does not impose undue hardship on the employee and (3) is not injurious to the public.”

Source: 1st American Systems, Inc. v. Rezatto (1981)

Balance Test (non-applicable)

A non-compete does not have to follow the balance test for employees that voluntarily quit their job. No further showing of reasonableness is necessary.

Source: Centrol, Inc. v. Morrow (1992)

Continued Employment

A non-compete can be agreed upon at any time, whether before or after the start of employment. No additional consideration must be provided.

Source: § 53-9-11, § 53-8-7, Central Monitoring Service, Inc. v. Stanley Zakinski (1996)

Sale of a Business

A seller of a business is eligible to sign a non-compete that prohibits carrying on a similar business within the same county, city, or other specified areas.

Source: § 53-9-9

Dissolution of a Partnership

If a partnership is to be dissolved, the partners may agree to a non-compete in the municipality where the entity transacted business.

Source: § 53-9-10

Maximum Term

2 years is the maximum period allowed under the South Dakota Codified Laws. The term must also include a geographical area.

Source: § 53-9-11

Blue Penciling

South Dakota has implemented the “blue pencil rule” that allows a court to modify an unreasonable and overbroad agreement to be compliant with the statutes.

Source: Loescher v. Policky (1969), Ward v. Midcom, Inc. (1998)