Are employee non-compete agreements enforceable in South Dakota?
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 .
The practical rule is statutory first. South Dakota does not start with a free-floating reasonableness test for ordinary employee non-competes. A covenant must fit an exception, and South Dakota cases repeatedly say those exceptions are read narrowly.
For employees, the core drafting limits are two years or less, a specified county, first- or second-class municipality, or other specified area, existing customers only for a customer non-solicit, and a requirement that the employer continue a like business in the restricted area .
Do not treat statutory compliance as optional style. If the covenant restrains work but does not fit an exception in SDCL chapter 53-9, the baseline statute voids it to that extent .
Sources for this answer
Primary law
A.1 S.D. Codified Laws § 53-9-8S.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.
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.
See S.D. Codified Laws § 53-9-8.
Primary law
A.2 S.D. Codified Laws § 53-9-11S.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.
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.
See S.D. Codified Laws § 53-9-11.
Case law · 1986-02-26
A.3 American Rim & Brake, Inc. v. ZoellnerAmerican Rim supports narrow construction of the employee exception to promote South Dakota's general policy against restraints on trade.
In reading the exception, we must construe it narrowly so as to promote the proscription against general restraints on trade.
See American Rim & Brake, Inc. v. Zoellner, 382 N.W.2d 421, 424 (S.D. 1986).
Case law · 2018-04-11
A.4 Farm Bureau Life Ins. Co. v. DollyDolly supports narrow construction of chapter 53-9 exceptions and treats the baseline rule as a legislative public-policy expression.
As such, SDCL 53-9-12 “must be construed narrowly so as to promote the prohibition against contracts in restraint of trade.”
See Farm Bureau Life Ins. Co. v. Dolly, 2018 S.D. 28, ¶ 13, 910 N.W.2d 196.
Are customer non-solicitation agreements enforceable in South Dakota?
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 .
South Dakota draws a sharp line between soliciting a customer and accepting customer work that the former employee did not solicit. Miller applied SDCL 53-9-11 and held that none of the statutory exceptions permit a covenant barring acceptance of unsolicited business .
That reading is consistent with Dolly, which interpreted the closely similar captive-insurance-agent statute. Dolly held that an agreement not to solicit is not the same as an agreement not to sell to customers who ask for service on their own .
Avoid no-service, no-sale, and no-acceptance language in a South Dakota customer non-solicit. The safer clause targets affirmative solicitation of existing customers in the specified area and leaves unsolicited customer choice alone.
Sources for this answer
Case law · 2021-08-24
B.1 Miller v. Honkamp Krueger Financial Services, Inc.Miller supports the rule that an employee non-solicit under SDCL 53-9-11 cannot prohibit accepting unsolicited business.
None of the enumerated statutory exceptions allow for agreements not to accept unsolicited business.
See Miller v. Honkamp Krueger Fin. Servs., Inc., 9 F.4th 1011, 1019 (8th Cir. 2021).
Case law · 2018-04-11
B.2 Farm Bureau Life Ins. Co. v. DollyDolly supports distinguishing a permitted agreement not to solicit from an impermissible agreement not to sell to existing customers.
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.
See Farm Bureau Life Ins. Co. v. Dolly, 2018 S.D. 28, ¶ 10, 910 N.W.2d 196.
Can South Dakota independent contractors be bound by non-competes?
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 .
The contractor label does not solve every case by itself, but it can be fatal when the party seeking enforcement relies on the employee exception. Aqreva treated the contract language disclaiming an agency or employment relationship as controlling for SDCL 53-9-11 .
South Dakota does have a separate statutory exception for a narrow insurance category: captive insurance agents who are independent contractors and work exclusively for a single insurer or affiliated group. That exception is in SDCL 53-9-12, not the general employee statute .
Do not assume that reclassifying a worker as a contractor preserves an employee non-compete. If the relationship is not employee-employer, the drafter needs a different statutory hook, and most contractors will not fit the captive-agent exception.
Sources for this answer
Case law · 2020-10-28
C.1 Aqreva, LLC v. Eide Bailly, LLPAqreva 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.
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.”
See Aqreva, LLC v. Eide Bailly, LLP, 2020 S.D. 59, ¶ 32, 950 N.W.2d 774.
Primary law
C.2 S.D. Codified Laws § 53-9-12S.D. Codified Laws § 53-9-12 supports the separate captive-insurance-agent independent-contractor exception.
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:
See S.D. Codified Laws § 53-9-12.
Can a no-hire agreement with a customer or vendor restrict a South Dakota worker?
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 .
In Densmore, a company tried to keep a departing worker in place by relying on a clause in its services contract with another business that barred that business from hiring, soliciting, or recruiting its employees. The South Dakota Supreme Court treated the no-recruit clause as a variation on the covenant not to compete governed by SDCL 53-9-11 and the baseline rule of SDCL 53-9-8, and held that the employer could not use a third-party agreement to restrain an employee who had signed no valid covenant of his own .
Do not rely on a no-poach or no-hire clause in a customer, vendor, or services agreement to lock in a South Dakota worker. If the worker has signed no valid SDCL 53-9-11 covenant, the third-party clause will not supply one .
Sources for this answer
Case law · 1998-08-05
D.1 Communication Technical Sys., Inc. v. DensmoreDensmore 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.
Instead, CTS sought to bind its employee through an agreement with a third party. As we have stated, this it may not do.
See Communication Technical Sys., Inc. v. Densmore, 1998 S.D. 87, ¶ 27, 583 N.W.2d 125.
What special non-compete rules apply to South Dakota healthcare practitioners?
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 .
The healthcare rule is broader than a physician-only rule. SDCL 53-9-11.1 defines practitioner for section 53-9-11.2 and includes physicians, physician assistants, emergency medical personnel, respiratory care practitioners, nurses, dentists, pharmacists, psychologists, social workers, counselors, therapists, podiatrists, optometrists, chiropractors, and several other licensed roles .
The statute preserves two important categories. It does not apply to a contractual provision effective on the sale of a practice or an interest in a practice, and it does not bar a practitioner patient or client non-solicit if the solicitation restriction complies with the geographic and temporal limits referenced in SDCL 53-9-11 .
Use the statutory word voidable, not void, for covered practitioner restrictions. Also separate a practice restriction from a compliant current-patient or current-client solicitation restriction because section 53-9-11.2 treats those differently.
Sources for this answer
Primary law
E.1 S.D. Codified Laws § 53-9-11.2S.D. Codified Laws § 53-9-11.2 supports the voidable rule for covered practitioner restrictions entered into on or after July 1, 2023.
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.
See S.D. Codified Laws § 53-9-11.2.
Primary law
E.2 S.D. Codified Laws § 53-9-11.1S.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.
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;
See S.D. Codified Laws § 53-9-11.1.
Primary law
E.3 S.D. Codified Laws § 53-9-11.2S.D. Codified Laws § 53-9-11.2 supports the sale-of-practice and compliant solicitation exceptions for practitioner contracts.
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 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.
See S.D. Codified Laws § 53-9-11.2(1)-(2).
Are sale-of-business non-competes enforceable in South Dakota?
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 .
The sale exception is still not open-ended. Franklin treated a restaurant-sale covenant as within the goodwill-sale framework, but narrowed overbroad language that reached isolated, insubstantial, or non-detrimental activity rather than carrying on a similar business .
The key drafting move is to tie the restriction to purchased goodwill. A buyer may protect against detrimental competition from the seller, but the covenant should not reach tangential roles, passive interests, or activities that do not fairly count as carrying on a similar competing business .
South Dakota also recognizes a parallel exception for partnerships. On or in anticipation of dissolution, partners may agree not to carry on a similar business, though the permitted geography is tighter than the goodwill-sale rule, reaching only the same municipality where the partnership did business .
Sources for this answer
Primary law
F.1 S.D. Codified Laws § 53-9-9S.D. Codified Laws § 53-9-9 supports the sale-of-goodwill exception for a similar-business restraint in a specified area.
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.
See S.D. Codified Laws § 53-9-9.
Case law · 2005-04-27
F.2 Franklin v. Forever Venture, Inc.Franklin supports narrowing sale-of-goodwill covenants that exceed the statutory purpose of preventing similar detrimental competition.
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.
See Franklin v. Forever Venture, Inc., 2005 S.D. 53, ¶ 14, 696 N.W.2d 545.
Case law · 2005-04-27
F.3 Franklin v. Forever Venture, Inc.Franklin supports the similar-business analysis for sale-of-goodwill covenants.
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.
See Franklin v. Forever Venture, Inc., 2005 S.D. 53, ¶ 13, 696 N.W.2d 545.
Primary law
F.4 S.D. Codified Laws § 53-9-10S.D. Codified Laws § 53-9-10 supports the partnership-dissolution exception, limited to the same municipality where the partnership transacted business.
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.
See S.D. Codified Laws § 53-9-10.
Will South Dakota courts narrow an overbroad non-compete?
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 .
In Franklin, the court held that the sale-of-business covenant was broader than SDCL 53-9-9 allowed, but it did not invalidate the entire provision. It remanded for relief consistent with the narrower statutory construction .
For employment covenants, Rezatto also matters because SDCL 53-9-8 voids a contract only to the extent it restrains trade, and divisible nondisclosure or confidentiality promises can survive even when a non-compete fails .
Partial enforcement is a backstop, not a drafting strategy. South Dakota cases still construe exceptions narrowly and refuse to invent statutory exceptions that the Legislature did not adopt.
Sources for this answer
Case law · 2005-04-27
G.1 Franklin v. Forever Venture, Inc.Franklin supports South Dakota's partial-enforcement rule for an overbroad non-compete provision.
Yet, despite the covenant being overbroad in its restraint, we need not invalidate the entire provision.
See Franklin v. Forever Venture, Inc., 2005 S.D. 53, ¶ 15, 696 N.W.2d 545.
Case law · 1981-08-19
G.2 1st American Systems, Inc. v. RezattoRezatto supports divisibility between invalid non-compete restraints and enforceable nondisclosure restrictions.
The trial court erred in completely voiding the instant contract since it is divisible and paragraph 7 is not a general restraint on trade.
See 1st American Systems, Inc. v. Rezatto, 311 N.W.2d 51, 57 (S.D. 1981).
Case law · 2021-08-24
G.3 Miller v. Honkamp Krueger Financial Services, Inc.Miller supports refusing to read a non-statutory unsolicited-business exception into SDCL 53-9-11.
We will not read into the statute an exception that the South Dakota legislature did not adopt.
See Miller v. Honkamp Krueger Fin. Servs., Inc., 9 F.4th 1011, 1019 (8th Cir. 2021).
Does continued employment or termination status matter for South Dakota non-competes?
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.
The continued-employment point comes from Zakinski, so it should be used with age and context in mind. The case also drew a practical distinction between employees who quit or are fired for cause and employees fired through no fault of their own. For the latter, the court required a reasonableness balancing inquiry .
That makes discharge facts relevant to enforcement strategy. A covenant that appears statutory on paper can still face equitable limits if the employer terminated the employee through no fault of the employee and then seeks to restrain later work .
Do not overstate Zakinski as a modern blank-check consideration rule. It is useful South Dakota authority for continued employment, but the same opinion requires more analysis when the employee was fired through no fault of their own.
Sources for this answer
Primary law
H.1 S.D. Codified Laws § 53-9-11S.D. Codified Laws § 53-9-11 supports allowing an employee covenant at the time of employment or during employment.
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.
See S.D. Codified Laws § 53-9-11.
Case law · 1996-09-18
H.2 Central Monitoring Service, Inc. v. ZakinskiZakinski supports the older South Dakota rule that continued employment can be sufficient consideration for a non-compete signed during employment.
That the Non-Compete and Confidentiality Agreement executed by Zakinski on June 9, 1992, required no additional consideration to be binding and enforceable.
See Central Monitoring Serv., Inc. v. Zakinski, 1996 S.D. 116, 553 N.W.2d 513.
Case law · 1996-09-18
H.3 Central Monitoring Service, Inc. v. ZakinskiZakinski supports added reasonableness review when an employee is fired through no fault of the employee.
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.
See Central Monitoring Serv., Inc. v. Zakinski, 1996 S.D. 116, 553 N.W.2d 513.
Can an out-of-state choice-of-law clause save a South Dakota non-compete?
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 .
The public-policy point is important because SDCL 53-9-8 is not merely a private contract default. Miller relied on South Dakota's policy against restraints of a lawful profession, trade, or business, then refused to enforce a no-acceptance restriction under another state's law .
For drafting, that means a South Dakota worker, South Dakota restricted territory, or South Dakota customer base should be analyzed under South Dakota chapter 53-9 even if the template names another state's law.
Sources for this answer
Case law · 2021-08-24
I.1 Miller v. Honkamp Krueger Financial Services, Inc.Miller supports refusing an out-of-state choice-of-law clause when the restrictive covenant violates South Dakota public policy.
Under South Dakota law, courts honor contractual choice-of-law provisions unless they contravene South Dakota public policy.
See Miller v. Honkamp Krueger Fin. Servs., Inc., 9 F.4th 1011, 1018 (8th Cir. 2021).
Are trade-secret and confidentiality protections still available in South Dakota?
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.
Rezatto distinguishes nondisclosure restrictions from general non-competes and explains why confidential-information protection can support fair competition. That said, confidentiality covenants are still strictly construed and enforced only to the extent reasonably necessary to protect the employer's interest in confidential information .
The statutory trade-secret remedies can matter in both directions. Bad-faith misappropriation claims, bad-faith injunction fights, and willful and malicious misappropriation can trigger attorney-fee awards, and a misappropriation claim must be brought within three years after discovery or when reasonable diligence should have discovered it.
Do not use an NDA as a disguised work ban. South Dakota supports confidential-information protection, but Rezatto enforces those covenants only to the extent reasonably necessary to protect confidential information .
Sources for this answer
Case law · 1981-08-19
J.1 1st American Systems, Inc. v. RezattoRezatto supports enforceability of narrowly tailored nondisclosure covenants protecting confidential information.
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.
See 1st American Systems, Inc. v. Rezatto, 311 N.W.2d 51, 57 (S.D. 1981).
Primary law
J.2 S.D. Codified Laws § 37-29-4S.D. Codified Laws § 37-29-4 supports attorney-fee shifting in specified South Dakota trade-secret disputes.
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.
See S.D. Codified Laws § 37-29-4.
Primary law
J.3 S.D. Codified Laws § 37-29-6S.D. Codified Laws § 37-29-6 supports the three-year statute of limitations for South Dakota trade-secret misappropriation claims.
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.
See S.D. Codified Laws § 37-29-6.
What survival-drafting issue should South Dakota non-compete templates avoid?
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 .
The case is a drafting warning, not a new statutory exception. In the acquisition setting, the covenants were meant to give the buyer time to transition the business and protect purchased goodwill during the specified duration .
For templates, align the duration clause, agreement term, termination language, and restrictive-covenant survival clause. A covenant that appears enforceable under SDCL 53-9-11 may still fail if the contract itself ends before the restriction is triggered.
Sources for this answer
Case law · 2024-06-12
K.1 Wilbur-Ellis Co. v. EriksonWilbur-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.
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.
See Wilbur-Ellis Co. v. Erikson, 103 F.4th 1352, 1357 (8th Cir. 2024).
Case law · 2024-06-12
K.2 Wilbur-Ellis Co. v. EriksonWilbur-Ellis supports treating acquisition-related restrictive covenants as a drafting tool to transition and protect purchased goodwill.
This gives Wilbur-Ellis time to transition the business and protects the goodwill it purchased should an employee leave during the specified duration.
See Wilbur-Ellis Co. v. Erikson, 103 F.4th 1352, 1356 (8th Cir. 2024).