# Non-Competes in South Dakota[^about] A question-by-question summary of South Dakota non-compete law under SDCL chapter 53-9, including employee covenants, customer non-solicits, healthcare practitioners, sale-of-business covenants, independent contractors, and trade-secret alternatives. ## Are employee non-compete agreements enforceable in South Dakota? {#employee-noncompetes} **Short answer.** Sometimes, but only inside the statutory exception. SDCL 53-9-8 voids restraints on a lawful profession, trade, or business[^sdcl-53-9-8-void-baseline] 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 [^sdcl-53-9-11-employee-exception]. 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 [^american-rim-narrow-exception][^dolly-narrow-exception]. 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 [^sdcl-53-9-11-employee-exception]. > [!CAUTION] > **Drafting note.** > > 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 [^sdcl-53-9-8-void-baseline]. ## Are customer non-solicitation agreements enforceable in South Dakota? {#customer-nonsolicits} **Short answer.** 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 [^miller-unsolicited-business]. 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 [^miller-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 [^dolly-solicit-not-sell]. > [!CAUTION] > **Drafting note.** > > 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 [^miller-unsolicited-business][^dolly-solicit-not-sell]. ## Can South Dakota independent contractors be bound by non-competes? {#independent-contractors} **Short answer.** 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 [^aqreva-employee-exception-limited]. 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 [^aqreva-employee-exception-limited]. 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 [^sdcl-53-9-12-captive-agent]. > [!NOTE] > **Practice note.** > > 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 [^aqreva-employee-exception-limited][^sdcl-53-9-12-captive-agent]. ## Can a no-hire agreement with a customer or vendor restrict a South Dakota worker? {#no-hire-third-party} **Short answer.** 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 [^densmore-third-party-restraint]. 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 [^densmore-third-party-restraint]. > [!CAUTION] > **Drafting note.** > > 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 [^densmore-third-party-restraint]. ## What special non-compete rules apply to South Dakota healthcare practitioners? {#healthcare-practitioners} **Short answer.** 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 [^sdcl-53-9-11-2-practitioner-voidable]. 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 [^sdcl-53-9-11-1-practitioner-list]. 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 [^sdcl-53-9-11-2-practitioner-exceptions]. > [!CAUTION] > **Drafting note.** > > 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 [^sdcl-53-9-11-2-practitioner-voidable][^sdcl-53-9-11-2-practitioner-exceptions]. ## Are sale-of-business non-competes enforceable in South Dakota? {#sale-of-business} **Short answer.** 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 [^sdcl-53-9-9-goodwill-exception]. 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 [^franklin-overbroad-goodwill]. 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 [^franklin-similar-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 [^sdcl-53-9-10-partnership-dissolution]. ## Will South Dakota courts narrow an overbroad non-compete? {#overbroad-covenants} **Short answer.** 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 [^franklin-partial-enforcement]. 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 [^franklin-partial-enforcement]. 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 [^rezatto-divisible-nda]. For a clause-by-clause pass over a specific agreement against these rules, the [South Dakota non-compete review checklist](/checklists/non-compete/us/south-dakota) walks the full covenant suite item by item with each requirement's force level. > [!CAUTION] > **Drafting note.** > > 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 [^franklin-partial-enforcement][^miller-no-new-exception]. ## Does continued employment or termination status matter for South Dakota non-competes? {#consideration-termination} **Short answer.** 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 [^sdcl-53-9-11-during-employment][^zakinski-continued-employment]. 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 [^zakinski-fired-no-fault]. 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 [^zakinski-fired-no-fault]. > [!NOTE] > **Practice note.** > > 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 [^zakinski-continued-employment][^zakinski-fired-no-fault]. ## Can an out-of-state choice-of-law clause save a South Dakota non-compete? {#choice-of-law} **Short answer.** 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 [^miller-choice-law-public-policy]. 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 [^miller-choice-law-public-policy]. 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. ## Are trade-secret and confidentiality protections still available in South Dakota? {#trade-secrets-ndas} **Short answer.** 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-confidentiality-public-policy][^sdcl-37-29-4-fees][^sdcl-37-29-6-limitations]. *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 [^rezatto-confidentiality-public-policy]. 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 [^sdcl-37-29-4-fees][^sdcl-37-29-6-limitations]. > [!CAUTION] > **Drafting note.** > > 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 [^rezatto-confidentiality-public-policy]. ## What survival-drafting issue should South Dakota non-compete templates avoid? {#survival-drafting} **Short answer.** 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 [^wilbur-ellis-no-survival]. 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 [^wilbur-ellis-statutory-context]. 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. [^about]: By Steven Obiajulu, J.D. Published by [openagreements.org](https://openagreements.org). Last reviewed 2026-06-02. License: CC BY 4.0. Steven Obiajulu, J.D. is admitted in New York, not South Dakota. This article synthesizes South Dakota primary law and is not legal advice from a South Dakota-admitted attorney. This article is for informational purposes only and does not create an attorney-client relationship. [^sdcl-53-9-8-void-baseline]: **S.D. Codified Laws § 53-9-8** — "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." *S.D. Codified Laws § 53-9-8.* [^sdcl-53-9-11-employee-exception]: **S.D. Codified Laws § 53-9-11** — "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." *S.D. Codified Laws § 53-9-11.* [^american-rim-narrow-exception]: **American Rim & Brake, Inc. v. Zoellner** — "In reading the exception, we must construe it narrowly so as to promote the proscription against general restraints on trade." *American Rim & Brake, Inc. v. Zoellner, 382 N.W.2d 421, 424 (S.D. 1986).* [^dolly-narrow-exception]: **Farm Bureau Life Ins. Co. v. Dolly** — "As such, SDCL 53-9-12 ‘must be construed narrowly so as to promote the prohibition against contracts in restraint of trade.’" *Farm Bureau Life Ins. Co. v. Dolly, 2018 S.D. 28, ¶ 13, 910 N.W.2d 196.* [^miller-unsolicited-business]: **Miller v. Honkamp Krueger Financial Services, Inc.** — "None of the enumerated statutory exceptions allow for agreements not to accept unsolicited business." *Miller v. Honkamp Krueger Fin. Servs., Inc., 9 F.4th 1011, 1019 (8th Cir. 2021).* [^dolly-solicit-not-sell]: **Farm Bureau Life Ins. Co. v. Dolly** — "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." *Farm Bureau Life Ins. Co. v. Dolly, 2018 S.D. 28, ¶ 10, 910 N.W.2d 196.* [^aqreva-employee-exception-limited]: **Aqreva, LLC v. Eide Bailly, LLP** — "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.’" *Aqreva, LLC v. Eide Bailly, LLP, 2020 S.D. 59, ¶ 32, 950 N.W.2d 774.* [^sdcl-53-9-12-captive-agent]: **S.D. Codified Laws § 53-9-12** — "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:" *S.D. Codified Laws § 53-9-12.* [^densmore-third-party-restraint]: **Communication Technical Sys., Inc. v. Densmore** — "Instead, CTS sought to bind its employee through an agreement with a third party. As we have stated, this it may not do." *Communication Technical Sys., Inc. v. Densmore, 1998 S.D. 87, ¶ 27, 583 N.W.2d 125.* [^sdcl-53-9-11-2-practitioner-voidable]: **S.D. Codified Laws § 53-9-11.2** — "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." *S.D. Codified Laws § 53-9-11.2.* [^sdcl-53-9-11-1-practitioner-list]: **S.D. Codified Laws § 53-9-11.1** — "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;" *S.D. Codified Laws § 53-9-11.1.* [^sdcl-53-9-11-2-practitioner-exceptions]: **S.D. Codified Laws § 53-9-11.2** — "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." *S.D. Codified Laws § 53-9-11.2(1)-(2).* [^sdcl-53-9-9-goodwill-exception]: **S.D. Codified Laws § 53-9-9** — "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." *S.D. Codified Laws § 53-9-9.* [^franklin-overbroad-goodwill]: **Franklin v. Forever Venture, Inc.** — "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." *Franklin v. Forever Venture, Inc., 2005 S.D. 53, ¶ 14, 696 N.W.2d 545.* [^franklin-similar-business]: **Franklin v. Forever Venture, Inc.** — "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." *Franklin v. Forever Venture, Inc., 2005 S.D. 53, ¶ 13, 696 N.W.2d 545.* [^sdcl-53-9-10-partnership-dissolution]: **S.D. Codified Laws § 53-9-10** — "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." *S.D. Codified Laws § 53-9-10.* [^franklin-partial-enforcement]: **Franklin v. Forever Venture, Inc.** — "Yet, despite the covenant being overbroad in its restraint, we need not invalidate the entire provision." *Franklin v. Forever Venture, Inc., 2005 S.D. 53, ¶ 15, 696 N.W.2d 545.* [^rezatto-divisible-nda]: **1st American Systems, Inc. v. Rezatto** — "The trial court erred in completely voiding the instant contract since it is divisible and paragraph 7 is not a general restraint on trade." *1st American Systems, Inc. v. Rezatto, 311 N.W.2d 51, 57 (S.D. 1981).* [^miller-no-new-exception]: **Miller v. Honkamp Krueger Financial Services, Inc.** — "We will not read into the statute an exception that the South Dakota legislature did not adopt." *Miller v. Honkamp Krueger Fin. Servs., Inc., 9 F.4th 1011, 1019 (8th Cir. 2021).* [^sdcl-53-9-11-during-employment]: **S.D. Codified Laws § 53-9-11** — "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." *S.D. Codified Laws § 53-9-11.* [^zakinski-continued-employment]: **Central Monitoring Service, Inc. v. Zakinski** — "That the Non-Compete and Confidentiality Agreement executed by Zakinski on June 9, 1992, required no additional consideration to be binding and enforceable." *Central Monitoring Serv., Inc. v. Zakinski, 1996 S.D. 116, 553 N.W.2d 513.* [^zakinski-fired-no-fault]: **Central Monitoring Service, Inc. v. Zakinski** — "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." *Central Monitoring Serv., Inc. v. Zakinski, 1996 S.D. 116, 553 N.W.2d 513.* [^miller-choice-law-public-policy]: **Miller v. Honkamp Krueger Financial Services, Inc.** — "Under South Dakota law, courts honor contractual choice-of-law provisions unless they contravene South Dakota public policy." *Miller v. Honkamp Krueger Fin. Servs., Inc., 9 F.4th 1011, 1018 (8th Cir. 2021).* [^rezatto-confidentiality-public-policy]: **1st American Systems, Inc. v. Rezatto** — "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." *1st American Systems, Inc. v. Rezatto, 311 N.W.2d 51, 57 (S.D. 1981).* [^sdcl-37-29-4-fees]: **S.D. Codified Laws § 37-29-4** — "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." *S.D. Codified Laws § 37-29-4.* [^sdcl-37-29-6-limitations]: **S.D. Codified Laws § 37-29-6** — "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." *S.D. Codified Laws § 37-29-6.* [^wilbur-ellis-no-survival]: **Wilbur-Ellis Co. v. Erikson** — "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." *Wilbur-Ellis Co. v. Erikson, 103 F.4th 1352, 1357 (8th Cir. 2024).* [^wilbur-ellis-statutory-context]: **Wilbur-Ellis Co. v. Erikson** — "This gives Wilbur-Ellis time to transition the business and protects the goodwill it purchased should an employee leave during the specified duration." *Wilbur-Ellis Co. v. Erikson, 103 F.4th 1352, 1356 (8th Cir. 2024).*