In South Dakota, an employee non-compete agreement can be enforced, but only within strict statutory limits: under South Dakota Codified Laws (SDCL) 53-9-11, an employee may agree not to engage in the same business or profession as the employer for no more than two years from the date employment ends, and only within a specified county, a first- or second-class municipality, or other specified area. This is the key difference from many states: South Dakota's non-compete rule is written directly into statute, with a hard two-year ceiling and a required geographic boundary. Any restriction that goes beyond those statutory limits, or that lacks a defined area, is vulnerable to being struck down or narrowed by a court.
The general rule: most restraints on work are void
South Dakota starts from a position that is hostile to restrictions on a person's right to earn a living. Under SDCL 53-9-8, every contract that restrains anyone from exercising a lawful profession, trade, or business is void to that extent -- except in the specific situations the Legislature has carved out. In other words, a non-compete is unenforceable unless it fits squarely inside one of the statutory exceptions. The burden is on the employer to show the agreement falls within an exception.
The Legislature has created a short list of exceptions, the most important of which for workers are:
- Employee agreements (SDCL 53-9-11): An employee may agree, at the time of employment or during employment, not to engage in the same business or profession as the employer for up to two years after leaving, within a specified geographic area.
- Sale of a business (SDCL 53-9-9): Someone who sells the goodwill of a business may agree not to carry on a similar business within a specified area, so long as the buyer continues to operate.
- Dissolution of a partnership (SDCL 53-9-10): Partners may agree not to compete within a specified area when a partnership is dissolved or a partner leaves.
If your agreement does not fit one of these categories, the default rule under SDCL 53-9-8 is that it is void.
What "reasonable" means in South Dakota
Because the statute itself sets the outer limits, South Dakota courts focus on whether a non-compete stays inside those boundaries and whether its terms are reasonable in light of the employer's legitimate interests. Two things matter most:
- Duration: The restriction cannot exceed two years from the date employment ends. A clause that tries to bind you for three, five, or ten years exceeds the statute.
- Geography: The agreement must identify a specific area -- a county, a municipality, or another defined territory. A nationwide or open-ended "anywhere we do business" restriction with no defined boundary is on shaky ground.
South Dakota also limits the restriction to the same business or profession as the employer. A non-compete cannot bar you from working in an unrelated field. The closer the new job is to your former employer's actual line of work, the more likely the clause applies; the further away, the weaker the employer's claim.
South Dakota courts have authority to enforce a non-compete only to the extent it is reasonable and statutorily valid, and can decline to enforce -- or narrow -- a provision that reaches too far. Do not assume that because you signed a broad agreement, every word of it will hold up.
Is there a ban for low-wage workers?
Unlike a growing number of states, South Dakota does not have a statute that bans non-competes for low-wage, hourly, or minimum-wage employees, nor a salary threshold below which non-competes are automatically void. The two-year and geographic limits in SDCL 53-9-11 apply regardless of how much you earn. That said, a court weighing whether a restriction is reasonable can consider the practical hardship on the worker, so the lack of a wage-based ban does not mean every clause against a low-paid worker will be enforced.
It is also worth distinguishing non-competes from other restrictive clauses. Non-solicitation agreements (promising not to poach customers or coworkers) and confidentiality / trade-secret agreements are analyzed differently and are often easier for employers to enforce than a blanket ban on working in your field. Read your document carefully to see which type of clause you actually signed.