What is a non-compete?
A non-compete agreement (sometimes referred to as a “restrictive covenant”) is a legal contract under which one party (an employee) agrees not to enter into or start a similar profession or trade in competition against another party (an employer).
In this agreement, the restricted party cannot pursue employment in the same field of the employer, whether direct or indirect competition. A violation of a non-compete usually takes the form of an employee seeking employment at or starting a business in the same field of their previous employer, causing substantial and detrimental damage to the previous employer.
Why do employers use non-compete agreements?
- To protect sensitive business information and trade secrets
- To keep valuable employee-customer relationships
- To protect their research and development
Are non-competes enforceable in South Dakota?
Depending on the scope of the non-compete, the agreement is enforceable in South Dakota. There are, however, limits to enforceability.
The Court has ruled that the non-disclosure agreement is reasonable if it (1) is no greater than is required for the protection of the employer (including geographic scope and duration), (2) does not impose undue hardship on the employee and (3) is not injurious to the public.
What does an enforceable non-compete look like in South Dakota?
- There exists an employer/employee relationship
- Non-compete is signed during employment
- Non-compete bans competition and solicitation
- Non-compete is valid for up to two years post-employment
- Non-compete is enforceable in a specified geographic location
With questions regarding this topic or for assistance in evaluating a non-compete agreement, contact a Goosmann Law Firm attorney today. Our Sioux Falls attorneys would be more than happy to assist you in developing or understanding your non-compete agreement.