• October 2019

Understanding your employment contract


An employment contract not only establishes your responsibilities to your employer, but your employer's responsibilities to you as its employee. Some of those responsibilities even continue past the termination of your employment relationship. So, whether you're looking for your first big job or your next big adventure, this article lays out how to address three big questions you as a prospective employee should consider when reviewing the contract you receive from your employer.

1. Am I actually an employee?

Whether you're an independent contractor or an employee is a significant consideration, as it can affect the benefits you're entitled to, who pays taxes, whether the company can ask you to enter into a non-competition agreement, and on and on. Whether you're an employee or an independent contractor has a lot to do with how much control your employer exercises over your relationship. The more control your employer has over your behavior and finances, the more likely it is that you're an employee. The following table can be a helpful guide:

Employee Independent Contractor
Employer provides detailed instructions on where, when and how to work Worker is told what needs to be done, but not given detailed instructions on how to do it
No independent opportunity for profit or loss; not free to seek outside business opportunities Independent opportunity for profit or loss; free to seek outside business opportunities
Employer has significant investment in equipment used by worker Worker provides his or her own equipment
Expected that relationship is permanent Expected that relationship will end after a short period of time or upon completion of a particular project
Paid a regular amount on a regular basis Paid per project for a flat fee

2. Can I be fired for no reason?

If you're employed in South Dakota, you can probably expect that you can be terminated “at will.” This means that you can be fired for about any reason, or no reason at all (as long as they're not doing so in a way that is discriminatory—but that's a lengthy topic that would require its own article). However, look for termination provisions that define termination “for cause”. These provisions would lay out the only kind of behaviors for which you can be fired and firing you for any other reason could be a breach of your employment contract.

3. If this doesn't work out, then what?

There are a few ways your employment contract can control you even after you're no longer working for that employer. You might see these as separate agreements or as clauses within your employment contract. Two of the most common are: a) non-competes and 2) non-disclosure agreements.

a. Non-Competition Agreements

Generally, South Dakota doesn't like contracts that restrain trade. However, the law makes an exception for non-competition and/or non-solicitation agreements (commonly known as “non-competes”) between an employer and employee (but remember, only if you're an employee, not an independent contractor). South Dakota law allows an employee to agree with an employer that they will not directly or indirectly engage in the same business as their employer or solicit existing customers of the employer for up to two years from the date of termination of the employment relationship in a specific, identified area, so long as the employer carries on that business. In other words, your agreement must lay out the area in which you are not allowed to compete. Legally, it could be as small as the city limits of Sioux Falls to as large as the entire continental United States.

b. Non-Disclosure Agreements

Non-disclosure agreements (also known as “NDAs”) protect confidential information and the people signing these agreements need not be in an employment relationship for these to be enforceable (lookin' at you, independent contractors). Some information, however, can arise to the level of a “trade secret,” which is statutorily protected from disclosure, even without being addressed in the contract.

Unfortunately, this article covers only the tip of the iceberg when it comes to the kind of information your employment contract may contain. Do your research, ask questions and contact your own independent attorney for more on these important agreements.

As an associate attorney at Boyce Law Firm, L.L.P., Kelsey Knoer represents clients as a general litigation attorney, advising on a broad range of civil matters, particularly in employment and business disputes. Knoer is also active in various local organizations, including YPN, Second Circuit Women in Law, and as a board member with Family Connection—a nonprofit that serves and supports individuals and families with loved ones in prison.

Thank you to our Chamber News Premium Sponsors

  • img
  • img
  • img
  • img