As businesses grow, owners may increasingly rely on key employees and HR professionals to manage functions owners don’t directly oversee. Key employees and HR professionals are typically those employees who have access to important, confidential business information. These individuals often gain access to confidential operational details, employee information, and other sensitive data. A common question that arises: When should employers use nondisclosure agreements (NDAs)?
While NDAs aren’t required in every situation, they are one of the most effective tools for protecting valuable business information—especially in Wisconsin, where confidentiality agreements are generally enforceable when drafted reasonably. This article provides basic guidance to help Wisconsin employers evaluate when NDAs are appropriate.
Why NDAs Matter for Key Employees
In many companies, key employees run critical parts of the business—customer relationships, pricing, financial oversight, technical processes, or strategic planning. When an employee holds significant authority and the owner has limited insight or specialized knowledge into those operations, the risk of losing sensitive and private information increases if that employee departs.
A central concern for both the owner and the company is ensuring that confidential information is not used in a way that could harm the business, and an NDA helps protect against that by restricting how such information may be used. It also reinforces that confidential business practices should not be shared with competitors, customer and vendor information must remain protected, proprietary operational knowledge stays within the company, and the employer is taking “reasonable efforts” to safeguard sensitive information—an important factor if litigation arises under Wisconsin’s trade secret law. In many cases, an NDA also serves as an opportunity to educate employees, since those with access to confidential information often don’t fully understand the trade secret laws that govern and protect it.
NDAs and HR Professionals
HR managers and generalists routinely handle personnel records, compensation data, medical or disability-related information, internal complaints and investigations, and all aspects of hiring and separation processes. This information is highly sensitive, and improper disclosure can create legal, financial, and reputational exposure.
An NDA underscores confidentiality obligations and supports compliance with state and federal privacy requirements.
When Employers Should Strongly Consider NDAs
While every business is different, NDAs are especially appropriate when an employee:
- Holds specialized operational knowledge that the owner may not directly oversee;
- Has access to financial, pricing, or customer information considered competitively sensitive;
- Manages or participates in HR functions where broad employee data are handled; or
- Regularly interacts with vendors or negotiates contracts—gaining insight into margins, cost structures, and negotiation strategies.
What an NDA Should Generally Include
A strong NDA should clearly define what information is considered confidential and explain how that information will be identified, such as by marking applicable documents as “confidential.” It should limit the use of that information strictly to business purposes, require confidentiality during employment and after separation (with the postemployment duration tailored with legal guidance), and make clear that general job skills and publicly available information are not restricted.
The agreement should reflect reasonable, not overly broad, expectations. You don’t need complex or exhaustive terms. Instead, clarity and fairness carry far more weight under Wisconsin law.
Bottom Line
Here are some key takeaways for Wisconsin employers:
- If an employee has meaningful access to sensitive information, an NDA is typically advisable.
- HR personnel should almost always sign one at the inception of their tenure at a company, given their exposure to confidential employee data.
- Signing an NDA before an employee starts their role is ideal. Companies can lose leverage if they ask an executive or key employee to sign an NDA too far into their tenure because there may be limited or no incentive for them to sign the NDA.
- Wisconsin enforces NDAs that are reasonable and tailored, providing employers with strong protections. Each state has its own rules regarding NDAs and when and how they are enforced.
- NDAs support compliance and help demonstrate the “reasonable efforts” required under trade secret law.
- Using NDAs proactively can prevent costly disputes and reduce the risk of losing valuable information when an employee departs.
Attorney Tracy J. Murn is a partner with Axley LLP in Waukesha, Wisconsin. She can be reached at 262-409-2294 or tmurn@axley.com.