What to Look for in a Colorado Severance Agreement Before Signing

Short answer: Colorado does not require employers to offer severance pay, so any package offered is essentially a trade: money (or other benefits) in exchange for releasing legal claims. Before signing, Colorado employees should review the scope of the release, the review period, non-disclosure and non-compete restrictions, and their non-waivable wage rights under state law.

Colorado has updated its employment laws significantly in recent years, including a 2022 overhaul of non-compete rules, a 2023 law limiting non-disclosure agreements (the POWR Act), and a 2025 amendment affecting healthcare workers. These changes directly affect what a severance agreement can and cannot require you to give up.

What rights can a Colorado severance agreement legally ask you to waive?

A release of claims is the core of most severance agreements, but some rights cannot be signed away under Colorado law.

• Waivable: Most civil claims against your employer, including discrimination claims under state and federal law, wrongful termination claims, and the right to recover money through an EEOC or Colorado Civil Rights Division charge.
• Non-waivable wage rights: If your employer owes you unpaid wages, overtime, earned vacation, or commissions, those obligations survive regardless of what a severance agreement says, under C.R.S. § 8-4-121.
• Unemployment benefits: Under Colorado law, an agreement between an employee and employer that the employee will not file for unemployment compensation is void. Individuals may not waive, release, or commute their rights to unemployment benefits.
• Agency charges: Workers' compensation rights, unemployment insurance benefits, and the right to file charges with government agencies like the EEOC or the Colorado Civil Rights Division also generally cannot be waived.

How long do you have to review a Colorado severance agreement?

Your review period depends on your age and whether the agreement asks you to waive age discrimination claims.

• Workers 40 and older (individual termination): The Older Workers Benefit Protection Act (OWBPA) requires that a valid waiver of Age Discrimination in Employment Act (ADEA) claims must be knowing and voluntary, must advise the employee to consult an attorney, and must give an individual employee at least 21 days to consider the agreement and 7 days to revoke after signing.
• Workers 40 and older (group layoff): For waivers offered in connection with a group or class termination program, the review period extends to 45 days, and the seven-day revocation period still applies.
• Workers under 40: Outside the OWBPA, employers set their own deadlines, commonly 7 to 21 days.
• Revocation: The regulation is explicit that the seven-day revocation period cannot be shortened by the parties, by agreement or otherwise (29 CFR § 1625.22).

What does Colorado's POWR Act mean for NDAs in severance agreements?

Colorado's Protecting Opportunities and Workers' Rights (POWR) Act, effective August 7, 2023, significantly restricts non-disclosure and non-disparagement clauses in severance agreements.

• An employer cannot ask you to sign an NDA that prohibits you from disclosing or discussing conduct you reasonably believe to be discriminatory, harassing, or retaliatory, or that prevents you from disclosing the underlying facts of any such allegation.
• If an agreement includes a confidentiality or NDA clause, the POWR Act requires that the clause be mutual, allow the employee to discuss the facts underlying any unfair employment practices with specific individuals and entities, and be referenced by an addendum signed by both the employer and employee.
• An NDA that does not comply with POWR or that attempts to broadly silence you about discrimination, harassment, or retaliation may be unenforceable, and an employer who requires one may be liable for damages and your attorney's fees.

Can a Colorado severance agreement include a non-compete clause?

Colorado law under C.R.S. § 8-2-113 makes most non-compete clauses void by default. If your severance agreement includes one, check these thresholds carefully.

Restriction type	2026 income threshold	Additional requirement
Non-compete	$130,014/year	Must protect trade secrets; no broader than reasonably necessary
Customer non-solicitation	$78,008.40/year	Same trade-secret and tailoring requirements
Healthcare providers	Neither exception applies	Void for physicians, APRNs, and dentists as of August 6, 2025

The income threshold has to be met twice: when the agreement is signed and when the employer tries to enforce it. Because the number resets each January, an agreement valid at signing can become unenforceable if a worker's pay drops below the current threshold. See more about wrongful termination claims if you believe a non-compete is being used to pressure you unfairly.

What steps should you take before signing a Colorado severance agreement?

1. Gather your documents. Collect your offer letter, any employment contract, bonus or commission plans, and equity agreements before reviewing the severance package.
2. Confirm all final pay is included. Colorado law requires that all final wages, including accrued but unused vacation pay, be paid upon termination (C.R.S. § 8-4-109). This is owed to you regardless of severance.
3. Check the release language. Identify every claim and statute named in the release. Note whether the agreement specifically mentions the ADEA if you are 40 or older, as required by OWBPA.
4. Review every restrictive covenant. Flag any non-compete, non-solicitation, or non-disclosure clause and compare it against the thresholds and POWR Act requirements above.
5. Use your full review period. Do not sign early simply because an employer pressures you. If you are 40 or older, the 21-day period cannot be shortened by the employer.
6. Consult a licensed attorney. A lawyer can review the full agreement, explain what each provision does, identify claims that may be released, flag compensation issues such as unpaid bonus, commission, or equity, and assess whether negotiation makes sense.

Frequently asked questions

Is severance pay required in Colorado?

Neither Colorado state law nor federal law requires employers to provide severance pay. Severance obligations arise only from an employer's policy, an employment contract, or a collective bargaining agreement.

Can a severance agreement prevent me from filing for unemployment in Colorado?

Colorado law does not allow severance agreements to block unemployment claims. Colorado law does not allow a severance agreement to block your ability to file for unemployment benefits. Any clause purporting to do so is void under state law.

Are severance agreements negotiable in Colorado?

Yes. Employers sometimes offer a low severance package in hopes that employees will sign quickly without negotiating. Severance packages are often negotiable, and employees can hire a lawyer to review the package and potentially negotiate. Review deadlines give you time to do exactly that.

What happens if I already signed but I am still in the revocation period?

If you are within a revocation period (typically 7 days for ADEA-covered releases), you may still be able to revoke and renegotiate. Revocation must generally be delivered in writing before the period expires. Check the agreement for specific revocation instructions.

Do I need a lawyer to review a severance agreement in Colorado?

No law requires you to hire an attorney, but Colorado's OWBPA rules, POWR Act NDA requirements, and updated wage and overtime rights create real complexity. For employees over 40 whose release includes age discrimination claims, legal review is especially important given the federal timing and disclosure requirements that govern those waivers.

Talk to an employment lawyer

Severance agreements involve a permanent trade: you give up legal claims in exchange for benefits your employer was not required to offer. The specific language in the release, any restrictive covenants, and Colorado's POWR Act requirements all affect what you are actually signing. A licensed attorney can read the full agreement, explain the claims at stake, and help you decide whether the offer is worth accepting or worth negotiating before you sign.