Severance Agreements in Colorado

A severance agreement in Colorado is a contract between you and your employer that typically provides pay in exchange for a release of legal claims.

When an employer offers you a severance agreement, it can feel like a lifeline after a difficult separation. But severance agreements are not gifts. They are contracts, and the employer is offering you money in exchange for something, usually a release of legal claims, a promise not to disparage the company, a non-compete restriction, or all of the above. Understanding what you are being asked to give up, and whether the amount being offered reflects the value of what you are releasing, is critical before you sign.

What a Severance Agreement Typically Includes

Most severance agreements contain several key provisions. A general release of claims waives your right to bring legal action against the employer for anything that occurred during your employment, including discrimination, harassment, retaliation, and wage violations. A non-disparagement clause restricts what you can say about the employer publicly. A confidentiality provision prevents you from disclosing the terms of the agreement or, in some cases, the circumstances of your departure. A non-compete or non-solicitation clause restricts your ability to work for competitors or contact former clients for a defined period. A cooperation clause requires you to assist the employer in any future litigation or investigations.

What You Cannot Be Asked to Waive

Colorado law establishes certain rights that cannot be waived through any agreement. Statutory wage rights under C.R.S. section 8-4-121 are non-waivable. This means that if your employer owes you unpaid wages, overtime, earned vacation, or commissions, those obligations survive regardless of what a severance agreement says. If an agreement purports to release wage claims in exchange for payment of less than the full amount owed, that provision is unenforceable. You are entitled to be paid everything you have earned, period.

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, although you can agree to waive the right to recover monetary damages from the employer through those agencies.

Non-Disclosure Provisions Under Colorado’s POWR Act. Since 2023, Colorado’s Protecting Opportunities and Workers’ Rights (POWR) Act has placed significant limits on what non-disclosure and non-disparagement provisions in severance agreements can require. 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. Any NDA in this context must include specific language confirming that you retain the right to disclose those facts to the CCRD, the EEOC, law enforcement, and your attorneys, and to discuss them with current and former coworkers and family members. 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.

Age Discrimination Protections (OWBPA)

If you are 40 or older, the Older Workers Benefit Protection Act imposes additional requirements on any severance agreement that includes a release of age discrimination claims. The agreement must specifically reference your rights under the Age Discrimination in Employment Act. You must be given at least 21 days to consider the agreement (or 45 days if the severance is offered as part of a group layoff). You must have seven days after signing to revoke your acceptance. The agreement must advise you in writing to consult with an attorney. If the employer does not comply with these requirements, the release of age discrimination claims is void.

Non-Compete Provisions

Colorado has significantly restricted the enforceability of non-compete agreements. Under current Colorado law, non-compete clauses are generally void unless they apply to highly compensated employees earning above a threshold set annually (approximately $123,750 for 2024), or fall within certain narrow exceptions such as protecting trade secrets or applying to the sale of a business. Even enforceable non-competes must be reasonable in scope, duration, and geographic area. If your severance agreement includes a non-compete, it deserves careful scrutiny.

Before You Sign a Severance Agreement in Colorado

Do not sign a severance agreement without having it reviewed by an employment attorney. An attorney can evaluate whether you have viable legal claims that the release would extinguish, whether the severance amount is reasonable in light of those claims, whether any provisions are unenforceable under Colorado law, and whether there is room to negotiate better terms. Most employment attorneys, including our firm, offer initial consultations for severance agreement review.

Helpful Resources

• Older Workers Benefit Protection Act
• EEOC
• Colorado Division of Labor

There is almost always time to have the agreement reviewed. Employers who pressure you to sign immediately are often the ones offering the least favorable terms. Take the time you are entitled to.