Severance Agreement Review: What Colorado Employees Should Know Before Signing

When a severance package arrives with a signing deadline attached, the pressure to act quickly can make it hard to think clearly about what you are agreeing to. A severance agreement review in Colorado can clarify the terms before you sign away rights you may not realize you have, claims you may not realize you could pursue, and leverage you may not realize still exists.

At Elkus & Sisson, P.C., our Colorado employment law attorneys review severance packages for Colorado employees before they sign, evaluating release provisions, compensation issues, restrictive covenants, and applicable legal claims so that employees facing a deadline understand what the agreement actually does.

Should I sign my severance agreement?

Not until you understand what you are giving up.

In many cases, a severance agreement asks the employee to release legal claims in exchange for compensation the employer was not otherwise required to pay. That can include claims involving employment discrimination under Colorado law, retaliation, wrongful termination under Colorado law, contract disputes, commissions, bonuses, or other employment-related issues, depending on the language used. The agreement is usually built around the employee waiving claims against the employer in exchange for severance benefits.

That does not mean you should never sign. It means you should know what the agreement does before you do.

A severance review often focuses on:

• What claims are being released?
• Is the severance amount fair in context?
• Are bonus, equity, commission, PTO, or benefits issues addressed correctly?
• Does the agreement include a non-compete or customer non-solicit?
• Does the agreement affect future employment, references, or cooperation duties?
• Is there room to negotiate the money, timing, language, or restrictions?

What should Colorado employees look for in a severance agreement?

A strong review starts with the actual text, not the employer’s summary. Key provisions often include:

Release of claims

This is usually the center of the agreement. A release may cover known and unknown claims arising through the signing date. Once signed and effective, it can significantly limit later litigation options.

Severance pay terms

How much is being offered, when it will be paid, whether payment is lump sum or salary continuation, and whether payment stops if you breach the agreement all matter.

Vacation, PTO, commissions, and bonus issues

Under the Colorado Wage Act (CWA), C.R.S. § 8-4-101^[1], earned and determinable vacation pay must be paid upon separation in accordance with the agreement between employer and employee. Colorado guidance also states employers cannot rely on policies or agreements that waive or forfeit earned vacation. Colorado law separately provides that severance pay is not part of “wages” under the CWA.

That distinction matters. Earned vacation and certain other accrued compensation may be owed whether or not you sign a severance agreement, while severance is usually a separate negotiated benefit. Whether commissions, bonuses, or equity are owed depends heavily on the governing documents and the timing of vesting or earning.

Restrictive covenants

A severance agreement may contain or restate non-compete, non-solicit, confidentiality, or trade secret obligations. Under C.R.S. § 8-2-113 as amended by House Bill 22-1317^[3], most non-compete provisions in Colorado are void except in limited circumstances that include salary thresholds and specific job-type requirements. Colorado also governs enforceability for workers who primarily lived and worked in Colorado at the time of termination.

That does not mean every restrictive term is unenforceable, but these provisions deserve close attention before signing.

Non-disparagement and confidentiality

These clauses can affect what you can say about the separation, internally and publicly. The practical scope of the language matters.

Cooperation, return-of-property, and reference terms

Some agreements require future cooperation in investigations or litigation, impose deadlines for returning materials, or address how the company will respond to reference checks.

What can be negotiated in a severance package?

More than many employees expect.

Depending on the facts, employers may be willing to negotiate:

• the severance amount
• the payment schedule
• bonus or commission treatment
• equity vesting or exercise windows
• PTO or vacation treatment where disputes exist
• COBRA or benefits contributions
• the wording of a reference or departure statement
• confidentiality and non-disparagement language
• restrictive covenant scope or wording
• the date by which the agreement must be signed

Whether the employer will move on those terms depends on leverage, including role, tenure, contract language, potential legal claims, the employer’s risk tolerance, and how the separation was handled. A severance package is often a risk-management document for the company, which is one reason review and negotiation can matter before the release becomes final.

Can a lawyer review my severance agreement?

Yes.

A lawyer can review the agreement, explain what it does, identify risks, flag claims that may be released, and help you decide whether negotiation makes sense. In some situations, the legal review addresses more than the dollar amount. It is about preserving important carve-outs, narrowing overbroad language, correcting unpaid compensation issues, or protecting future job opportunities. If the circumstances of the termination suggest discrimination or retaliation, a review can also evaluate whether a retaliation claim under Colorado law or other employment claim should be considered before any release is signed.

Legal review is especially important where the severance offer follows:

• a sudden termination
• a layoff affecting older workers
• complaints about discrimination or retaliation
• executive separation
• disputes over commissions, bonus, or equity
• a non-compete or customer non-solicit issue
• pressure to sign quickly

What happens if I do not sign a severance agreement?

In many cases, you simply do not receive the offered severance benefits.

Because severance is excluded from wages under the CWA, disputes over unpaid severance are generally outside CDLE wage-claim jurisdiction, which does not have authority over unpaid severance complaints. That said, not signing can preserve claims you otherwise would have released. It can also leave room to negotiate, depending on the deadline, the surrounding facts, and whether the employer is open to revisions.

The right choice depends on the whole picture, not just the existence of a deadline.

Signing Deadlines and the Rules That Govern Them

Many severance offers include short deadlines. Some are enforceable as written. Some deserve scrutiny. Some can be extended through negotiation.

When the agreement includes a waiver of age discrimination claims, special federal rules apply. The Older Workers Benefit Protection Act (OWBPA)^[2] 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. For certain group termination or exit incentive programs, the consideration period is generally 45 days instead of 21, along with additional disclosures about the program and affected employees.

Those federal timing rules apply to employees age 40 and older when age discrimination claims are part of the release. An employer that shortens these periods, or fails to include the required disclosures, may invalidate the age-claim waiver even if the rest of the agreement stands.

Does severance affect unemployment in Colorado?

It can. Colorado’s unemployment guidance^[4] states that severance pay may affect unemployment benefits and should be reported when weekly payment requests are filed. CDLE may request additional details to determine whether severance is deductible from benefits. Colorado also provides that employees generally qualify for unemployment only if they lost work through no fault of their own, such as a layoff or reduction in hours or pay unrelated to performance.

Severance and unemployment should be evaluated together, not as separate issues. An agreement that defers severance payments or structures them as salary continuation may affect when unemployment benefits begin.

What to Weigh Before Any Agreement Is Signed

The severance agreement in front of you is a risk-transfer document written to serve the employer’s interests. Reading it carefully before the deadline closes is what makes the difference between a negotiated outcome and a signed release.

• The release language determines what you lose. Before meeting with a severance negotiation lawyer in Denver, employees should read the release section in full and note whether it covers known and unknown claims, specific statutes, or both. Overbroad releases can extinguish valuable claims the employer has every incentive to bury in boilerplate.
• Compensation disputes belong on the table before you sign. A severance package attorney evaluating unpaid commissions, unvested equity, or deferred bonus knows these issues are best resolved before a release closes. Earned compensation that pre-dates the separation may be owed regardless of whether you sign; getting that clarity early protects the claim.
• The signing deadline is usually negotiable. Employers present deadlines as fixed, but most will extend them when an employee has retained legal counsel. The OWBPA mandates minimum review periods for age-claim waivers; for other releases, negotiating more time is often a first step before any other terms are addressed.

Signing a severance agreement is a legal act with lasting consequences. The review happens before the signature, or it does not happen at all.

Review Your Severance Agreement Before You Sign

Severance agreements involve legal, financial, and professional consequences that last well beyond the signing deadline. Acting before that deadline expires, and before leverage shifts to the employer who holds the release, is what makes legal review most useful. Elkus & Sisson, P.C. reviews severance packages for employees at our Colorado office locations in employment law matters including severance agreement review, wrongful termination, retaliation, and employment contract disputes.

If you have been offered a severance package and the deadline is approaching, contact us or call +1 303-567-7981 to schedule a confidential consultation.