Should I Sign a Severance Agreement Before Talking to an Employment Lawyer in Colorado?
What Colorado Employees Should Know Before Signing a Severance or Separation Agreement
Losing a job can happen quickly. You may walk into a meeting expecting a normal conversation and leave with a termination notice and a severance agreement that your employer wants you to sign.
The offer of additional pay can be tempting, especially when your regular paycheck is suddenly coming to an end. However, a severance agreement is more than an offer of money. It is a legal contract, and signing it may mean agreeing to restrictions or giving up certain legal claims against your former employer.
Before signing a severance agreement in Colorado, it is important to understand what the agreement actually says, what you are receiving in return, and what rights you may be releasing.
If you have questions about an agreement, an experienced employment lawyer in Denver can review the circumstances surrounding your termination and help you understand the terms before you make a decision.
What Is a Severance Agreement?
A severance agreement, sometimes called a separation agreement, termination agreement, or separation and release, is a contract between an employer and an employee that addresses the end of the employment relationship.
An employer may offer compensation or additional benefits in exchange for the employee agreeing to certain terms.
Depending on the agreement, those terms may address:
- Severance payments
- Continued benefits
- Release of legal claims
- Confidentiality
- Nondisparagement
- Return of company property
- References
- Cooperation with the employer
- Restrictions involving confidential information
- Other obligations after employment ends
The exact language matters.
According to the U.S. Equal Employment Opportunity Commission (EEOC), employers commonly use severance agreements to offer money or benefits in exchange for an employee releasing certain existing employment-related claims. A valid release generally must provide the employee something of value beyond benefits or compensation the employee is already entitled to receive.
EEOC – Understanding Waivers of Discrimination Claims in Employee Severance Agreements
Is Severance Pay Required in Colorado?
Employees sometimes assume that being laid off or terminated automatically entitles them to severance pay.
Generally, that is not the case.
Colorado's wage laws specifically exclude severance pay from the definition of wages or compensation. The Colorado Department of Labor and Employment also states that its Division of Labor Standards and Statistics does not have authority over disputes involving unpaid severance.
However, an employee may have severance rights under an employment agreement, company policy, severance plan, or another contractual arrangement.
That distinction matters because severance pay and wages you have already earned are not necessarily the same.
Colorado Department of Labor and Employment – Division Authority and Coverage
What Are You Giving Up by Signing?
This is one of the most important questions to ask.
The severance payment is only one side of the agreement. Employees should also understand exactly what their employer is receiving in return.
Many agreements contain a release of claims.
Depending on the language and circumstances, an employer may ask an employee to release existing claims involving federal, state, or local employment laws.
For example, the agreement may reference claims involving:
- Employment discrimination
- Age discrimination
- Disability discrimination
- Equal pay
- Retaliation
- Wrongful termination
- Other employment-related disputes
That does not mean every release is necessarily enforceable or that every legal right can be waived. The enforceability of a particular provision depends on the agreement, the law involved, and the circumstances under which it was signed.
However, employees should understand the basic trade:
The employer is offering something, and the employee is usually agreeing to something in return.
Before signing, make sure you understand both sides of that transaction.
What If You Believe You Were Wrongfully Terminated?
This is where reviewing a severance agreement before signing can become particularly important.
Imagine that you were terminated shortly after:
- Reporting harassment
- Complaining about discrimination
- Reporting unpaid wages
- Requesting medical or family leave
- Requesting a disability accommodation
- Participating in a workplace investigation
- Reporting conduct you believed was unlawful
Your employer then offers you severance in exchange for signing a broad release.
The severance amount should not be considered in isolation.
You should also understand whether the circumstances surrounding your termination raise potential employment-law issues and what the release could mean for those issues.
Wrongful Termination Page or Existing Wrongful Termination Blog
Workplace Retaliation in Colorado – April 2026 Blog
What If You Were Fired After Taking FMLA Leave?
The timing of a termination can matter.
An employee may receive a severance agreement after returning from medical leave or after requesting protected leave.
A severance offer does not automatically mean the termination was unlawful. At the same time, receiving severance does not automatically resolve questions about why the termination occurred.
If your termination followed an FMLA request, medical leave, or another protected workplace activity, reviewing the timeline before signing a release can help you better understand the situation.
Understanding Your FMLA Rights in Colorado: What Employees Need to Know
Pay Attention to Confidentiality and Nondisclosure Language
A severance agreement may also contain confidentiality or nondisclosure provisions.
Colorado employees should pay particularly close attention to these sections.
Colorado's Protecting Opportunities and Workers' Rights (POWR) Act established requirements affecting certain nondisclosure provisions involving alleged discriminatory or unfair employment practices.
Among other requirements, Colorado law limits when provisions restricting discussion of alleged discriminatory or unfair employment practices are enforceable.
Therefore, employees should not assume that every confidentiality provision is simply standard boilerplate.
Read exactly what the agreement says you may and may not discuss.
Colorado General Assembly – Protecting Opportunities and Workers' Rights Act (SB23-172)
Employees Age 40 and Older Have Additional Federal Protections
Federal law contains additional requirements when an employee age 40 or older is asked to waive potential claims under the Age Discrimination in Employment Act (ADEA).
Under the Older Workers Benefit Protection Act (OWBPA), a waiver of ADEA claims must satisfy specific requirements to be considered knowing and voluntary.
For an individual termination, the agreement generally must provide at least 21 days to consider the agreement and advise the employee in writing to consult with an attorney.
After signing a qualifying ADEA waiver, the employee generally must also receive seven days to revoke the agreement.
Different requirements may apply when an employer offers waivers as part of certain group termination or reduction-in-force programs. For example, the consideration period may increase to 45 days and additional information may have to be provided.
If you're 40 or older, these provisions deserve careful attention.
EEOC – Understanding Waivers of Discrimination Claims in Employee Severance Agreements
Can a Severance Agreement Stop You From Filing an EEOC Charge?
This is another area employees frequently misunderstand.
According to the EEOC, an agreement cannot prevent an employee from filing a discrimination charge with the EEOC or from participating in an EEOC investigation, hearing, or proceeding.
That remains true even when an agreement contains broad release language.
However, the effect of a signed release on an employee's ability to recover personally on particular claims can involve separate legal questions.
That is another reason to understand the agreement before signing rather than trying to figure out its consequences afterward.
Can You Negotiate a Severance Agreement?
Employees sometimes see a severance package and assume:
"This is the offer. Take it or leave it."
That isn't necessarily true.
Whether an employer is willing to negotiate depends on the circumstances, but severance agreements may involve more than the dollar amount.
Potential areas of discussion can include:
- Amount of severance
- Payment structure
- Benefits
- Reference language
- Termination characterization
- Confidentiality provisions
- Nondisparagement language
- Return of company property
- Timing of payments
- Other post-employment obligations
Whether negotiating makes sense depends on the employee's position, employment history, circumstances surrounding the separation, and terms of the agreement.
An employment attorney in Denver can help an employee understand which provisions may deserve closer attention.
How Can Severance Affect Colorado Unemployment Benefits?
This is an easy issue to overlook.
Colorado's unemployment system specifically recognizes severance or separation pay, and receiving severance may affect when unemployment benefits are payable.
The Colorado Department of Labor and Employment instructs unemployment claimants to report severance payments. Depending on the circumstances, severance may result in unemployment benefits being reduced or postponed for a period of time.
Therefore, don't assume that receiving severance and collecting unemployment are completely unrelated.
Colorado Department of Labor and Employment – Unemployment Benefit Amounts and Severance
Don't Confuse Severance With Your Final Paycheck
Another important distinction is the difference between severance pay and money you've already earned.
Colorado law treats earned wages differently from severance.
Depending on the circumstances, final compensation may include earned wages and earned, determinable vacation pay under an applicable agreement. Severance, on the other hand, is expressly excluded from the Colorado Wage Act's definition of wages or compensation.
So if an employer presents a severance package, look carefully at what each payment represents.
Your final paycheck and severance payment are not necessarily the same thing.
Colorado Department of Labor and Employment – Colorado Wage Act
Five Questions to Ask Before Signing a Severance Agreement
Before signing, slow the process down enough to understand what you're agreeing to.
Ask yourself:
- What exactly am I receiving?
Determine what compensation or benefits are actually being offered beyond amounts you may already be owed. - What rights or claims am I being asked to release?
Look closely at the release language rather than focusing only on the severance amount. - Are there confidentiality, nondisparagement, or other restrictions?
Understand what obligations continue after your employment ends. - Does anything about my termination raise concerns?
Consider whether the termination followed a complaint, protected leave, wage dispute, accommodation request, or other protected activity. - Do I understand the agreement well enough to sign it?
If the answer is no, consider having the agreement reviewed before the deadline.
Don't Let a Deadline Force an Uninformed Decision
A deadline can make a severance agreement feel more urgent than it should.
Read the agreement carefully and identify the actual deadline. Employees age 40 and older may have specific federal consideration and revocation rights when waiving ADEA claims.
For other agreements, the applicable timeline can depend on the agreement and circumstances.
Either way, signing simply because you're worried the offer will disappear can leave you dealing with consequences you didn't fully understand.
Should You Talk to an Employment Lawyer Before Signing?
Not every severance agreement requires a legal dispute, and not every termination means an employer violated the law.
However, if an agreement asks you to release significant rights—or if you have concerns about why you were terminated—having it reviewed before you sign it can provide clarity at the point when you still have options.
At Mitchiner Law, we help employees throughout Denver and Colorado understand workplace agreements, terminations, retaliation concerns, discrimination claims, wage disputes, and other employment-law matters.
Understand What You're Signing Before You Sign Away Your Rights
A severance agreement can provide valuable financial support during a job transition. But the amount of the check is only part of the decision.
You should also understand what you're agreeing to, what restrictions may continue after employment, what claims may be released, and whether the circumstances surrounding your termination deserve closer examination.
Once an agreement is signed and becomes effective, your options may change.
If you've received a severance agreement in Colorado and have questions about its terms, contact Mitchiner Law to discuss your situation before making your decision.
Employment Law Insights – Denver
