Colorado Severance Pay Laws (2026): Is Severance Required?

No Colorado statute we found requires an employer to pay severance, and Colorado's Wage Act says severance is not wages. C.R.S. 8-4-101(14)(b) provides that "Wages" or "compensation" does not include severance pay, and the Colorado Court of Appeals applied that rule to a contractual severance promise in Sommers v. MarketPlace Realty, LLC, 2025 COA 97.

So in Colorado, severance is owed only when a contract, policy or agreement promises it, and an unpaid promise is enforced as a contract in court rather than as a wage claim. For how other states handle severance and the federal rules in full, see our severance pay laws by state guide.

Information last verified on October 7, 2026. This article has not been reviewed by a licensed lawyer.

Jurisdiction scope: This article covers Colorado law on severance pay: the absence of a mandate or layoff-notice law, the exclusion of severance from Wage Act wages (C.R.S. 8-4-101(14)(b)), the unemployment postponement rule (C.R.S. 8-73-110 and 8-70-103(23.7)), and limits on nondisclosure terms (C.R.S. 24-34-407). Federal rules appear in short notes; the full federal layer is on our severance pay laws guide. For final-pay deadlines, see Colorado final paycheck laws; for benefit amounts, see Colorado unemployment benefits.

Is severance pay required in Colorado?

No Colorado law we found requires it. We searched the full text of Title 8 in the official 2026 edition of the Colorado Revised Statutes for severance, plant closing, mass layoff, worker adjustment, dismissal pay, separation pay and notice of layoff.

Every severance reference was either the Wage Act exclusion, the unemployment rules, or a case note. None requires an employer to pay severance. That was a keyword search of Title 8, not a read of every title of the Colorado code, so treat it as what our review found. The U.S. Department of Labor says the federal Fair Labor Standards Act does not require severance either.

No Colorado WARN act: federal WARN applies

We found no Colorado law requiring advance notice of a plant closing or mass layoff in the same Title 8 search; the only plant-closure reference was an unrelated legislative declaration about the transition away from coal. We could not run a full search of 2025-2026 bills, so a pending bill cannot be ruled out.

Federal WARN requires 60 days' written notice before a covered plant closing or mass layoff, and an employer that skips it owes back pay and benefits for up to 60 days (29 U.S.C. 2101-2102, 2104). It covers employers with 100 or more employees not counting part-time employees, or 100 or more employees, counting part-time employees, who together work at least 4,000 hours a week, not counting overtime (29 U.S.C. 2101(a)(1)). Our severance pay laws guide explains who is covered.

Severance is not wages under the Colorado Wage Act

C.R.S. 8-4-101(14)(b) states: "Wages" or "compensation" does not include severance pay. This one sentence decides most of what happens when a Colorado employer does not pay promised severance.

The Sommers decision

In Sommers v. MarketPlace Realty, LLC, 2025 COA 97 (decided December 24, 2025), an employment agreement promised six months' salary as severance if the employee was terminated not for cause. The Colorado Court of Appeals held that this was "severance pay" excluded from wages by 8-4-101(14)(b), even if it was earned, vested and determinable, and affirmed summary judgment for the employer on the Wage Act claim.

The court noted that the 2002 version of the statute did not exclude severance, and that an earlier Court of Appeals decision had treated severance as wages under that older version. We did not confirm whether a petition for review to the Colorado Supreme Court was filed in Sommers.

What that means for unpaid severance

Because severance is not wages, the Wage Act's penalties in C.R.S. 8-4-109(3) do not apply to it, and the state's wage-complaint process is not available. The Colorado Department of Labor and Employment's Division of Labor Standards and Statistics says:

"The Division does not have authority over disputes about severance pay, as severance is explicitly excluded from the definition of wages under the Colorado Wage Act, Colorado Revised Statute (C.R.S.) § 8-4-101(14)."

The same page says "you may be able to pursue unpaid severance pay in an appropriate court, and you may wish to contact an attorney for legal advice." A Colorado severance promise is therefore enforced as a contract. The Wage Act's filing deadline of two years, or three if the violation is willful (C.R.S. 8-4-122), applies to wage claims, which exclude severance; for a contract suit over severance, Colorado's general deadline is three years (C.R.S. 13-80-101(1)(a)), and a six-year period applies to actions to recover a liquidated debt or a determinable amount of money due (C.R.S. 13-80-103.5(1)(a)). Which one fits your agreement is a question for a lawyer, so plan around three years from the missed payment. We did not research fee rules for that kind of suit.

An ongoing company severance program can also be a benefit plan under ERISA, the federal benefits law, which supersedes state laws that relate to covered plans (29 U.S.C. 1002(1), 1144(a)).

When severance must be paid

When an employer ends the employment, C.R.S. 8-4-109(1)(a) makes "the wages or compensation for labor or service earned, vested, determinable, and unpaid at the time of such discharge" due "immediately," with timing exceptions set out in the statute. That deadline covers wages, not severance. We found no Colorado statute or agency page that sets a deadline for severance; the payment date is whatever the agreement or policy says. Final-pay rules are on Colorado final paycheck laws.

Severance and Colorado unemployment benefits

Colorado postpones benefits rather than reducing them dollar for dollar. C.R.S. 8-73-110 says: "The benefits for an individual who is separated from employment and receives a severance allowance must be postponed for a number of calendar weeks after separation from employment that is equal to the total amount of the severance allowance, divided by the individual's usual weekly wage."

How the postponement works under 8-73-110:

• Length: the total severance allowance divided by your usual weekly wage gives the number of calendar weeks.
• Start: the postponement begins in the calendar week the allowance was received.
• Fractions: the remainder of a fractional week is disregarded.
• Other earnings: wages earned during the postponement period are disregarded.

What counts as a severance allowance

Under C.R.S. 8-70-103(23.7), a severance allowance is a payment that the employer designates as a severance allowance, that is paid because you are separated from employment, and that compensates you for a period of time after separation during which you do not work.

One payment type is carved out: "a payment made by an employer to an individual is not a "severance allowance" if the purpose of the payment is to induce the individual to waive rights or claims against the employer." A payment made in exchange for a release of claims therefore does not postpone benefits under this definition.

The Colorado Department of Labor and Employment's claimant guide describes severance pay the same way: "Any payment that is designated by your employer as a severance allowance paid to you because you are separated from employment and compensates you for a period of time that you may be unemployed." We found no source deciding whether pay in lieu of notice or continued salary counts as a severance allowance, which turns on how the employer designates it. Benefit amounts and filing are on Colorado unemployment benefits.

What a Colorado severance agreement can ask you to give up

Nondisclosure terms: the POWR Act

For agreements entered into or renewed on or after August 7, 2023, C.R.S. 24-34-407 makes a nondisclosure provision void if it limits you from disclosing or discussing any alleged discriminatory or unfair employment practice, unless all of these conditions are met:

• The provision applies equally to all parties to the agreement.
• It states expressly that it does not stop you from disclosing the underlying facts, including the existence and terms of a settlement, to your immediate family, religious advisor, medical or mental-health provider, support group, legal counsel, financial advisor or tax preparer; to a government agency without notifying the employer; in response to legal process; or as otherwise required by law.
• It states expressly that such a disclosure is not disparagement.
• If the agreement also has a nondisparagement clause and the employer disparages you, the employer cannot enforce the nondisparagement or nondisclosure provisions.
• Any liquidated damages are reasonable, proportionate, varied by the severity of the breach and not punitive.
• An addendum signed by all parties attesting that the agreement complies is attached.

An employer that violates the section is liable for actual damages plus $5,000 per violation, and for costs and attorney fees in a private action.

Wage Act rights cannot be signed away

C.R.S. 8-4-121 says: "Any agreement, written or oral, by any employee purporting to waive or to modify such employee's rights in violation of this article shall be void." A severance agreement therefore cannot waive your Wage Act rights, such as final pay owed under 8-4-109. Severance itself is outside the Wage Act, so 8-4-121 does not protect the severance payment. We found no source deciding whether a settlement of a genuinely disputed wage claim can release it.

Unemployment rights cannot be signed away

A release in a severance agreement cannot take away your right to unemployment benefits. C.R.S. 8-80-101 provides that "Any agreement by an individual to waive, release, or commute his or her rights to benefits or any other rights under articles 70 to 82 of this title 8 shall be void," and no employer may "require or accept any waiver of any rights" under those articles by an individual in its employ.

Non-compete terms in a severance agreement

Colorado makes most non-competes void: one is allowed only for a highly compensated worker to protect trade secrets or under a few other listed exceptions, and an employer that enters into, presents or tries to enforce a void non-compete is liable for actual damages and a $5,000 penalty per worker harmed (C.R.S. 8-2-113(2), (8)). Even an allowed non-compete is void for a current worker unless separate, signed notice of it is given at least 14 days before the earlier of its effective date or the effective date of the pay or other change given in exchange for it (C.R.S. 8-2-113(4)).

Federal limits that apply in Colorado

Our severance pay laws guide explains each of these:

• Workers 40 and older. A release of federal age-discrimination claims must give you at least 21 days to consider it (45 in a group layoff) and 7 days to revoke it after signing (29 U.S.C. 626(f)).
• Sexual harassment and assault. A nondisclosure or non-disparagement clause agreed to before a dispute arises cannot be enforced in court in a sexual assault or sexual harassment dispute (42 U.S.C. 19403). The federal law preserves state laws that are at least as protective.
• Labor-law rights. The NLRB's McLaren Macomb decision, 372 NLRB No. 58 (2023), bars severance agreements that require employees to broadly give up their rights under the National Labor Relations Act. The NLRB General Counsel said in memo GC 26-04 (August 26, 2026) that she is arguing to overrule it in an open case, so it remains Board law until the Board acts.

In Colorado, how the agreement labels each payment matters twice: a release payment does not postpone unemployment, and a nondisclosure clause needs the POWR Act's carve-outs and signed addendum. Read those parts closely before signing and keep every version you receive.

Recent changes

• Sommers v. MarketPlace Realty, LLC, 2025 COA 97 (December 24, 2025). Held that contractual severance is excluded from Wage Act wages. Whether review was sought in the Colorado Supreme Court was not confirmed.
• POWR Act (SB23-172), C.R.S. 24-34-407. Applies to agreements entered into or renewed on or after August 7, 2023.

Bills the Legislature's own search returned for 2026 (SB26-189, SB26-097 and SB26-131) do not concern severance, layoff notice or separation agreements. We could not complete a keyword search of the 2025-2026 bill index, so other bills cannot be ruled out.

Related

• Severance pay laws by state
• Colorado final paycheck laws
• Colorado unemployment benefits

Disclaimer: This article provides general legal information about Colorado severance pay law (C.R.S. 8-4-101, 8-4-109, 8-4-121, 8-70-103, 8-73-110 and 24-34-407) and the federal laws that apply in Colorado. It is not legal advice. The information was verified on October 7, 2026. For advice about your situation, contact the Colorado Department of Labor and Employment, a legal aid office, or a lawyer licensed in Colorado.

Last updated: October 7, 2026.

Frequently Asked Questions

Is severance pay required by law in Colorado?

No Colorado statute we found requires it. Severance is owed only when a contract, policy or agreement promises it, and C.R.S. 8-4-101(14)(b) says severance pay is not wages under the Colorado Wage Act.

Can I file a wage complaint with CDLE for unpaid severance?

No. The Division of Labor Standards and Statistics says it has no authority over severance disputes because C.R.S. 8-4-101(14) excludes severance from wages; it says you may be able to pursue unpaid severance in court.

Do Colorado Wage Act penalties apply to unpaid severance?

No. In Sommers v. MarketPlace Realty, 2025 COA 97, the Court of Appeals held that a contractual six-month severance was severance pay excluded from wages, so the Wage Act claim failed.

Does severance affect unemployment in Colorado?

Yes. C.R.S. 8-73-110 postpones benefits for a number of calendar weeks equal to the severance allowance divided by your usual weekly wage, starting the week you receive it.

Does a payment for signing a release delay Colorado unemployment?

Not as a severance allowance. Under C.R.S. 8-70-103(23.7), a payment whose purpose is to induce you to waive rights or claims against the employer is not a severance allowance.

Can a Colorado severance agreement include a confidentiality clause?

Only on conditions. For agreements entered into or renewed on or after August 7, 2023, C.R.S. 24-34-407 voids a nondisclosure clause covering discriminatory or unfair employment practices unless it meets the statute's requirements, including a signed compliance addendum.

Does Colorado have a state WARN Act?

We found none in the 2026 Colorado Revised Statutes Title 8. Federal WARN requires 60 days' notice from employers with, generally, 100 or more full-time employees.