One of the biggest challenges startups and early stage companies face is attracting and retaining talented employees. When the potential of a company outstrips its ability to pay market value salaries, compensation packages that include grants of stock or options can bridge the gap until the business has sufficient cash flow. There are many advantages to these compensation arrangements, but companies need to be aware of some of the legal pitfalls as well.
The 7th Circuit Court of Appeals recently created a schism between the Circuits that may lead to the Supreme Court's intervention on an important issue: whether an employer may bar employees from bringing class action claims by requiring claims to be arbitrated. The 7th Circuit, in deciding that employers cannot do so, has diverged from the 5th Circuit, leaving a circuit split that the Supreme Court will now likely be compelled to resolve.