&gt;and then the employee issues options back to the startup<p>In effect, yes. When the employee purchases the stock, they <i>sign</i> a contract to sell their stock back to the company (with the number of shares to be sold left blank). Their vesting schedule establishes how the number of shares that the company is allowed to repurchase decreases with time, normally with a &#x27;cliff&#x27;, which removes the need for a probation period.