Well, if they tell her when to report for work and what hours to work they are probably employees under IRS and Indiana WC statutes.
http://www.irs.gov/govt/fslg/article...110344,00.html
Also note if he is mistakingly/illegally treating employees as contractors he has most probably not paid social security, unemployment, etc, either.
Here's the IA WC statutes
http://www.state.in.us/legislative/ic/code/title22/ar3/
They're are exceptions as to who must have WC insurance and they vary by state. Your wife can filre a claim by herself, but realistically you're probably going to need a local lawyer to handle a claim with an employer who doesn't comply with the law.