It may mean they have a non compete clause but remain independent painters. If your crew will be subs, make sure the subs have liability insurance and are registered with city if required.

If the subs are scheduled work hours, he's in violation of the law.

If you have employees, you are required to carry work comp for them, but if you make all your employees become their own contractors, then you have found a loophole. A lot of contractors do this and a lot of them consider it to be completely legit. But, you are obviously worried that your contractor is hiring any clown off the street to do his painting and that is not what he is doing. All his painters work only for him and that is pretty common.