Whats the best way to handle a boss saying you're an independent contractor when you're an employee?

My friend was hired as in independent contractor. He fills out a 1099 and signed a contract saying he was an independent contractor & won't sue for injury. They bought him insurance, supplies, set his schedule, trained him to do jobs a certain way, was told he couldn't get another job because they might need him on the weekend, is given gas money, he does almost all of the jobs, and they charge the customer then take most of the money for work he did. Customers have dropped off and they arent advertising at all so he is making almost nothing. He is told to advertise with their business cards and is supposed to get a few bucks if anyone uses them but never has. Since he is insured under them and uses their supplies can he get in trouble for advertising for himself? He didn't know what they were doing was wrong until now. What is the best way to handle this and what can happen?