They don't actually meet the legal requirements of contractors. In CA, anyway, they'd have to be full time employees since they do the same thing every day, full time, they are required to be on-prem during dictated hours, and the business relies on their work (e.g. they can never finish their project.)
Hourly employees are still employees. Salary v. Hourly is completely different distinction from employee/contractor (you can have an hourly or fixed monthly/annual contract rate, and you can get either model as an employee, though salary is more common if your pay and working conditions make you an FLSA exempt employee, since otherwise you might need to be treated as hourly for overtime and certain other things anyway.)
