Last I checked, the bet was in reference to products made by ButteflyLabs, which is headquartered in Leawood, Kansas. Given that Kansas is in the United States (not sure if you knew that), the company is required to abide by all State and Federal laws..including anything regulated by the Department of Labor.

Bruno was correct. The biggest distinction between being an employee of a company and being paid by one (whatever the reason may be) is Taxes (though other aspects such as Benefits, Reimbursements, Workman's Compensation, etc can also come into play). By IRS definition alone, a subcontractor is not an employee of a company.

Simply giving another person compensation for their work does not instantly qualify them to be an employee. Don't you think using a dictionary definition in this case is a bit naïve? If you had a substantial amount of coins riding on this bet and it hinged on the word "employee", wouldn't you want to make sure it was correctly defined?