[JeremyD]

You should not be discussing performance with a 1099 employee. If he's contract - his contract either continues or it's over.

You open yourself to all kind of issues when you treat your 1099 contractors like employees. Research the case law surrounding Microsoft. Look at Wage and Hour issues, Fair Labor and Standards Act.

Has he worked overtime? Has he kept a log of his work? I think you need to look at your full exposure of wage and hour issues before doing anything.

Make sure you have non-competes/non disclosure information in place before releasing - when the crap hits the fan (and employees know all your secrets) you want to be protected as well as possible.

Just my opinion.