No company with a legal rep is going to be happy with that situation - ever.
Who even owns the code the person is working on? Who is responsible when it goes wrong?
That’s the “firming up” bit. You have a contract that deems the code “work for hire” even though the money flow is wonky. Legally the guy is like any 1099.
Never happy is a bit of an exaggeration. SYSV UNIX had all of these risks and various legal departments went through them as they do regularly for more typical types of research.