I'm an accountant, I've been in the business world for a long time. Here are my thoughts:
It isn't clear from your post about the travel time. If it is travel time from the worksite to the employee's home he is not obligated to pay for it. If it is from the job site back to the shop, he is. At least not in the US, I'm not sure where you are.
Contractor vs employee definitions can be slippery. If the "employee" has his own business license it may be legal.
The business with the checks and paying in cash and not paying overtime is fraud. Call the local labor relations agency. He likely won't go to jail, but he'll have to pay his workers what they are owed, plus some hefty fines. I've seen a lot of people like this over the years, in my opinion getting spanked is good for them.