The really unfortunate things about your situation are:

1. You're probably legally misclassified as a contractor rather than a full-time employee. You should read IRS Rule 87-41 to understand why that is, but the really telling part is that you're carefully managed as to work down to the minute. Dead giveaway - you're an employee.

2. Since you're clearly an employee, you're subject to the protections of FMLA. My favorite nickname for FMLA is the "F*ing Leave Me Alone" Act. If you're hospitalized and your employer knows it, it's really unnecessary to invoke FMLA to receive its protections. Your employer violated it by requiring you to work while incapacitated.

3. Because you're misclassified, you're probably paying self-employment tax, so you're getting screwed coming and going.

4. Your employer is too lazy to figure out how to get benefits for small firms. Going to a trade association like the AeA would easily get you access to insurance at a good rate. I assume he's covered through his spouse, and, as such, doesn't need coverage. So he's letting you hang.

IANAL, but I've been an exec who has had to walk in and clean up quite a few shops doing illegal things like this. Here are some options.

A) Just leave. Easier said than done, obviously. Also, he almost certainly owes you back overtime as well as back taxes that he didn't deposit consistent with the IRC.

B) Contact your state's version of the Labor Board. Explain the situation, and see if they're able to take administrative action on your behalf. This might be a good option for you, because these actions are usually sealed, and they'll order the employer to provide null references in the future.

C) Get a lawyer and sue. This can get very messy very quickly, and the real downside of it is that since your pay rate is only about $12.50/hr, even if a court awarded you a year's salary, an attorney on contingency would take half of it, and you'd still be boned. Also, future employers have a way of finding out about employee lawsuits, and it makes you somewhat more unemployable since there's nothing that says they can't discriminate against you based on your past history of litigating against employers.

Now, an interesting side option is that I suspect that you don't have an ironclad Intellectual Property and Inventions Assignment agreement with the company, given that he's a management slob. Odds are that it's buried in your contractor agreement which is, itself, a piece of fiction. There might be a severability clause in it, but I bet a judge would vacate the entire agreement if given the chance. That means that you possibly OWN the intellectual property of the company. Which is to say, in effect, that you own the core asset of the company since the IP and the client list are probably its only assets.

I can't speak for you to say whether you WANT to own this company's core asset, and certainly if you owned the IP and licensed it back to the founder, you'd have the joy of having to continue working with him for as long as that went on. But since the company is successfully signing customers and is turning over about $400k a year, that may well be a lucrative path to pursue.

Anyhow, the way you'd look into that is to contact the local branch of the nearest major municipality's bar association. Almost all of them have a referral service, and it's usually cheap or free. An attorney will probably give you an hour or so to go over the case and figure out if it's a good idea to act or just jump ship.

I wish you luck, and I hope your next employer appreciates you more than your current one does.