Employee being told if they want to keep job, must go 1099?

Location: Colorado

My spouse is employed by the HOA where we also live. The Board recently decided to hire a management company to run things as the in-house manager left. The new management company is telling my spouse that if they want to keep their job, they must switch over to a 1099 employee (and carry his own insurance) and are saying it’s his choice but they aren’t “firing” him. Can they do that? We feel they should just fire them in writing as they refuse to be a 1099 employee