Box 3 vs box 7 is a big deal.
If the amount is in box 7, you will pay self-employment tax PLUS normal taxes on the amount.
Lawsuit settlements should always be in box 3. Ask the IRS.
Many companies put the amount in box 7 as a parting shot to increase your tax liability on the payment.
Ask the business to issue you a revised 1099 with the amount in box 3.
Reporting of Damage Awards on Forms 1099-MISC
IRC §§ 6041 and 6051 and Treasury Regulations 1.6041-1(f) and 1.6041-2 are the operative provisions with respect to the reporting requirements for the client receiving the settlement or award.
Box 3 of Form 1099-MISC is used to report other income that is not reportable in one of the other boxes on the form. Generally, all punitive damages (even if they relate to physical injury or physical sickness), any damages for non-physical injuries or sickness, liquidated damages received under the Age Discrimination in Employment Act of 1967, and any other taxable damages are required to be reported in Box 3. Generally, all compensatory damages for non-physical injuries or sickness (for example, emotional distress) arising from employment discrimination or defamation are reportable in Box 3. However, if a taxpayer receives an award of back pay that constitutes wages, it generally would be reportable on Form W-2, not Form 1099-MISC.https://www.irs.gov/businesses/small-businesses-self-employed/lawsuits-awards-and-settlements-audit-techniques-guide
Box 7 is where businesses are supposed to place non-employee compensation. Those amounts are subject to self-employment taxes.