My thought ..... The people would probably qualify as an employee and the company doesn't want to pay employment taxes. If they are paying strictly in cash, if the employee files for anything it's a he said/she said situation. Very difficult to prove.

Another reason could be they are under-reporting their own income, so they don't want these expenses on the books.

Even if a 1099 is not issued, it's still the person that received payment's responsibility to report the income on their taxes. They should be depositing the money into a checking account when it's received, keeping some type of log or record of when they were paid, how much, by whom and for what job. Something to support the income (and if any, expenses).