I'm glad I could help you.
Unfortunately you will probably get a letter from the IRS saying that you should have filed Schedule C and Schedule SE, and that you owe self-employment tax on the payment. I don't think there's any way to avoid this. The letter is computer-generated when there's a 1099-NEC (over $400) and no Schedule C. No human being looks at the tax return until they get your reply to the letter. You will have to reply to the letter explaining that the payment was incorrectly reported on Form 1099-NEC instead of 1099-MISC, and that it's a lawsuit settlement for attorney's fees, not back wages.
You could try to get the company to issue a corrected 1099-NEC with a zero amount, and a 1099-MISC with the payment in box 3, but that might be more of a hassle than answering the letter from the IRS.
