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Wife's boss is on a power trip. Is this legal?
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I am pretty sure at any firm bigger than a mom & pop, there will be some sort of written agreement that the employee signs that establishes their intent to work for the employer. That's an employment contract even if it's not labeled as such. For example, they can sue if they aren't paid their agreed compensation. Because there's a contract for them to receive that compensation.
This is not correct. Wage theft is protected by law, not contract.
An offer letter is specifically not an employment contract - that distinction is usually spelled out in the law and also in virtually every offer letter.