For this: "However,  if paid on a 1099 that carries over to the personal return on a Schedule C then they qualify for the QBI.  Looking for clarification?"

That would mean you Ignored that they work for their S Corp and you want to treat their Business Activity as a sole proprietorship activity, as if they are In business for themselves, doing that business as an independent contractor to their own S Corp.

Which isn't your reality and isn't how the regulations are applied.