I think you're right. It could mean exactly what you said that all work is done in 4-days and then three days off.

But it's equally right to do less work and spend the time on anything you like or things you have to do.

I do agree that freelancer status gives you more control, but it should not hurt anyone to ask what is your company's point of view. Assuming that employee is interested of downshifting, studying, working on a side-project (that is not competing with employers product) etc.