I thought that was simply how tipping worked. Wage+tips have to average (at least) minimum wage.
It's obviously a terrible system, but is this different from how most everywhere with tipping in the US works? I've never worked a tipped job in the US.
Many, many decades ago when I worked in a restaurant, the rule was tipped employees needed to be paid at least 50% of the standard minimum wage. At the end of the day, if the employee didn't clear the minimum wage rate with the total of their wage + tips, the employer was required to fork over the additional amount to equal the minimum wage.
However, the absolute bare minimum the employer was allowed to pay was 50% of minimum wage. Not sure if this was just state-specific or if it changed.
It's obviously a terrible system, but is this different from how most everywhere with tipping in the US works? I've never worked a tipped job in the US.