Source:
http://www.nexsenpruet.com/insights/...bor-violations
I was using Subway as an example because I remember having a conversation with a friend of mine who's kid was excited about their first job at Subway for the summer. We were talking about how is it possible for the kid to only be making $8/hr when the Nevada state minimum wage is $8.25 (if employer does not offer health insurance) and $7.25 (if the employer does offer health insurance). Individual franchises are skirting these rules by using the tip credits.
Quote:
Make Up the Difference Between Tips and Minimum Wage
A “tipped employee” is defined as one who customarily and regularly receives more than $30 per month in tips. The tip credit allows employers to count tips toward satisfying the federal minimum wage requirement of $7.25 per hour. Employers may pay “tipped employees” a reduced hourly wage, which can be as low as $2.13 per hour. But when tips combined with hourly wages do not meet the federal minimum wage, the employer must make up the difference.
As long as an employee is earning "$30 in tips per month" then that employer is able to drop to whatever the state based low is. Now in this kid's particular case you might say, "Maybe at that Subway franchise they offer health insurance". Which might be true, but only to full time employees. By keeping someone under full time hours and applying "tip credits" employers are able to penny pinch and bend laws to pay their employee's as little as possible without affecting their bottom line. Meanwhile, leaving the customer to make up the rest with this "tipping culture" that's left the service industry and is now seen in anywhere with a cash register.
These corporations bank millions a year in profit, but act like paying their most bottom of the rung employee an extra $1-2 would bankrupt them.