How this works in practice is servers are fired if they do not sign off that they earned the difference in tips. This is a big issue with fast food restaurants like Pizza Hut, and cheap buffets where there is a lunch rush and then a slow period, coupled with a propensity of patrons of this sort of place not to tip because they think it is a buffet or fast food restaurant, not one where servers are paid $2.35. Often you have slow periods where there might not be any customers. Let's say from 1-5pm at Pizza Hut you have 3 tables and each leaves $1. So you made $3 in a 4 hr part time shift. You get paid $2.35 * 4 = $9.40 for those three hours. If minimum wage in your state is $8.25, you are required to report that you made $23.60 in tips during that period, not $3. You then pay various taxes on those phantom wages, notably social security and medicare tax, which are regressive flat taxes. You also may find yourself being forced to split the phantom wages with the dishwasher and manager. Often you make less than $0 during your shift. Some people can make up the difference during the dinner and lunch shifts, but those usually go to senior employees and the more attractive women. Getting more than 4-6 hrs a day is hard because then you are no longer a part time employee, which means the employer might have to start paying benefits, which would ruin their entire business model that relies on $2.35/hr wages and no benefit costs. Talk to anyone who works at Pizza Hut or most buffet chains to hear more about this in great detail, I have heard about this situation from dozens of people over the last 30 years.
I'm sorry you've had that experience. I've worked as a waiter, and was never pressured to report anything other than what I made. I'm not advocating for poor tipping, I was just clarifying for those not in the US how the law is written.
Waiters and waitresses typically make more than minimum wage, once tips are taken into account. A cut in tips due to Groupons yields an effective cut in salary. Minimum wage is just the floor.
