To be honest they are paid a full salary. Tipped wage does not preclude the minimum wage. In addition there are many states like CA that do not have a tipped wage.
Likely depends on the state, but in many states, traditionally tipped positions have a different, lower, minimum wage than non-traditionally tipped positions.
So it’s really a way to extort good tips from customers, because it’s understood that our gratuities are the only way they can make minimum wage!
That was grossing up for her. Illegal? Likely. "But they have laws against that" - low wage employees are easily taken advantage of. They often _need_ that job.