Around 30 years ago, I would bring home $500 cash working two days per week. Back then we only reported enough tips to get us just over minimum wage (not claiming this was ok but if I had reported the full amount it would have red flagged the whole crew). Seriously tipped employees do not fret over the pay check.
They make an average of the local minimum wage over the pay period.
Which is something a lot of servers act like they don't get.
Their work is more akin to contracting than it is to regular employment. You make hay while the sun is shining. The people who tip well make up for the people who don't tip well and for the times when you aren't tipped at all.
Just because you didn't physically get $7.25 this exact hour, doesn't mean your employer has to make up the difference for that hour. No, you take all the money you made from both your hourly wage and all the tips you collected, and you divide that by the number of hours you worked. If it comes out to $7.25 or over on average, everything is cool. If not, the employer has to make up the difference. That's the law.
And really, we should just absolutely do away with it. It pits the servers against the customers and creates an adversarial relationship. Servers don't want it to go away because a certain segment of servers know they cannot make as much as they do tipped. They are good at the hustle. They don't want to bring up their coworkers because it means they have to go down a bit.
So, fuck em. They could have a better system, but they choose this one. So I really couldn't give half a shit about most of their complaints. Especially when they put the blame on the customers rather than where it belongs, their employers.
The framing here is odd. Even when a restaurant doesn't take many orders per hour, it has to stay open or else people will stop coming there due to inconsistency. That's just the cost of doing business.
Waitstaff understand this and build it into their concept of what their true hourly wage is. Many people will scramble to get jobs at $200/plate places, even if you have to wait around for 5 hours during the day time doing almost nothing till dinner comes. On the contrast, hardly anyone wants to work at busy diners that charge very little per plate. You'll be busy yourself, working non-stop and you'll take home very little since that's all they charge.
Reality is somewhere in between those two examples, but its a known reality.
While there are really shitty places like this, it's almost getting to trope levels on the Internet.
The wait staff/bartenders I knew/know all do it because it was by far the highest paying job you could get. Especially with part time hours. There isn't much else you can do as a college student that will pay any better. And if you are very good, attractive, and get a bit lucky on where you work you are talking white collar pay levels per hour.
You're not wrong, but generally speaking, trying to get your employer to make up the difference (as they are legally required to) is a good way to get fired.
Definitely not, they just average your hours out so you're technically paid minimum wage for enough hours to cover those ones where you don't make anything.
TL;DR: the restaurant calculates a much higher number for cash tip income than actually received and withholds the meager wage income to cover the taxes.
The server kept the actual cash tips, which should be most of their income, although they might have an unexpected tax bill. The restaurant can't report the wrong amount for tips and has to report what the employee reports to them, so this is likely illegal.
It's not uncommon to have a low paycheck since taxes for tip and wage income are withheld only from wages. If you make $20/hour total and your tax rate is 20%, wages will generally cover your taxes if they are at least 20% of your income or $4/hour.
Usually this works the other way, where servers under-report cash tips and get a little tax-free income.