Employers are always obligated to pay at least minimum wage in the US for tipped employee jobs. The employer can set a baseline like $4.00 per hour plus tips, but if the resulting wage is not at least minimum wage, then the employer must pay minimum wage regardless ("make up the difference").
Formulas for tipping can be used to raise a wage above minimum wage, but not drop it below minimum wage. Employers are consequently not paying unlivable wages (or not below the minimum). They are just advertising formula for how you can get a bonus beyond the minimum wage.
Formulas for tipping can be used to raise a wage above minimum wage, but not drop it below minimum wage. Employers are consequently not paying unlivable wages (or not below the minimum). They are just advertising formula for how you can get a bonus beyond the minimum wage.
Source: http://www.dol.gov/whd/minwage/q-a.htm
(If employers are breaking the law then that is an entirely different matter.)