My sister works as a server at a restaurant owned by a family that also owns four other restaurants and a sixth currently under construction.
Several weeks ago, restaurant management told employees that the IRS audited them because one of their employees went to buy a car and told the dealership that while his paystubs said he made $X per week, he actually made $Y more per week because of tips. I don't at all believe that would've triggered an audit. I think it more likely would've happened because of, say, a construction loan for the new restaurant.
“Because of the audit”, what they are now doing is withholding 20% of all servers' tips from their checks. Payroll is done by, you guessed it, someone in the family.
I've told my sister the tip withholding seems illegal, and every employee needs to file a claim with the Department of Labor for stolen wages (“an employer cannot keep employees’ tips under any circumstances; managers and supervisors also may not keep tips received by employees, including through tip pools” https://www.dol.gov/agencies/whd/flsa/tips). No one has filed a claim yet, AFAIK.
Is this definitely illegal or just illegal under certain circumstances?
EDIT: This is in an NC city with about 45K people. Also fixed formatting because I suck at posting.