There's technically two different rates employers are federally required to pay. First there's the standard $7.25/h. The second is for workers that receive cash tips. Employers are allowed to pay said workers as little as $2.13/h so long as their tips and their regular wages work out to $7.25h. If the employee's gross pay works out to less than $7.25/h, then the employer is obligated to make up the difference. The idea, I presume, is to allow some wiggle room to "encourage a more competitive market for smaller businesses," while still ensuring workers make at least the minimum.