On the dive boat I used the most in South Florida, the captain would usually tell the divers that the DM works for tips, so please treat him/her kindly. I started a thread on that topic, because my non-attorney mind thought that was illegal. In that thread, it turned out that it is indeed illegal. Even if tips are expected, a certain legally specified minimum wage is required. The manager did not post to ScubaBoard, but I know he read it. Soon the captains were saying something like "tips are an important part of their income" or "they work mostly for tips." When I go on dive boats today, I hear something similar.
I am sure the pay for both DMs and instructors I received in Colorado was/is illegal. When I argued about minimum wage issues with the Director of Instruction for my shop (oddly enough, just before I went independent) he said they did not have to meet minimum wage requirements because we could make that up in tips. I explained to him that under the law, if the tips an employee received did not make minimum wage, the employer was required to make up the difference. I also told him that tips in scuba instruction are pretty darn rare. He shrugged it off, and nothing changed.
I wonder what would happen if the authorities in charge of that sort of thing were notified about these illegal practices.