Labor & Employment Law Daily Wrap Up, ARBITRATION—N.D. Ill.: EFAA blocked arbitration of gentlemen’s club manager’s claim he was fired for reporting sexual harassment of waitresses, (Jul 25, 2025)

By Marjorie Johnson, J.D.

Even if the manager’s factual allegations did not plausibly allege a viable claim of sexual harassment, the court rejected the employer’s contention that the EFAA required him to do so.

Denying the gentlemen’s club operator’s motion to compel arbitration of a shift manager’s claim that he was terminated in retaliation for reporting that two cocktail waitresses had complained to him that the general manager had made sexual advances towards them, a federal district court held that the EFAA applied because his case, brought under both Title VII and the Illinois Human Rights Act (IHRA) “relates to” conduct alleged to constitute sexual harassment. Interpreting the statutory text and pointing to Congressional intent, the court held that while the manager did plausibly allege that sexual harassment had occurred, the EFAA would still apply even if he did not since the statute did not incorporate a plausibly standard and, moreover, his claim of retaliation only required that he demonstrate that he had a reasonable belief that sexual harassment had occurred (Thomas v. Pooh Bah Enterprises, Inc., No. 1:25-cv-00077 (N.D. Ill. July 24, 2025)).

Retaliatory discharge. The shift manager claimed that during his years working at the club, his supervisors allowed customers to grab and grope the club’s semi-nude dancers. In June 2022, the club provided all staff with state-mandated sexual harassment training, after which two female cocktail waitresses reported to him that the general manager made unwanted sexual advances towards them. Two days after he reported their complaints to the regional manager, he was terminated for “upselling to customers” in the club’s VIP areas, which he claimed he had been trained to do.

Motion to compel. He sued, alleging retaliation and sex discrimination. The employer moved to dismiss and compel arbitration based on an agreement he undisputedly signed. In response, he claimed the arbitration clause was unenforceable due to EFAA.

Sexual harassment plausibly alleged. First, the court found that to the extent that the EFAA requires a plausible claim of sexual harassment be alleged, the shift manager made that showing. In particular, it could be reasonably inferred that when a cocktail waitress is subjected to sexual advances by the general manager of a so-called “gentleman’s club,” her submission to the conduct is either explicitly or implicitly a term or condition of employment. This was especially true when management allegedly had been allowing sexual assaults against the club’s dancers.

Statutory text. However, even if his factual allegations did not allege a viable claim of sexual harassment, the court rejected the employer’s contention that the EFAA required him to do so. The text of the EFAA provides that when a “person alleging conduct constituting a sexual harassment dispute” seeks to avoid application of an arbitration agreement, the agreement shall not be “valid or enforceable with respect to a case... [that] relates to the... sexual harassment dispute.” “Sexual harassment dispute,” is defined as “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal … or State law.”

“Relating to.” Observing that Black’s Law Dictionary defines “relating to” as meaning to “to stand in some relation; to have bearing or concern; to pertain; refer; to bring into association with or connection with,” the court explained that this meant the plain reading of the EFAA required that the shift manager’s lawsuit “pertain to, refer to, or have a connection with, sexual harassment.” which included a claim of retaliation for having reported sexual harassment.

Pleading standard. However, the parties disputed what pleading standard the EFAA required for the sexual harassment dispute. The employer argued that a plaintiff must state a plausible claim of sexual harassment while the shift manager claimed he need only allege a nonfrivolous claim. The Seventh Circuit has not yet addressed this issue, and district courts are split.

Plausibility not required. Ultimately, the court found no textual support in the EFAA for the employer’s argument. Importantly, Congress used the phrase “alleged to constitute sexual harassment,” which was broader than just stating “constitutes sexual harassment.” The court again turned to Black’s Law Dictionary, which defines “allege” as meaning “[to] assert as true, [especially] that someone has done something wrong, though no occasion for definitive proof has yet occurred.” Therefore, by using the word “alleged” to modify “sexual harassment,” Congress intended to reach more broadly than just plausible claims of sexual harassment.

In addition, requiring sexual harassment claims to be plausibly pled would be inconsistent with Congressional intent to “help to put a stop to the culture of silence that protects perpetrators at the cost of their victims.” For such a requirement “would deny plaintiffs whose first pleadings were technically flawed the opportunity to amend, sending claims to arbitration that would have been clearly within the EFAA’s scope if the plaintiff had submitted a better initial complaint,” explained the court.

Reasonable belief. In addition, the shift manager stated a plausible claim of Title VII retaliation by alleging that that he was fired for pretextual reasons just two days after he reported to his manager his reasonable belief that sexual harassment had occurred. If, as the employer argued, the EFAA required that the sexual harassment be plausibly he alleged, “a plaintiff with a reasonable but mistaken belief about what constitutes sexual harassment could sustain a claim under Title VII for retaliation but would not be able to seek the protections of the EFAA,” which would be inconsistent with both the statutory text and Congress’s intent.

Finally, the court rejected the employer’s argument that numerous plaintiffs will add “bogus, implausible claims of sexual harassment to their viable claims” to avoid the enforcement of arbitration agreements. Defendants can move to dismiss implausible claims, and here, the shift manager adequately pled his claim. Moreover, Title VII protects those who make report sexual harassment even when they are incorrect, “and the law should protect employees who are not legal experts.”

The case is No. 1:25-cv-00077.

Judge: Perry, A.

Attorneys: Jeffrey R. Kulwin (Kulwin, Masciopinto & Kulwin) for TJ Thomas. Eric James Meli (Nielsen, Zehe & Antas) for Pooh Bah Enterprises, Inc. d/b/a Rick's Cabaret Chicago.

Companies: Pooh Bah Enterprises, Inc.; Rick's Cabaret Chicago

Cases: Arbitration SexualHarassment Discrimination SexDiscrimination Discharge Retaliation StateLawClaims IllinoisNews