Complicated situation, and a good reminder about important employment boundaries. Note that although most patient/client employment in mental health practices should be avoided (especially considering confidentiality issues), not all patient/client employment is "forbidden." Many public mental health agencies hire some of their own patients for various jobs, or allow them to work as volunteers (but almost never in jobs that offer records access or patient contact, so far as I know). Sometimes the worker is a representative of a patient-based advocacy group. I agree with some of the things that are done (often in the name of diversity, political correctness, advocacy group pressure, equal opportunity, or just opportunity) and disagree with others.

Of course, virtually all our patients have jobs somewhere, many in positions that allow them access to private records of some kind. Our patients work for someone else, and it may well be that some of our staff members are patients of someone else (I rarely ask). When I have a patient who turns out to be a receptionist's neighbor or cousin, I don't worry much about it. The patient may need to discuss it, and I need to be sure my receptionist isn't snooping or revealing confidences, but that's just life.

In the private sector, I am aware of a few situations in which a patient or patient's family member is employed -- sometimes to help pay off a bill -- by the clinician. Once again, issues of privacy, confidentiality, exploitation, and interference with care must be adequately dealt with, and the practice should not be entered into lightly, but I am not willing to say it should never be done. Of course, psychotherapy patient situations should be considered differently from those that involve, say, a chronically schizophrenic patient who sees the doctor for periodic follow-up.

Years ago, of course, mental patients' working in hospital jobs or being employed by doctors was quite common, and probably led to few problems and considerable benefit for patients. As I was growing up, my father (a community psychiatrist) helped many patients and their families in that way, and there was frequently a dysfunctional adult or juvenile living in a basement apartment in our home for a few months to experience a sort of live-in model of normal family life. Those people did well, as I recall, and a few are still in touch with my stepmother some 40 years later. Early in my own career, I provided medication coverage for a rather prominent Jungian lay psychoanalyst whose patients would sometimes travel from Europe to live in her U.S. compound during their analyses. They would sometimes participate in the household activities, including working around the compound in one way or another.

All of this is not intended to encourage such things for inexperienced or unsupervised therapists, but rather to avoid a knee-jerk "never do this" view of all clinical boundaries in every single clinical situation, to the exclusion of common sense and patient benefit. I'm not sure what is going on (or has gone on) in the case you describe, but it sounds as if you could use a couple of things:

(1) If there is a licensure or professional ethics complaint (or even if there's not), contact the appropriate agency or organization yourself and ask them for guidance. They are likely to appreciate your forthrightness, whether or not they believe you have done anything wrong, and you can stop that part of your worrying.

(2) Consult with a senior peer supervisor in your area and profession. That person can hear the whole story, give you some objective comments, help with future actions and, again, remove some of your confusion (which sounds a little obsessive in your post).

The convoluted relationships you described among the client, family, employee, and "sister of the girlfriend of the half brother of her significant other" sound a bit obtuse. Let's not get too crazy about this. Use common sense; talk to some local people you respect; deal appropriately with whatever complaint issues may come up (or may not: anyone can send a nasty email); try to do good work; and get on with your life.