6 (Legal) Considerations for Therapists Who Coach

There is much discussion about whether therapists should offer coaching services and the legal implications of doing so. This episode explores the 'why' behind some of advice you commonly hear for therapists who are considering moving into coaching. The discussion includes:

1. Getting Clear on the Distinction Between Coaching & Therapy. While there are some distinctions, there is also significant overlap. We talk about how clear you need to be on this distinction.

2. Do I Need a Separate Business Entity to Coach? Possibly. We talk about the reasoning behind having a separate business entity and why the answer to this question may differ from state to state or practice to practice.

3. Do I Need a Separate Website? The answer may not be surprising, but the reasoning may be.

4. What Credentials Can I Use? A common question is how you can explain your education and experience--especially in marketing. We talk about the big 'no-no' and how you can convey your expertise instead. 

5. What Documents Do I Need? We talk about the primary document you need to make sure you have with each and every coaching client before you begin providing services.

6. What Do My Clients Need to Know? We discuss what information you and your clients should be clear on regarding the distinction between therapy and coaching.

TRANSCRIPT:

Today we are talking about some common legal considerations for therapists who coach. These are the topics of discussion all of the time for therapists who are moving into coaching services. But although we often hear the common recommendations. This episode, we'll discuss the why and the reasoning behind those recommendations. To help you better understand which best apply to you. Stay tuned for a deeper discussion on legal considerations or therapists who coach.

So for therapists who want to move into a coaching role, it is often a topic of conversation amongst therapists on the best way to do that, and the legalities of doing that, to protect our license and to do it in an ethical way for our clients. And there are some things that come up in these conversations such as you could keep, you should keep these as two completely distinct and separate entities that we hear again and again, but oftentimes it's missing the why behind that and kind of Background logic and background reasoning of why it may be should be done that way or why it may not be necessary to do it that way. And so today's episode, I hope to go over some of these things, and also go a little bit further beyond. This is the recommendation to talk about the reasoning behind that recommendation. The first thing that we hear over and over is that we need to be clear on the distinction between coaching and therapy so that we make sure that we don't cross this line into doing therapy with a coaching client. Now, I talked about this a little bit in the prior episode, should I coach about making that distinction between therapy and coaching, and there may be some controversy in me saying this, but there's not always a clear distinction between the two. Depending on what type of therapy you do, there may be a clear distinction between that and coaching.

But for a lot of different therapeutic modalities, it is very similar. And sometimes even the same as coaching. These modalities are usually more pop psychology, more self-help modalities, and we're looking at things like positive psychology, and even CBT interventions, basic CBT interventions, you know, those are things that a lot of coaches are using that a lot of self-help books are using. They can also be therapy. Absolutely, it is therapy, it is a therapeutic intervention, but it's not necessarily exclusively therapy. So when I think about coaching and therapy it's like coaching is a very small piece of the pie of therapy. But most importantly, I just want to put it out there, that sometimes these distinctions between coaching and therapy are overstated. And I think oftentimes they're overstated by coaches who are trying to prove that they are not doing therapy. And so they are trying to draw all these lines and distinctions between therapy and coaching that don't necessarily exist in reality. And this is where it comes from. We hear things like coaching is focused on the future, and the present, and therapy is looking at the past. Well, obviously, we know that that's not true as therapists, yes, there are some therapeutic modalities that are very past-oriented, but there's also solution-focused therapy, which is very much about Being future-oriented, it's not about the past. And there are many therapeutic modalities that are not past focused. So that's just a myth. It's just a myth. That's overstating the distinction between therapy and coaching. So consideration number one is getting clear on the distinction, or the lack of distinction. Don't try to draw lines and distinctions where they don't exist just for the sake of saying that you're clear on it. That's not helpful to anyone, including our clients. Because if we're confused by these things, then, of course, our clients are, they don't have the background and the immersion in this stuff that we do as therapists.

And so if it's not clear to us, then it's probably not clear to them and it's unrealistic for us to think that it should be clear to them if we're not clear on it. So sometimes, the interventions are going to be identical or nearly identical depending on the type of therapy that you practice and the type of coaching that you do. The second issue that comes up all the time is if as therapists we need to have a separate legal entity. And overwhelmingly the recommendation is, yes, you need to have two completely distinct entities, one for coaching, and one for therapy, and that this protects your license by doing it that way. So having two separate LLC with two separate websites and finances completely independent of one another, that creates some clarity and some distinction between the two so that you are not putting your license in jeopardy by doing coaching.

So consideration number two is do I need a separate entity as a coach?
Do I need to have one entity for therapy and one entity for coaching? And the answer is maybe, but not necessarily. So there are a few things that go into this discussion. First of all, it is going to be your state laws and how what kind of entity you are talking about creating or what kind of entity you already operate as, as a therapist. So most often, therapists are operating as an LLC. In some states, therapists are not allowed to operate as an LLC, but the majority of states you are, it's a very flexible entity. And so it's very popular among entrepreneurs and small business owners. And so most of us operate as an LLC. Now also in many states, many therapists are operating as a PLLC. The P stands for professional and most state statutes set out specific types of professionals that either may or shall form a PLLC. Now that may or shall becomes important, because if it's permissive, if you may form a PLLC, then you don't necessarily have to do that. But some states say if you are a licensed professional, such as a therapist and attorney and accountant, then you have to form a PLLC to practice your profession. So this is going to differ from state to state.

So when we have these discussions, in the context of social media or something like that, it's important to remember that this can be very state-specific. So here's the thing if you have a PLLC, then no, you don't want to practice coaching under your PLLCbecause if anything happens, and it goes to the licensing board, most state statutes say that you can't do anything other than that service, that professional service is all that the PLLC can provide. So you're gonna have a hard time making your case that you weren't acting in a professional capacity when you were doing it under your pllc. Your pllc was receiving the revenue, you were providing the service under your pllc. And so it's gonna be really hard for you to say I was not acting in my professional capacity as a therapist. Now, if you are in a state where you formed an LLC did not issue is not there. So that is a little bit of the background as far as the reasoning behind creating two separate entities. So if you're in a state where it's permissive, then opt to form an LLC. And that's not necessary to create two distinct entities.

The other thing is Come up with this a lot is that by creating two separate entities, there's never any confusion as to what service are you were providing. Let's be clear here that that is a completely different issue. Because if there was ever any confusion as to what service you were providing you did something else wrong. You did not get the proper consent forms. Because if there was confusion on your part, or on the licensing boards part on what service you were providing, then your client probably wasn't clear. And that's a big issue. So other than the distinction between a PLC and an LLC, there's something else that plays into this question of do I need a separate entity, and that's HIPAA. So many therapists are what we refer to as HIPAA covered entities. And when you are a HIPAA covered entity, you need to comply with HIPAA. It means that it applies to you, and it applies to the services that you provide. Now, notice that I said many therapists are. The definition by federal law of a HIPAA covered entity is pretty specific in that you are a covered entity if you are transmitting certain clients information electronically, and it specifically sets forth what those electronic transmissions are, and it pertains to billing insurances electronically or communicating with insurance companies electronically.

So, under the definition, by federal law, there's a large number of private pay therapists that are not necessarily HIPAA covered entities. And so HIPAA does not apply to these therapists. Now, I don't want to go down the rabbit hole of talking about you know, if it really has become a professional standard or an industry-standard as far as complying with HIPAA, and so then these individuals should be complying with HIPAA that's really a completely different conversation than what we're doing today. But as far as do I need a separate entity to coach if you are
a HIPAA covered entity, so to simplify it for the purpose of this conversation, if you are billing insurance for your therapy clients, then you're a HIPAA covered entity. And here's the thing, you are a HIPAA covered entity. That means that it's not the service that HIPAA applies to. It is your entire business that HIPAA applies to. HIPAA doesn't apply to specific services that you provide. HIPAA applies to your LLC, or to your pllc. And so if you provide coaching services under that same entity, and you are a HIPAA covered entity, now, there is a pretty strong argument that your coaching services fell under HIPAA. And as we all know, there's a lot of red tapes that go with maintaining HIPAA compliance and that type of thing. And I don't think that most therapists want to make their coaching practices subject to HIPAA. So, if you are a HIPAA entity as a therapist, then it may be a good idea to form a separate entity so that you can provide coaching without all of the HIPAA red tape.

So the third consideration is do I need a separate website for coaching? Do I need to have my therapy website and then my coaching websites, you'll hear a lot of different things on this. I do not feel like it keeps you more legally protected to have a separate website. But I do say that it is necessary to have two websites and that is simply because for a clear marketing message to your clients. I think that that needs to be completely separate. I talked about in the prior episode, should I coach, I talked about making sure that our clients aren't confused about what service they're receiving, and not giving our clients really the option of therapy or coaching. You say this is how I go, this is who I help, and this is how I help them. And then if the client is interested and receiving those services, then they do. But to basically give our client this crash course and here's the distinction between therapy and coaching and there's really not always the distinction but when there is this is what it is. Again, it's confusing for us as professionals oftentimes. So I don't think we can expect our clients to get this crash course and then be educated enough to make this big decision on which service they want to receive. So for that reason, I feel like it is the best practice to have two separate websites if you're going to be doing both. And I think that gives a clear marketing message and allows you the opportunity to have a thorough website that explains the service that you're providing. So that your client understands what service they'll be receiving. It lacks the potential for confusion. And as far as marketing goes, which is really the primary purpose of having a website and a web presence, less is more, the less choices that we have our potential clients make as barriers before getting to us and before working with us. So less is more. And I think it jumbles our marketing message and it causes confusion when we have these very similar services that we are trying to create a distinction for.

The fourth consider is what credentials can and should I use when marketing my coaching services and my recommendation is always do not use your license. If you are a psychologist, do not put the UI psychologist if you're an LMFT, you're not putting LMFT. You're not putting it on your website, you're not putting it on coaching business cards, you are not putting it on any kind of documents that you sign, because you are not acting in that professional capacity. However, you can state a degree. So you can state that you have a Master of Arts in marriage and family therapy, or you have a CD or you have you know, whatever your actual degree is, that is independent from our licensure, right? We got our degree
first, and we weren't licensed. We weren't able to practice as therapists at that point, we had to go through Canada see, through exams and be licensed to practice it was a completely separate credential. So yes, you can absolutely put your degree out there. And you can talk about your experience as well. You can say, I practiced as a therapist for x years, I had so many years of teaching experience and so many years of experience as a therapist, but do not put your credentials out there. It's going to cause confusion, potentially for your client. And that is going to cause confusion for the licensing board, if anything comes up in the future, and it's going to be a lot harder for you to defend that this was not therapy or that you are not acting in your professional capacity as a therapist. If your licensing credentials were all over everything.

The fifth consideration for coaching is, what documents do I need. And you definitely need to have a contract or an agreement, whatever you want to call it with every single client that you start services with. And this goes back to what I mentioned earlier with having a separate entity. So I said, if there's any confusion as to what service you provided, then you did something else wrong. And this is what you did wrong because there should never be any confusion. If every single client, you have either signs a coaching agreement, or an informed consent. Informed consent is for therapy. And it specifies exactly what the risks and benefits are. A coaching agreement says this is coaching. This is the nature of this professional relationship. This is what you can expect, and it sets out all the expectations. So if your clients find one or the other of those, then there should have been no confusion on your part or your clients part regarding what service they were receiving, and what the expectations were of that service. Now, I have sometimes heard therapists refer to their coaching agreement as informed consent for coaching. And I caution against that I don't see that very often as informed consent for coaching. Informed Consent is something that really is within the medical field. When we go to a doctor, we go to therapy, when we are going to have a medical procedure, a surgery, something like that, we sign an informed consent, and the purpose of that is to let us know risks,
benefits, other potential treatments, etc. It really has a strong medical connotation with it.

And so if you're going to do coaching services, outlined in your coaching agreement that this is not a medical service and label a coaching agreement don't label it informed consent. So I don't want to get into the nitty-gritty of exactly what a coaching agreement should include. There's obviously important terms in there. Make sure that you're very familiar with that consult legal counsel is a really good idea to make sure that you've got a good, solid coaching agreement for your clients. This is a very important document. But the biggest thing is just that it is something different from informed consent. And that getting this document from every single client, that's where the clarity should come from as far as what service you were providing. It's not from having to separate LLC. That's not where the clarity comes from.

I think there could still be a strong argument that you are providing therapy, even if you have to different entities if you didn't have your paperwork, right, and your client was confused about what service they were getting. I think most licensing boards are going to look at this issue from the perspective or should look at this issue from the perspective of client confusion. If it's confusing to the client, then you probably did something wrong. So it's even more important for therapists who coach to make sure that they've got a solid coaching agreement that really outlines what coaching is and what it is not.

The sixth and final consideration is, what does the client need to know? And again, these are things that would be good to put in your coaching agreement, but you want to be really sure that your clients are clear on this. And your client needs to know that it's not therapy. And there is not any medical service for that matter.
You are not acting as any medical professional in providing this coaching service. Another thing that I feel like is really overlooked a lot is that I feel like our
clients, coaching clients need to know the difference in confidentiality, between therapy and coaching. Because it's big, right?

So as a coach, we keep things confidential, but it does not have the federal and state laws to protect that information like therapy does. So it doesn't have the HIPAA protection. It doesn't have psychotherapist-patient privilege, or psycho therapist-client privilege, which is a thing in most states by statute. And so in most states, your conversations with your therapist are very protected. Oftentimes, not obtainable by subpoena. And again, it's different from state to state. Yes, in some states, it is obtainable by subpoena. But in some states, it's not. But none of that applies for coaching. So I can say I'll keep this confidential. But beyond was basically a pinky promise, there's nothing to back it up. So if you are pulled into court, if you are asked for records via subpoena or something of that nature, you don't have any legal backing, to not provide that information. Your client needs to know that and this may be a big deal for some professionals. For example, if you work with attorneys, physicians, etc, who maybe have substance abuse issues, or have you know, some things like that that are going on that puts them in jeopardy in their profession. The name may want to seek out therapy because it has more protection, and that is their right and that is their choice. And they need to know and understand the difference. And they need to know and understand the risks of having less privilege and less confidentiality in the coaching process.

Another time that it might be a big deal is in custody or divorce matters. And so, if it is a high conflict custody matter or high conflict, divorce, then they may want therapy, because of the more protection for that. Now, obviously, there's a lot of other considerations that may go into that, that I would not really get in-depth with them on. I would refer them back to their legal counsel to talk about that because I don't want us crossing the line as therapists or coaches into giving legal advice. But you know, obviously, in coaching we are not going to be diagnosing a mental health disorder. And if they went to the therapy route, yes, it's more protected.
But particularly if they use insurance, they may then be diagnosed with a mental health disorder, which if those records did eventually come out in court,
maybe their attorney feels like that is a bigger risk than having a coach. But bottom line, your client needs to know that confidentiality looks different than confidentiality between coaching and therapy is different.

So I know that was a lot of information. And so just to run back through those six considerations, first of all, is looking at the distinction between coaching and therapy. And sometimes there is significant distinctions there. Other times, there's really not. Other times the intervention and the process really look the same.

The second consideration do I need a separate entity? Every attorney's favorite answer is, it depends. And so we look at what your state laws are for a pllc versus an LLC, as well as if you are a HIPAA covered entity as a therapist.

The third consideration is Do you need a separate website? And not from a legal standpoint, but from a marketing standpoint? Yes, it creates clarity and much less confusion for your clients, which is always a good thing.

Consideration number four, what credentials can I use? Not your licensing credentials, your degree, your education, your professional experience? Absolutely. all relevant. But do not use your licensing credentials when marketing coaching services.

Consideration number five, what documents do I need for therapy, you need informed consent from every single client every time single time.
And for coaching, you need a coaching agreement. And the title of those two documents should also help provide a distinction between the type of service that your client was receiving.

And number six, what does the client need to know? Well, your client needs to know a lot of details about the service that they're receiving. But a couple of the biggest ones is that coaching is not therapy. They are not receiving a medical service.
Coaching is not intended to diagnose or treat any medical or mental health disorder, and that there are differences between confidentiality that they would receive with a therapist, or even a healthcare provider potentially, but between a therapist-client relationship, and a coach-client relationship, and that although this coach-client relationship is confidential, there are limits to the confidentiality, and it does not go as far. confidentiality and privilege are not the same for coaching and therapy.

So let me know if you have any questions about any of that. Feel free to shoot me an email, engage on social media. I would love to hear from you. And take a moment to go ahead and subscribe so that you can join us for future episodes as well. And thank you so much for joining us today. Bye, y'all.

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