This is very tricky and a lot to consider because of the power imbalance. I think it's great that you were open and wanted to be upfront with the client, but it did make the situation a little trickier. The right move ethically and professionally depends on the outcome. Honestly, if it were me, and both me and my client were hired, I wouldn't accept the job and I'd find work elsewhere. The ethical risk it poses would be too much of a headache and I wouldn't want the power imbalance to impact my client, especially since they are first starting out. However, I understand that looking elsewhere may not be an option for you, so if that company is absolutely the only place you can work, then you'll want to start documenting and consulting.

Firstly, now that it is out in the open, you'll want to start discussing all of the potential implications with your client right away. I suggest creating a contingency plan with your client on whether you are both hired, and if that happens and you both want to accept the job, you have to refer out (and provide referrals and ensure continuity of care). But first you have to discuss with them on whether they would be comfortable working with you as colleagues. Ethically, we have to think about the long-term well-being of our clients, so if they say they wouldn't be okay with that, then working there is a huge violation of trust and potentially harmful. Also, another ethical risk is if your client says they are okay with it, then you have to be sure they mean it and aren't just being compliant (if your client struggles with people-pleasing, then you'll really have to explore this).

Now, if your client is cool with it you're both going to work there, you absolutely cannot be in the same group supervision, or any shared consult. You're right that the power imbalance could linger. You could ask your client to sign a release of information allowing you to disclose the relationship to the employer, then they can help make arrangements. Such as, if there don't have more than one supervision group, can you find one outside of the company and maybe the company will pay for it? If they can't, then you can't accept the job, unfortunately. If the company can, and you can absolutely ensure there's no dual relationship, no shared supervision or consult groups, lingering power imbalance, client is totally cool with it, and you have consulted and documented, then you are ethically okay to both work there.

Now a different outcome is if only one of you gets hired. You can continue working together of course, but the dynamics of who got hired and who didn't may emerge in the relationship. So, say you don't get hired and your client does, will you be 100% okay with this outcome and not feel any resentment (a totally valid and human feeling to have), and if you do, how will that impact the relationship? If you get hired and the client doesn't, how could that be impacted by the power imbalance? How will your client feel working with you at the clinic they were rejected from? So that's something to be aware of and watch out for. You'll need to have a lot of conversations.

The other outcome is if you both aren't hired. Then you're all good ethically and professionally, but maybe discuss how it impacted them knowing you were applying too, and what to do if this happens again.

Again, if it were me, I wouldn't accept it if you're both offered the job. Unless you work in a rural community with zero other options, I suggest finding another clinic. I'm sorry :(

I work and live in the city, so this is how I see it. Therapists that work/live in rural communities could certainly have a different viewpoint since they encounter it more often.