I work in a health care system with electronic medical records and everyone in the system can read everyone else's notes. It is totally legal. In our system, when you go to open a psych note, an automatic warning comes up that you could be audited, but it doesn't stop you. As a family practice provider, I occasionally read psych notes if it seems relevant (if I'm goIng to write a prescription for a psych med, for instance).
I do agree that your t should have mentioned the change in record confidentiality, and I can only imagine how horrible I would feel if my notes were available like that- in fact I see an out of system t for just that reason. I hope you can bring this up with your t and I am so sorry you are going through this.