PHOENIX — In a move that has left hundreds of workers shocked and uncertain about their futures, Arizona Autism has announced plans to terminate approximately 2,800 employees at the end of December and offer an undisclosed number of them positions as independent contractors without benefits.

The decision comes as providers brace for potential federal cuts to Medicaid funding that could significantly impact services for people with developmental disabilities.

Cathy Humphrey, of Glendale, who has worked as a caregiver for Arizona Autism for five years, said the termination notice came without warning. She thought it was a phishing attempt.

“The email was completely unexpected. I had no idea it was coming,” Humphrey said Monday. “I thought it was a scam. I thought it was fake.”

Humphrey wasn’t alone in her disbelief. The sudden announcement caught many employees off guard, rushing to post questions on social media.

The layoffs were revealed on Friday in a so-called WARN notice required under federal law.

Phoenix-based Arizona Autism, which provides in-home care and operates group homes for children with autism, addressed the restructuring in a 2-minute and 30-second YouTube video featuring CEO Ryker Martin.

“I know that kind of notice can sound alarming,” Martin said in the video for employees. “You have the opportunity to continue to work with us, just under a new structure that offers you more independency and flexibility.”

The company had previously signaled potential difficulties ahead.

During a rally at the Arizona Capitol in late September, Martin warned of possible layoffs, alluding to state and federal funding challenges.

“Arizona Autism has spent 10 years growing and never had to go backwards,” Martin told the crowd at the time.

While Arizona Autism cited “evolving market conditions” in a statement on Monday, the company did not provide specific reasons for the workforce transition. However, advocacy groups point to looming federal budget cuts as a likely factor.

Brandi Coon, executive director of the Raising Voices Coalition, which led efforts to restore state funding for developmentally disabled Arizonans, said providers are preparing for potential Medicaid reductions included in President Donald Trump’s spending legislation.

“The future of Medicaid funding feels very fragile right now,” Coon said. “Agencies, with (Arizona Autism) being an example, are looking at ways that they can endure potential rough roads ahead.”

Coon added that parents and providers are working together to respond to the anticipated federal cuts, which would have significant ripple effects in Arizona.

Despite the abrupt nature of the announcement, Humphrey said she remains committed to the organization and the families they serve.

“I’m very happy working for them. I think they do take care of their people,” Humphrey said. “This was just not the way to go about making a big change.”

Arizona Autism Vice President Nate Jensen provided the following statement:

“Arizona Autism recently completed a strategic review of its operations in light of evolving market conditions and industry practices and, following that review, determined that targeted organizational adjustments are necessary to align our service model.

While these changes include transitioning out certain roles, we are confident that these new changes will offer providers greater scheduling flexibility, the ability to serve a broader range of clients, and opportunities to collaborate with multiple providers while positioning our organization to sustain and strengthen high-quality services.

We remain fully committed to Arizona families and do not anticipate material disruption to our services and will provide timely updates to families, employees, and partners throughout this transition.”

The transition from traditional employment to independent contractor status will take effect Dec. 29. The company has not disclosed how many of the 2,800 affected employees have been offered positions as contractors.

Independent contractors typically don’t receive benefits such as health insurance, paid time off, or retirement contributions that traditional employees receive.