I worked for twenty years for Large Unnamed Airplane Manufacturer in
Seattle (use your imagination).  In their case, they had been sued
innumerable times for breach of privacy, but in virtually every case,
their right to monitor employee communications was upheld.  The computers
all had a logon warning that they were company property and any data on
them was subject to monitoring.  Bags were subject to search by Security
at any time.  It was understood that telephone conversations could be
monitored at any time by a supervisor, particularly in help desk areas. 
They had hidden cameras all over the place.  The one instance I know of
where they did lose such a case was in the matter of hidden cameras in the
restrooms.  But everywhere else there, you pretty much assumed anything
you typed, said, did, was monitored.

Where I am now, they have the same rights (spelled out in the AUPs that
the users don't read before they sign), but they're more leery of
exercising them.  We pretty much only monitor a user's communication in
conjunction with our Security department, when there's been an actual
complaint or suspicion of wrongdoing (misuse of company property, surfing
porn, inappropriate behavior with students, etc.).  I would never agree to
let anyone, including a supervisor, monitor someone else's mail simply
because they wanted to see what they were sending and receiving; they
would have to approach me through the appropriate chain of command (HR and
Security) and tell me what, specifically, we were looking for.  Then
Security and I would do the monitoring, NOT the supervisor in question. 
The whole idea is to prevent this being used for personal vendettas.

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