Every employee has a reasonable expectation of privacy when they use the phone, send an email, use the internet, store personal belongings at work, etc. But employers have the right to take measures to detect theft, thwart the disclosure of confidential information, and prevent discrimination.
The resolution between these competing interest is that if you tell your employees that you plan to monitor their activities during work, they no longer have a reasonable expectation of privacy. You may give this notice in the employee handbook or through posted notices. If you get written consent from your employees acknowledging your policy, that’s even better.
But there are limits. You should have a business necessity when you monitor your employees or conduct a search. If you come across something that is personal and non-work related, then stop reading it or monitoring it. Be careful in how you limit off-duty activities such as office romances, but be wary of romances between a supervisor and subordinate. Be consistent in any disciplinary action. Never search your employee’s person. Call the police to conduct such a search. Limit your searches to company-owned property and try not to search the employee’s personal property.