Anyone who steals, slacks off or just tends to a few personal matters at work should know one thing: Increasingly, the boss is watching.

Katy Nagel, 24, of Asheville learned that the hard way in November after the owners of a credit-repair agency she worked for read her personal e-mail, in which she had complained about their demeanor. She was fired promptly, despite having been a competent and otherwise committed worker, she said. She was shocked.

"I never signed anything saying it was OK to monitor my e-mail or Internet activity," Nagel said. "So I assumed it wasn't, which was a horrible assumption."

But increasingly, big institutions think that to protect people and assets, they must monitor their electronic realms. Nearly 80 percent of 1,400 U.S. executives polled said they have installed content-filtering or blocking software or instituted Web browsing policies, according to Robert Half Technology.

Few laws regulate electronic surveillance in the private sector, so often, it's done without employees' knowledge.

Indeed, quite an industry has grown around the increasing fear of what employees will say and do online. According to Forrester Research, the market for scanning software is increasing at about 30 percent annually and is well over half a billion dollars.

The latest monitoring software can scan and flag content on Web sites and in e-mail, instant messages, blog posts and offline documents. It can record keyboard strokes, spot uploads, downloads and changes to documents and flag when a worker copies a document to a USB stick to take home. Employee badges can even be embedded with radio frequency tracking devices, similar to those used to track livestock.

"Your digital bread crumbs are everywhere," said Steve Chase, executive vice president of Alphanumeric Systems, an IT services company in Raleigh. "Most people don't realize what they leave behind. Unless they're highly savvy, they don't cover their tracks."

Former New York Gov. Eliot Spitzer made conspicuous payments to a prostitution ring that were flagged by data-mining software.

Detroit Mayor Kwame Kilpatrick left a trail of sexy text messages that exposed his affair and led to an obstruction of justice scandal involving a former aide.

Companies see a need

Until recently, companies were leery of monitoring software, because they didn't want to seem like Big Brother, said Adam Schran, CEO of Ascentive in Philadelphia, a maker of employee monitoring software, referring to the ominous overseer in George Orwell's "1984."

"But in the last year and a half, they just don't care, because there's a real frustration out there, and they're desperate to do whatever it takes to solve the problem."

The biggest buyers of monitoring technology are banks, health-care providers, food processors and companies with highly coveted intellectual property. But it applies to any large firm with a network and secrets to protect.

Part of the problem is the Web: It has grown so large and tangled that the risks go well beyond intentional harm.

Unwitting workers have been known to pass highly sensitive data over unsecured networks or take information home on a USB stick left unattended.

Other infractions, though more benign, are considered treacherous in the eyes of certain employers, Schran said. "Ten minutes after installing, one client said, 'Our top sales guy is on Monster.com, I gotta hang up,' " he said.

Employers are also concerned about productivity. That's why CBS Sports, which is streaming live NCAA playoffs on the Internet, includes a "boss" alert icon that when clicked automatically raises a spreadsheet.

"It used to be companies were just worried about stealing or browsing pornography," said Stephen Chetcuti Bonavita, director of global marketing for GFI Software in Malta in Southern Europe. The company has U.S. headquarters in Cary, where it is breaking into the U.S. market for work-force monitoring software.

"Now the worry is also about Facebook and MySpace. It's not just a security threat; it's a productivity threat."

According to research firm IDC, Internet surfing on the job accounts for 30 percent to 40 percent of lost worker productivity.

Employers say that e-mail unrelated to work hurts productivity.

Stacy Carias, a former health-care professional in Durham, said her former boss sent sexually harassing e-mail. "You couldn't walk away from your desk, because he would get on your computer and send stuff to like 600 people under your name," Carias said.

When he did it to her, "it was something to the effect of: 'I'm the smartest person in this entire company, and I'm really hot too.' He thought it was the funniest thing in the world. I had two weeks of people who did not know me coming up to me asking about it."

Carias declined to name her former employer because of pending legal action.

When does it go too far?

Worker privacy advocates concede that monitoring can detect and even thwart wrongdoing, but they say it can also be abusive.

Corporate chiefs have gone beyond legitimate management concerns to spy on employees and directors. HP leaders did in 2006, when they employed tracing software, obtained personal phone records and sifted trash to uncover links between journalists, employees and board members.

Such behavior is a real threat because bad bosses can use technology to prey on suspected whistle-blowers or employees they want to fire, said Faith Herndon, a Durham employment lawyer who is Carias' attorney.

Employers may troll for even slight indiscretions, so an off-color e-mail message to a friend could be reason for a firing.

"It's the classic dumb thing to do, because you're creating a written record," said Herndon. "And employers can totally and legally dump you. You're out the door."

Herndon said that may have happened to some of Carias' former colleagues who were fired after supporting her in company e-mail exchanges.

Bank of America, based in Charlotte, is one of many financial institutions that monitor electronic activity; some monitoring is required by federal law. "Systems are in place to monitor technology use by associates to ensure information protection and code of ethics standards are upheld," spokeswoman Kelly Sapp said. She said employees are made aware of electronic surveillance but not told how it's used or to what extent. She declined to discuss the practice in detail.

WakeMed Health & Hospitals monitors employees electronically, spokeswoman Heather Monackey said. The same goes for poultry producer Butterball, based in Garner, which declined to comment on the topic.

WakeMed explains its monitoring policy in an online manual for employees.

Jennifer Rudinger, executive director of the American Civil Liberties Union for North Carolina, said not telling employees is wrong.

Though courts have recognized employers' right to monitor the use of company time and equipment, employees should know what kind of privacy they're giving up, Rudinger said.

Monitoring an employee's whereabouts can be especially touchy.

FoodLogiQ in Durham this month introduced a product to correlate workers' movements with potential contamination incidents in the food-processing industry. The ID badge works by radio frequency and is designed for big restaurant chains and food processors.

"It's not Big Brother," said FoodLogiQ's president, Andrew Kennedy. "It's leveraging technology. We're taking it to the next step to see who was working and where in case something happens."

That irks Michael Fredenburg, 31, a customer service professional for PC maker Lenovo. "The fear is that we're slowly seduced with subtle introductions, like chips in your animals, chips in your credits cards and chips for tracking jeans," he said. "Now they're chipping prisoners. My fear is that it's going to become standard."

(News researcher Brooke Cain contributed to this report.)