From the July 2005 issue of Entrepreneur

This winter, medical benefits administration company Weyco started a firestorm when it announced it would test employees for nicotine use and fire people who didn't stop smoking.

The Okemos, Michigan, company says it's trying to create a healthy work force. Of course, healthier workers lead to lower insurance costs for companies. The Centers for Disease Control and Prevention estimates smoking accounts for at least $75 billion in direct medical expenditures every year, as well as $80 billion in lost productivity.

But where should employers draw the line on lawful, off-the-clock behavior? "The problem is, [smoking is] not illegal," says Jeff Hornsby, a management professor at Ball State University in Muncie, Indiana. "The issue with nonwork time is: When does it become an invasion of privacy?"

Situations of employers trying to regulate employee behavior off the clock are also emerging in cases of cohabitation, drinking and single parenthood. "Sometimes, the employer's rule is motivated by the employer's religious views," says Jeanne Goldberg, a senior attorney advisor in the Equal Employment Opportunity Commission's Office of Legal Counsel in Washington, DC. In 2004 alone, the EEOC received 2,466 complaints alleging religion-based discrimination.

Stephen E. Fox, a principal with law firm Fish and Richardson P.C. in Dallas, sees another legal off-site activity--blogging--as a bigger worry to employers. "I'm not so sure employers are interested in saying, 'You can't blog,'" he says. But "employers are concerned about the disclosure of information that's confidential or proprietary." Fox sees employers considering contract provisions in which employees agree not to disparage or defame the employer.

Employers should be careful, however. In 29 states, "lifestyle rights laws" protect workers' off-duty activities, such as smoking, and in some cases, the Americans with Disabilities Act protects addictive behavior. Employers should also weigh off-the-clock monitoring as a business practice. "Good employees with high education and skill levels don't want to be regulated like that," Hornsby says. And as the job market catches fire, such policies could quickly go up in smoke.